Document:

Exhibit 10.1

 

EXECUTION COPY

 

 

 

CREDIT
AGREEMENT

 

dated
as of

 

June 13,
2008

 

among

 

HARDINGE INC.,

as the Company

 

HARDINGE HOLDINGS GMBH,

as the Swiss Borrower

 

The Lenders Party Hereto

 

HSBC BANK USA, NATIONAL ASSOCIATION

and

KEYBANK NATIONAL ASSOCIATION

as Co-Documentation Agents

 

BANK OF AMERICA, N.A.

as Syndication Agent

 

and

JPMORGAN CHASE BANK, N.A.

as Administrative Agent

 

 

J.P.
MORGAN SECURITIES INC.

as
Sole Bookrunner and Sole Lead Arranger

 

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE
  I Definitions

  	
   

  
	
   

  	
   

  
	
  SECTION 1.01.  Defined Terms

  	
  1

  
	
  SECTION 1.02.  Classification
  of Loans and Borrowings

  	
  21

  
	
  SECTION 1.03.  Terms
  Generally

  	
  21

  
	
  SECTION 1.04.  Accounting
  Terms; GAAP

  	
  22

  
	
   

  	
   

  
	
  ARTICLE II The Credits

  	
  22

  
	
   

  	
   

  
	
  SECTION 2.01.  Commitments

  	
  22

  
	
  SECTION 2.02.  Loans and
  Borrowings

  	
  22

  
	
  SECTION 2.03.  Requests for
  Revolving Borrowings

  	
  23

  
	
  SECTION 2.04.  Determination
  of Dollar Amounts

  	
  24

  
	
  SECTION 2.05.  Swingline
  Loans

  	
  24

  
	
  SECTION 2.06.  Letters of
  Credit

  	
  25

  
	
  SECTION 2.07.  Funding of
  Borrowings

  	
  30

  
	
  SECTION 2.08.  Interest
  Elections

  	
  30

  
	
  SECTION 2.09.  Termination
  and Reduction of Commitments

  	
  32

  
	
  SECTION 2.10.  Repayment of
  Loans; Evidence of Debt

  	
  32

  
	
  SECTION 2.11.  Prepayment of
  Loans

  	
  33

  
	
  SECTION 2.12.  Fees

  	
  34

  
	
  SECTION 2.13.  Interest

  	
  35

  
	
  SECTION 2.14.  Alternate Rate
  of Interest

  	
  35

  
	
  SECTION 2.15.  Increased
  Costs

  	
  36

  
	
  SECTION 2.16.  Break Funding
  Payments

  	
  37

  
	
  SECTION 2.17.  Taxes

  	
  38

  
	
  SECTION 2.18.  Payments
  Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs

  	
  39

  
	
  SECTION 2.19.  Mitigation
  Obligations; Replacement of Lenders

  	
  41

  
	
  SECTION 2.20.  Expansion
  Option

  	
  42

  
	
  SECTION 2.21.  Market
  Disruption

  	
  43

  
	
  SECTION 2.22.  Judgment
  Currency

  	
  43

  
	
  SECTION 2.23.  Senior Debt

  	
  44

  
	
   

  	
   

  
	
  ARTICLE III Representations and Warranties

  	
  44

  
	
   

  	
   

  
	
  SECTION 3.01.  Organization;
  Powers; Subsidiaries

  	
  44

  
	
  SECTION 3.02.  Authorization;
  Enforceability

  	
  44

  
	
  SECTION 3.03.  Governmental
  Approvals; No Conflicts

  	
  44

  
	
  SECTION 3.04.  Financial
  Condition; No Material Adverse Change

  	
  45

  
	
  SECTION 3.05.  Properties

  	
  45

  
	
  SECTION 3.06.  Litigation and
  Environmental Matters

  	
  45

  
	
  SECTION 3.07.  Compliance
  with Laws and Agreements

  	
  46

  

 

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  SECTION 3.08.  Investment
  Company Status

  	
  46

  
	
  SECTION 3.09.  Taxes

  	
  46

  
	
  SECTION 3.10.  ERISA

  	
  46

  
	
  SECTION 3.11.  Disclosure

  	
  46

  
	
  SECTION 3.12.  Federal
  Reserve Regulations

  	
  46

  
	
  SECTION 3.13.  Liens

  	
  46

  
	
  SECTION 3.14.  No Default

  	
  46

  
	
  SECTION 3.15.  No Burdensome
  Restrictions

  	
  46

  
	
  SECTION 3.16.  Security
  Interest in Collateral

  	
  47

  
	
   

  	
   

  
	
  ARTICLE IV Conditions

  	
  47

  
	
   

  	
   

  
	
  SECTION 4.01.  Effective Date

  	
  47

  
	
  SECTION 4.02.  Each Credit
  Event

  	
  49

  
	
   

  	
   

  
	
  ARTICLE V Affirmative Covenants

  	
  49

  
	
   

  	
   

  
	
  SECTION 5.01.  Financial
  Statements and Other Information

  	
  49

  
	
  SECTION 5.02.  Notices of
  Material Events

  	
  51

  
	
  SECTION 5.03.  Existence;
  Conduct of Business

  	
  51

  
	
  SECTION 5.04.  Payment of
  Obligations

  	
  51

  
	
  SECTION 5.05.  Maintenance of
  Properties; Insurance

  	
  51

  
	
  SECTION 5.06.  Books and
  Records; Inspection Rights

  	
  52

  
	
  SECTION 5.07.  Compliance
  with Laws and Material Contractual Obligations

  	
  52

  
	
  SECTION 5.08.  Use of
  Proceeds

  	
  52

  
	
  SECTION 5.09.  Subsidiary
  Guarantors; Pledges; Additional Collateral; Further Assurances

  	
  52

  
	
   

  	
   

  
	
  ARTICLE VI Negative Covenants

  	
  54

  
	
   

  	
   

  
	
  SECTION 6.01.  Indebtedness

  	
  54

  
	
  SECTION 6.02.  Liens

  	
  55

  
	
  SECTION 6.03.  Fundamental
  Changes and Asset Sales

  	
  56

  
	
  SECTION 6.04.  Investments,
  Loans, Advances, Guarantees and Acquisitions

  	
  56

  
	
  SECTION 6.05.  Swap
  Agreements

  	
  57

  
	
  SECTION 6.06.  Transactions
  with Affiliates

  	
  57

  
	
  SECTION 6.07.  Restricted
  Payments

  	
  57

  
	
  SECTION 6.08.  Restrictive
  Agreements

  	
  58

  
	
  SECTION 6.09.  Subordinated
  Indebtedness and Amendments to Subordinated Indebtedness Documents

  	
  58

  
	
  SECTION 6.10.  Financial
  Covenants

  	
  59

  

 

ii

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE VII Events of Default

  	
  59

  
	
   

  	
   

  
	
  ARTICLE VIII The Administrative Agent

  	
  62

  
	
   

  	
   

  
	
  ARTICLE IX Miscellaneous

  	
  66

  
	
   

  	
   

  
	
  SECTION 9.01.  Notices

  	
  66

  
	
  SECTION 9.02.  Waivers;
  Amendments

  	
  67

  
	
  SECTION 9.03.  Expenses;
  Indemnity; Damage Waiver

  	
  68

  
	
  SECTION 9.04.  Successors and
  Assigns

  	
  70

  
	
  SECTION 9.05.  Survival

  	
  72

  
	
  SECTION 9.06.  Counterparts;
  Integration; Effectiveness

  	
  73

  
	
  SECTION 9.07.  Severability

  	
  73

  
	
  SECTION 9.08.  Right of
  Setoff

  	
  73

  
	
  SECTION 9.09.  Governing Law;
  Jurisdiction; Consent to Service of Process

  	
  73

  
	
  SECTION 9.10.  WAIVER OF JURY
  TRIAL

  	
  74

  
	
  SECTION 9.11.  Headings

  	
  74

  
	
  SECTION 9.12.  Confidentiality

  	
  74

  
	
  SECTION 9.13.  USA PATRIOT
  Act

  	
  75

  
	
  SECTION 9.14.  Appointment
  for Perfection

  	
  75

  
	
   

  	
   

  
	
  ARTICLE X Cross-Guarantee

  	
  75

  

 

iii

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  SCHEDULES:

  	
   

  
	
   

  	
   

  
	
  Schedule
  2.01

  	
  —
  Commitments

  	
   

  
	
  Schedule
  2.02

  	
  —
  Mandatory Cost

  	
   

  
	
  Schedule
  2.06

  	
  —
  Existing Letters of Credit

  	
   

  
	
  Schedule
  3.01

  	
  —
  Subsidiaries

  	
   

  
	
  Schedule
  6.01

  	
  —
  Existing Indebtedness

  	
   

  
	
  Schedule
  6.02

  	
  —
  Existing Liens

  	
   

  
	
   

  	
   

  
	
  EXHIBITS:

  	
   

  
	
   

  	
   

  
	
  Exhibit A

  	
  —        Form of
  Assignment and Assumption

  	
   

  
	
  Exhibit B-1

  	
  —        Form of
  Opinion of Loan Parties’ Special U.S. Counsel

  	
   

  
	
  Exhibit B-2

  	
  —        Form of
  Opinion of Loan Parties’ Special Swiss Counsel

  	
   

  
	
  Exhibit B-3

  	
  —        Form of
  Opinion of Loan Parties’ Special UK Counsel

  	
   

  
	
  Exhibit C

  	
  —        Form of
  Increasing Lender Supplement

  	
   

  
	
  Exhibit D

  	
  —        Form of
  Augmenting Lender Supplement

  	
   

  
	
  Exhibit E

  	
  —        List
  of Closing Documents

  	
   

  

 

iv

 

CREDIT AGREEMENT (this “Agreement”)
dated as of June 13, 2008 among HARDINGE INC., HARDINGE HOLDINGS GMBH, the
LENDERS from time to time party hereto, BANK OF AMERICA, N.A. as Syndication
Agent and HSBC BANK USA, NATIONAL ASSOCIATION and KEYBANK NATIONAL ASSOCIATION
as Co-Documentation Agents and JPMORGAN CHASE BANK, N.A., as Administrative
Agent.

 

The parties hereto agree as
follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01. 
Defined Terms. 
As used in this Agreement, the following terms have the meanings specified
below:

 

“ABR”, when used in reference to
any Loan or Borrowing, refers to a Loan, or the Loans comprising such
Borrowing, bearing interest at a rate determined by reference to the Alternate
Base Rate.

 

“Adjusted LIBO Rate” means, with
respect to any Eurocurrency Borrowing for any Interest Period, an interest rate
per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
sum of (i) (a) the LIBO Rate for such Interest Period multiplied by (b) the
Statutory Reserve Rate plus, without duplication, (ii) in the case
of Loans by a Lender from its office or branch in the United Kingdom, the
Mandatory Cost.

 

“Administrative Agent” means
JPMorgan Chase Bank, N.A. (including its branches and affiliates), in its
capacity as administrative agent for the Lenders hereunder.

 

“Administrative Questionnaire”
means an Administrative Questionnaire in a form supplied by the Administrative
Agent.

 

“Affected Foreign
Subsidiary” means any Foreign Subsidiary to the extent such Foreign
Subsidiary acting as a Subsidiary Guarantor would cause a Dividend Tax Event.

 

“Affiliate” means, with respect
to a specified Person, another Person that directly, or indirectly through one
or more intermediaries, Controls or is Controlled by or is under common Control
with the Person specified.

 

“Aggregate Commitment”
means the aggregate of the Commitments of all of the Lenders, as reduced or
increased from time to time pursuant to the terms and conditions hereof.  As of the Effective Date, the Aggregate
Commitment is $100,000,000.

 

“Agreed Currencies” means (i) Dollars, (ii) euro, (iii) Swiss
Francs, (iv) Canadian Dollars (v) British Pounds Sterling and any
other Foreign Currency agreed to by the Administrative Agent and each of the
Lenders.

 

“Alternate Base Rate” means, for
any day, a rate per annum equal to the greater of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect on
such day plus 1⁄2 of 1%.  Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.

 

 

“Applicable Percentage” means,
with respect to any Lender, the percentage of the Aggregate Commitment
represented by such Lender’s Commitment. 
If the Commitments have terminated or expired, the Applicable
Percentages shall be determined based upon the Commitments most recently in
effect, giving effect to any assignments.

 

“Applicable Pledge Percentage”
means 100% but 65% in the case of a pledge by the Company or any Domestic
Subsidiary of its Equity Interests in an Affected Foreign Subsidiary.

 

“Applicable Rate” means, for any
day, with respect to any Revolving Loan, or with respect to the commitment fees
payable hereunder, as the case may be, the applicable rate per annum set forth
below under the caption “Eurocurrency Spread”, “ABR Spread” or “Commitment Fee
Rate”, as the case may be, based upon the Leverage Ratio applicable on such
date:

 

	
   

  	
   

  	
  Leverage Ratio:

  	
   

  	
  Eurocurrency

  Spread

  	
   

  	
  ABR

  Spread

  	
   

  	
  Commitment Fee

  Rate

  	
   

  
	
  Category
  1:

  	
   

  	
  < 1.50 to
  1.00

  	
   

  	
  1.00

  	
  %

  	
  0

  	
  %

  	
  0.20

  	
  %

  
	
  Category
  2:

  	
   

  	
  >
  1.50 to 1.00 but < 2.00 to 1.00

  	
   

  	
  1.25

  	
  %

  	
  0.25

  	
  %

  	
  0.225

  	
  %

  
	
  Category
  3:

  	
   

  	
  >
  2.00 to 1.00 but < 2.50 to 1.00

  	
   

  	
  1.50

  	
  %

  	
  0.50

  	
  %

  	
  0.25

  	
  %

  
	
  Category
  4:

  	
   

  	
  >
  2.50 to 1.00 but < 3.00 to 1.00

  	
   

  	
  1.75

  	
  %

  	
  0.75

  	
  %

  	
  0.30

  	
  %

  
	
  Category
  5:

  	
   

  	
  > 3.00 to
  1.00

  	
   

  	
  2.00

  	
  %

  	
  1.00

  	
  %

  	
  0.375

  	
  %

  

 

For
purposes of the foregoing,

 

(i) if at any time the
Company fails to deliver the Financials on or before the date the Financials
are due pursuant to Section 5.01, Category 5 shall be deemed applicable
for the period commencing five (5) Business Days after the required date
of delivery and ending on the date which is five (5) Business Days after
the Financials are actually delivered, after which the Category shall be
determined in accordance with the table above as applicable;

 

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

 

(iii) notwithstanding
the foregoing, Category 1 shall be deemed to be applicable until the
Administrative Agent’s receipt of the applicable Financials for the Company’s
first fiscal quarter ending after the Effective Date (unless such Financials
demonstrate that Category 2, 3, 4 or 5 should have been applicable during such
period, in which case such other Category shall be deemed to be applicable
during such period) and adjustments to the Category then in effect shall
thereafter be effected in accordance with the preceding paragraphs.

 

2

 

“Approved Fund” has the meaning
assigned to such term in Section 9.04.

 

“Approximate
Equivalent Amount” of any currency with respect to any amount of Dollars
shall mean the Equivalent Amount of such currency with respect to such amount
of Dollars on or as of such date, rounded up to the nearest amount of such
currency as reasonably determined by the Administrative Agent from time to
time.

 

“Assignment and Assumption”
means an assignment and assumption agreement entered into by a Lender and an
assignee (with the consent of any party whose consent is required by Section 9.04),
and accepted by the Administrative Agent, in the form of Exhibit A
or any other form approved by the Administrative Agent.

 

“Augmenting Lender”
has the meaning assigned to such term in Section 2.20.

 

“Available Revolving
Commitment” means, at any time, the Aggregate Commitment then in effect
minus the Revolving Credit Exposure of all the Lenders at such time; it being
understood and agreed that any Lender’s Swingline Exposure shall not be deemed
to be a component of the Revolving Credit Exposure for purposes of calculating
the commitment fee under Section 2.12(a).

 

“Availability
Period” means the period from and including the Effective Date to
but excluding the earlier of the Maturity Date and the date of termination of
the Commitments.

 

“Banking
Services” means each and any of the following bank services provided
to the Company or any Subsidiary by any Lender or any of its Affiliates: (a) commercial
credit cards, (b) stored value cards and (c) treasury management
services (including, without limitation, controlled disbursement, automated
clearinghouse transactions, return items, overdrafts and interstate depository
network services).

 

“Banking Services
Agreement” means any agreement entered into by the Company or any
Subsidiary in connection with Banking Services.

 

“Banking
Services Obligations” means any and all obligations of the Company
or any Subsidiary, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) in connection with Banking
Services.

 

“Board”
means the Board of Governors of the Federal Reserve System of the United States
of America.

 

“Borrower”
means the Company and/or the Swiss Borrower, as the context may require.

 

“Borrowing”
means (a) Revolving Loans of the same Type, made, converted or continued
on the same date and, in the case of Eurocurrency Loans, as to which a single
Interest Period is in effect or (b) a Swingline Loan.

 

“Borrowing
Request” means a request by any Borrower for a Revolving Borrowing
in accordance with Section 2.03.

 

“British Pounds Sterling”
means the lawful currency of Great Britain.

 

“Burdensome Restrictions”
means any consensual encumbrance or restriction of the type described in clause
(a) or (b) of Section 6.08 (without giving effect to any
exceptions described in clauses (i) through (iv) of such Section 6.08).

 

3

 

“Business
Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a
Eurocurrency Loan, the term “Business Day”
shall also exclude any day on which banks are not open for dealings in Agreed
Currencies in the London interbank market or the principal financial center of
the country in which payment or purchase of such Agreed Currency can be made
(and, if the Borrowings or LC Disbursements which are the subject of a
borrowing, drawing, payment, reimbursement or rate selection are denominated in
euro, the term “Business Day” shall also exclude any day on which the TARGET
payment system is not open for the settlement of payments in euro).

 

“Canadian Dollars”
means the lawful currency of Canada.

 

“Capital Expenditures”
means, without duplication, any expenditures for any purchase or other
acquisition of any asset which would be classified as a fixed or capital asset
on a consolidated balance sheet of the Company and its Subsidiaries prepared in
accordance with GAAP.

 

“Capital
Lease Obligations” of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in
accordance with GAAP.

 

“Change
in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof),
of Equity Interests representing more than 35% of the aggregate ordinary voting
power represented by the issued and outstanding Equity Interests of the
Company; (b) occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Company by Persons who were neither (i) nominated
by the board of directors of the Company nor (ii) appointed by directors
so nominated; (c) the acquisition of direct or indirect Control of the
Company by any Person or group; (d) the occurrence of a change in control,
or other similar provision, as defined in any agreement or instrument
evidencing any Material Indebtedness (triggering a default or mandatory
prepayment, which default or mandatory prepayment has not been waived in
writing); or (e) the Company ceases to own, directly or indirectly, and
Control 100% (other than directors’ qualifying shares) of the ordinary voting
and economic power of the Swiss Borrower.

 

“Change
in Law” means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender
or any Issuing Bank (or, for purposes of Section 2.15(b), by any lending
office of such Lender or by such Lender’s or such Issuing Bank’s holding
company, if any) with any request, guideline or directive (whether or not
having the force of law) of any Governmental Authority made or issued after the
date of this Agreement.

 

“Class”,
when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans.

 

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

 

4

 

“Co-Documentation
Agent” means each of HSBC Bank USA, National Association and KeyBank
National Association in its capacity as co-documentation agent for the credit
facility evidenced by this Agreement.

 

“Collateral” means
any and all property owned, leased or operated by a Person covered by the
Collateral Documents and any and all other property of any Loan Party, now
existing or hereafter acquired, that may at any time be or become subject to a
security interest or Lien in favor of Administrative Agent, on behalf of itself
and the Holders of Secured Obligations, to secure the Secured Obligations.

 

 “Collateral Documents” means,
collectively, the Security Agreement, the Foreign Pledge Agreements and all
other agreements, instruments and documents executed in connection with this Agreement
that are intended to create or evidence Liens to secure the Secured
Obligations, including, without limitation, all other security agreements,
pledge agreements, loan agreements, notes, guarantees, subordination
agreements, pledges, powers of attorney, consents, assignments, contracts, fee
letters, notices, leases, financing statements and all other written matter
whether heretofore, now, or hereafter executed by the Company or any of its
Subsidiaries and delivered to the Administrative Agent.

 

“Commitment”
means, with respect to each Lender, the commitment of such Lender to make
Revolving Loans and to acquire participations in Letters of Credit and
Swingline Loans hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such
commitment may be (a) reduced or terminated from time to time pursuant to Section 2.09,
(b) increased from time to time pursuant to Section 2.20 and (c) reduced
or increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04.  The
initial amount of each Lender’s Commitment is set forth on Schedule 2.01,
or in the Assignment and Assumption pursuant to which such Lender shall have
assumed its Commitment, as applicable.

 

“Company” means
Hardinge Inc., a New York corporation.

 

“Computation Date” is
defined in Section 2.04.

 

“Consolidated
EBITDA” means Consolidated Net Income plus, to the extent deducted from revenues in determining
Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense
for taxes paid or accrued, (iii) depreciation, (iv) amortization, (v) extraordinary
or non-recurring non-cash expenses or losses incurred other than in the
ordinary course of business, (vi) non-cash expenses related to stock based
compensation minus, to the
extent included in Consolidated Net Income, (vii) interest income, (viii) income
tax credits and refunds (to the extent not netted from tax expense), (ix) any
cash payments made during such period in respect of items described in clauses (v) or
(vi) above subsequent to the fiscal quarter in which the relevant non-cash
expenses or losses were incurred and (x) extraordinary, unusual or
non-recurring income or gains realized other than in the ordinary course of
business, all calculated for the Company and its Subsidiaries in accordance
with GAAP on a consolidated basis.  For
the purposes of calculating Consolidated EBITDA for any period of four
consecutive fiscal quarters (each, a “Reference Period”), (i) if at
any time during such Reference Period the Company or any Subsidiary shall have
made any Material Disposition, the Consolidated EBITDA for such Reference
Period shall be reduced by an amount equal to the Consolidated EBITDA (if
positive) attributable to the property that is the subject of such Material
Disposition for such Reference Period or increased by an amount equal to the
Consolidated EBITDA (if negative) attributable thereto for such Reference
Period, and (ii) if during such Reference Period the Company or any
Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such
Reference Period shall be calculated after giving pro forma effect thereto as
if such Material Acquisition occurred on the first day of such Reference
Period.  As used in this definition, “Material
Acquisition” means any acquisition of property or series of related

 

5

 

acquisitions of property
that (a) constitutes (i) assets comprising all or substantially all
or any significant portion of a business or operating unit of a business, or (ii) all
or substantially all of the common stock or other Equity Interests of a Person,
and (b) involves the payment of consideration by the Company and its
Subsidiaries in excess of $10,000,000; and “Material Disposition” means
any sale, transfer or disposition of property or series of related sales,
transfers, or dispositions of property that yields gross proceeds to the
Company or any of its Subsidiaries in excess of $10,000,000.

 

“Consolidated Fixed Charges”
means, with reference to any period, without duplication, cash Consolidated
Interest Expense, plus
the aggregate rent or other amounts payable under any lease (excluding Capital
Lease Obligations), plus
scheduled principal payments on Indebtedness made during such period, plus expense
for Taxes paid in cash, plus
dividends or distributions paid in cash, plus Capital Lease Obligation
payments, all calculated for the Company and its Subsidiaries on a consolidated
basis.

 

“Consolidated Funded
Indebtedness” means at any time the aggregate amount of Consolidated Total
Indebtedness which is outstanding at such time, whether or not such amount is
due or payable at such time.

 

“Consolidated
Interest Expense” means, with reference to any period, the interest
expense (including without limitation interest expense under Capital Lease
Obligations that is treated as interest in accordance with GAAP) of the Company
and its Subsidiaries calculated on a consolidated basis for such period with
respect to all outstanding Indebtedness of the Company and its Subsidiaries
allocable to such period in accordance with GAAP (including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers acceptance financing and net costs
under interest rate Swap Agreements to the extent such net costs are allocable
to such period in accordance with GAAP).

 

“Consolidated
Net Income” means, with reference to any period, the net income (or
loss) of the Company and its Subsidiaries calculated in accordance with GAAP on
a consolidated basis (without duplication) for such period.

 

“Consolidated
Total Assets” means, as of the date of any determination thereof,
total assets of the Company and its Subsidiaries calculated in accordance with
GAAP on a consolidated basis as of such date.

 

“Consolidated Total
Indebtedness” means at any time the sum, without duplication, of (a) the
aggregate Indebtedness of the Company and its Subsidiaries calculated on a
consolidated basis as of such time in accordance with GAAP, (b) the
aggregate amount of Indebtedness of the Company and its Subsidiaries relating
to the maximum drawing amount of all letters of credit outstanding and bankers
acceptances and (c) Indebtedness of the type referred to in clauses (a) or
(b) hereof of another Person guaranteed by the Company or any of its
Subsidiaries.

 

“Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings
correlative thereto.

 

“Country Risk Event”  means:

 

(i)            any law, action or failure to act by
any Governmental Authority in any Borrower’s or Letter of Credit beneficiary’s
country which has the effect of:

 

6

 

(a)           changing the obligations under the relevant Letter of
Credit, the Credit Agreement or any of the other Loan Documents as originally
agreed or otherwise creating any additional liability, cost or expense to the
relevant Issuing Bank, the Lenders or the Administrative Agent,

 

(b)           changing the ownership or control by such Borrower or
Letter of Credit beneficiary of its business, or

 

(c)           preventing or restricting the conversion into or transfer
of the applicable Agreed Currency;

 

(ii)           force majeure; or

 

(iii)          any similar event

 

which, in relation to (i), (ii) and
(iii), directly or indirectly, prevents or restricts the payment or transfer of
any amounts owing under the relevant Letter of Credit in the applicable Agreed
Currency into an account designated by the Administrative Agent or the relevant
Issuing Bank and freely available to the Administrative Agent or such Issuing
Bank.

 

“Credit Event” means
a Borrowing, the issuance of a Letter of Credit, an LC Disbursement or any of
the foregoing.

 

“Default”
means any event or condition which constitutes an Event of Default or which
upon notice, lapse of time or both would, unless cured or waived, become an Event
of Default.

 

“Dividend
Tax Event” means, with respect to any Foreign Subsidiary, such
Foreign Subsidiary’s accumulated and undistributed earnings and profits being
deemed to be repatriated to the Company or the applicable parent Domestic
Subsidiary under Section 956 of the Code and the effect of such
repatriation causing materially adverse tax consequences to the Company or such
parent Domestic Subsidiary, in each case as determined by the Company in its
commercially reasonable judgment acting in good faith and in consultation with
its legal and tax advisors.

 

“Dollar
Amount” of any currency at any date shall mean (i) the amount of such
currency if such currency is Dollars or (ii) the equivalent in such
currency of Dollars if such currency is a Foreign Currency, calculated on the
basis of the Exchange Rate for such currency, on or as of the most recent
Computation Date provided for in Section 2.04.

 

“Dollars”
or “$” refers to lawful money of the United
States of America.

 

“Domestic Loan Party”
means a Loan Party that is a Domestic Subsidiary.

 

“Domestic
Subsidiary” means a Subsidiary organized under the laws of a
jurisdiction located in the United States of America.

 

“Effective
Date” means the date on which the conditions specified in Section 4.01
are satisfied (or waived in accordance with Section 9.02).

 

“Environmental
Laws” means all laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural

 

7

 

resources, the management,
release or threatened release of any Hazardous Material or to health and safety
matters.

 

“Environmental
Liability” means any liability, contingent or otherwise (including
any liability for damages, costs of environmental remediation, fines, penalties
or indemnities), of the Company or any Subsidiary directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of
any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
release or threatened release of any Hazardous Materials into the environment
or (e) any contract, agreement or other consensual arrangement pursuant to
which liability is assumed or imposed with respect to any of the foregoing.

 

“Equity
Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants,
options or other rights entitling the holder thereof to purchase or acquire any
such equity interest.

 

“Equivalent
Amount” of any currency with respect to any amount of Dollars at any date
shall mean the equivalent in such currency of such amount of Dollars,
calculated on the basis of the arithmetical mean of the buy and sell spot rates
of exchange of the Administrative Agent for such other currency at 11:00 a.m.,
London time, on the date on or as of which such amount is to be determined.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time.

 

“ERISA
Affiliate” means any trade or business (whether or not incorporated)
that, together with the Company, is treated as a single employer under Section 414(b) or
(c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412
of the Code, is treated as a single employer under Section 414 of the
Code.

 

“ERISA
Event” means (a) any “reportable event”, as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an “accumulated funding deficiency” (as
defined in Section 412 of the Code or Section 302 of ERISA), whether
or not waived; (c) the filing pursuant to Section 412(d) of the
Code or Section 303(d) of ERISA of an application for a waiver of the
minimum funding standard with respect to any Plan; (d) the incurrence by
the Company or any of its ERISA Affiliates of any liability under Title IV of
ERISA with respect to the termination of any Plan; (e) the receipt by the
Company or any ERISA Affiliate from the PBGC or a plan administrator of any
notice relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (f) the incurrence by the Company or any
of its ERISA Affiliates of any liability with respect to the withdrawal or
partial withdrawal of the Company or any of its ERISA Affiliates from any Plan
or Multiemployer Plan; or (g) the receipt by the Company or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from the
Company or any ERISA Affiliate of any notice, concerning the imposition upon
the Company or any of its ERISA Affiliates of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.

 

“EU”
means the European Union.

 

“euro”
and/or “EUR” means the single currency of the participating member
states of the EU.

 

8

 

“Eurocurrency”,
when used in reference to a currency means an Agreed Currency and when used in
reference to any Loan or Borrowing, means that such Loan, or the Loans
comprising such Borrowing, bears interest at a rate determined by reference to
the Adjusted LIBO Rate.

 

“Eurocurrency Payment
Office” of the Administrative Agent shall mean, for each Foreign Currency,
the office, branch, affiliate or correspondent bank of the Administrative Agent
for such currency as specified from time to time by the Administrative Agent to
the Company and each Lender.

 

“Event
of Default” has the meaning assigned to such term in Article VII.

 

“Exchange Rate”
means, on any day, with respect to any Foreign Currency, the rate at which such
Foreign Currency may be exchanged into Dollars, as set forth at approximately
11:00 a.m., Local Time, on such date on the Reuters World Currency Page for
such Foreign Currency.   In the event
that such rate does not appear on any Reuters World Currency Page, the Exchange
Rate with respect to such Foreign Currency shall be determined by reference to
such other publicly available service for displaying exchange rates as may be
reasonably selected by the Administrative Agent or, in the event no such
service is selected, such Exchange Rate shall instead be calculated on the basis
of the arithmetical mean of the buy and sell spot rates of exchange of the
Administrative Agent for such Foreign Currency on the London market at 11:00 a.m.,
Local Time, on such date for the purchase of Dollars with such Foreign
Currency, for delivery two Business Days later; provided, that if at the
time of any such determination, for any reason, no such spot rate is being
quoted, the Administrative Agent, after consultation with the Company, may use
any reasonable method it deems appropriate to determine such rate, and such
determination shall be conclusive absent manifest error.

 

“Excluded
Taxes” means, with respect to the Administrative Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of any Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United States
of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction in which any Borrower is located and (c) in
the case of a Foreign Lender (other than an assignee pursuant to a request by
the Company under Section 2.19(b)), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes
a party to this Agreement (or designates a new lending office) or is
attributable to such Foreign Lender’s failure to comply with Section 2.17(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment),
to receive additional amounts from any Borrower with respect to such
withholding tax pursuant to Section 2.17(a).

 

“Federal
Funds Effective Rate” means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

 

“Financial
Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of the Company.

 

9

 

“Financials” means
the annual or quarterly financial statements, and accompanying certificates and
other documents, of the Company and its Subsidiaries required to be delivered
pursuant to Section 5.01(a) or 5.01(b).

 

“First Tier Foreign Subsidiary”
means each Foreign Subsidiary with respect to which any one or more of the
Company and its Domestic Subsidiaries directly owns or controls more than 50%
of such Foreign Subsidiary’s issued and outstanding Equity Interests.

 

“Fixed Charge Coverage
Ratio” has the meaning assigned to such term in Section 6.10(b).

 

“Foreign Currencies”
means Agreed Currencies other than Dollars.

 

“Foreign
Currency LC Exposure” means, at any time, the sum of (a) the Dollar
Amount of the aggregate undrawn and unexpired amount of all outstanding Foreign
Currency Letters of Credit at such time plus (b) the aggregate principal
Dollar Amount of all LC Disbursements in respect of Foreign Currency Letters of
Credit that have not yet been reimbursed at such time.

 

“Foreign
Currency Letter of Credit” means a Letter of Credit denominated in a
Foreign Currency.

 

“Foreign Currency
Sublimit” means $50,000,000.

 

“Foreign Facility
Obligations” means any and all obligations of the Company or any
Subsidiary, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), in connection with one or
more credit facilities to any Foreign Subsidiary by any Lender or any of its
Affiliates, all to the extent such credit facilities are approved by the Administrative
Agent, in its good faith, reasonable credit judgment, to be secured by the
Collateral.

 

“Foreign
Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Company is located.  For purposes of this definition, the United
States of America, each State thereof and the District of Columbia shall be
deemed to constitute a single jurisdiction.

 

“Foreign Loan Party”
means a Loan Party which is a Foreign Subsidiary.

 

“Foreign Pledge
Agreements” means those certain pledge agreements (including any and all
supplements thereto) executed by the relevant Loan Parties with respect to the
pledge of Equity Interests of a Pledge Subsidiary which is a Foreign Subsidiary
and any other pledge agreements, share mortgages, charges and comparable
instruments and documents from time to time executed pursuant to the terms of Section 5.09
in favor of the Administrative Agent for the benefit of the Holders of Secured
Obligations, in each case as
amended, restated, supplemented or otherwise modified from time to time.

 

“Foreign Pledge Trigger
Event” means the receipt by a Foreign Subsidiary (other than the Swiss
Borrower) following the Effective Date of an aggregate amount equal to or in
excess of $10,000,000, whether in the form of an investment, loan or other type
of advance, from another Loan Party.

 

“Foreign Subsidiary”
means any Subsidiary which is not a Domestic Subsidiary.

 

10

 

“GAAP”
means generally accepted accounting principles in the United States of America.

 

“Governmental
Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

 

“Guarantee”
of or by any Person (the “guarantor”) means
any obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Indebtedness or other obligation
of any other Person (the “primary obligor”)
in any manner, whether directly or indirectly, and including any obligation of
the guarantor, direct or indirect, (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation or to purchase (or to advance or supply funds for the purchase of)
any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such
Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay
such Indebtedness or other obligation or (d) as an account party in
respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that
the term Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business.

 

“Hazardous
Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all
other substances or wastes of any nature regulated pursuant to any
Environmental Law.

 

“Holders of Secured
Obligations” means the holders of the Secured Obligations from time to time
and shall include (i) each Lender and each Issuing Bank in respect of its
Loans and LC Exposure respectively, (ii) the Administrative Agent, the
Issuing Banks and the Lenders in respect of all other present and future
obligations and liabilities of the Company and each Subsidiary of every type
and description arising under or in connection with this Agreement or any other
Loan Document, (iii) each Lender and affiliate of such Lender in respect
of Swap Agreements and Banking Services Agreements entered into with such
Person by the Company or any Subsidiary, (iv) each Lender and affiliate of
such Lender in respect of agreements evidencing Foreign Facility Obligations, (v) each
indemnified party under Section 9.03 in respect of the obligations and
liabilities of the Loan Parties to such Person hereunder and under the other
Loan Documents, and (vi) their respective successors and (in the case of a
Lender, permitted) transferees and assigns.

 

“Increasing Lender”
has the meaning assigned to such term in Section 2.20.

 

“Incremental Term Loan”
has the meaning assigned to such term in Section 2.20.

 

“Incremental Term Loan Amendment”
has the meaning assigned to such term in Section 2.20.

 

“Indebtedness”
of any Person means, without duplication, (a) all obligations of such
Person for borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of
the deferred purchase price of property or services (excluding current accounts

 

11

 

payable incurred in the
ordinary course of business), (f) all Indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g) all
Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations, contingent or otherwise,
of such Person as an account party in respect of letters of credit and letters
of guaranty, (j) all obligations, contingent or otherwise, of such Person
in respect of bankers’ acceptances and (k) obligations of such Person
under Sale and Leaseback Transactions. 
The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person’s ownership interest in or other relationship with such entity, except
to the extent the terms of such Indebtedness provide that such Person is not
liable therefor.

 

“Indemnified
Taxes” means Taxes other than Excluded Taxes.

 

“Information
Memorandum” means the Confidential Information Memorandum dated April 2008
relating to the Company and the Transactions.

 

“Interest
Election Request” means a request by the applicable Borrower to
convert or continue a Revolving Borrowing in accordance with Section 2.08.

 

“Interest
Payment Date” means (a) with respect to any ABR Loan (other
than a Swingline Loan), the last day of each March, June, September and December and
the Maturity Date, (b) with respect to any Eurocurrency Loan, the last day
of the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurocurrency Borrowing with an Interest Period of more
than three months’ duration, each day prior to the last day of such Interest
Period that occurs at intervals of three months’ duration after the first day
of such Interest Period and the Maturity Date and (c) with respect to any
Swingline Loan, the day that such Loan is required to be repaid and the
Maturity Date.

 

“Interest
Period” means with respect to any Eurocurrency Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the applicable Borrower (or the Company on behalf of the Swiss
Borrower) may elect; provided, that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a
Eurocurrency Borrowing only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (ii) any Interest Period pertaining to a
Eurocurrency Borrowing that commences on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
last calendar month of such Interest Period) shall end on the last Business Day
of the last calendar month of such Interest Period.  For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and, in the case of
a Revolving Borrowing, thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.

 

“Investment Policy”
means the investment policy of the Company as in effect on the Effective Date
and as amended, restated or supplemented from time to time by management of the
Company with the prior written consent of the Administrative Agent.

 

“Issuing
Bank” means, as the context may require, (a) JPMorgan Chase
Bank, N.A., with respect to Letters of Credit issued by it, or (b) any
other Lender selected by the Company and approved by the Administrative Agent,
in its good faith, reasonable judgment, which agrees to act as an Issuing Bank
hereunder, with respect to Letters of Credit issued by it, and in each case its
successors in such capacity as provided in Section 2.06(i).  Each Issuing Bank may, in its discretion,
arrange for one or more

 

12

 

Letters of Credit to be
issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank”
shall include any such Affiliate with respect to Letters of Credit issued by
such Affiliate.

 

“LC Collateral Account”
has the meaning assigned to such term in Section 2.06(j).

 

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

 

“LC
Exposure” means, at any time, the sum of (a) the aggregate
undrawn Dollar Amount of all outstanding Letters of Credit at such time plus (b) the
aggregate Dollar Amount of all LC Disbursements that have not yet been
reimbursed by or on behalf of the Company at such time.  The LC Exposure of any Lender at any time
shall be its Applicable Percentage of the total LC Exposure at such time.

 

“Lenders”
means the Persons listed on Schedule 2.01 and any other Person that
shall have become a Lender hereunder pursuant to Section 2.20 or pursuant
to an Assignment and Assumption, other than any such Person that ceases to be a
party hereto pursuant to an Assignment and Assumption.  Unless the context otherwise requires, the
term “Lenders” includes the Swingline Lender.

 

“Letter
of Credit” means any letter of credit issued pursuant to this
Agreement.

 

“Leverage Ratio” has
the meaning assigned to such term in Section 6.10(a).

 

“LIBO
Rate” means, with respect to any Eurocurrency Borrowing for any
Interest Period, the rate appearing on, in the case of Dollars, Reuters Screen
LIBOR01 Page and, in the case of any Foreign Currency, the appropriate page of
such service which displays British Bankers Association Interest Settlement
Rates for deposits in such Foreign Currency (or, in each case, on any successor
or substitute page of such service, or any successor to or substitute for
such service, providing rate quotations comparable to those currently provided
on such page of such service, as reasonably determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to deposits in the relevant Agreed Currency in the
London interbank market) at approximately 11:00 a.m., London time, two (2) Business
Days prior to (or, in the case of Loans denominated in British Pounds Sterling,
on the day of) the commencement of such Interest Period, as the rate for
deposits in the relevant Agreed Currency with a maturity comparable to such
Interest Period.  In the event that such
rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurocurrency
Borrowing for such Interest Period shall be the rate at which deposits in the
relevant Agreed Currency in an Equivalent Amount of $5,000,000 and for a
maturity comparable to such Interest Period are offered by the principal London
office of the Administrative Agent in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two (2) Business
Days prior to the commencement of such Interest Period.

 

“Lien”
means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any purchase
option, call or similar right of a third party with respect to such securities.

 

“Loan
Documents” means this Agreement, any promissory notes issued
pursuant to Section 2.10(e) of this Agreement, any Letter of Credit
applications, the Collateral Documents, the Subsidiary Guaranty, and all other
agreements, instruments, documents and certificates identified in

 

13

 

Section 4.01 executed
and delivered to, or in favor of, the Administrative Agent or any Lenders and
including all other pledges, powers of attorney, consents, assignments,
contracts, notices, letter of credit agreements and all other written matter
whether heretofore, now or hereafter executed by or on behalf of any Loan
Party, or any employee of any Loan Party, and delivered to the Administrative
Agent or any Lender in connection with the Agreement or the transactions
contemplated thereby.  Any reference in
the Agreement or any other Loan Document to a Loan Document shall include all
appendices, exhibits or schedules thereto, and all amendments, restatements,
supplements or other modifications thereto, and shall refer to the Agreement or
such Loan Document as the same may be in effect at any and all times such
reference becomes operative.

 

“Loan Parties” means,
collectively, the Borrowers and the Subsidiary Guarantors.

 

“Loans”
means the loans made by the Lenders to the Borrowers pursuant to this
Agreement.

 

“Local Time” means (i) New
York City time in the case of a Loan, Borrowing or LC Disbursement denominated
in Dollars to, or for the account of, the Company and (ii) local time at
the place of the relevant Loan, Borrowing or LC Disbursement (or such earlier
local time as is necessary for the relevant funds to be received and
transferred to the Administrative Agent for same day value on the date the
relevant reimbursement obligation is due) in the case of a Loan, Borrowing or
LC Disbursement which is denominated in a Foreign Currency or which is to, or
for the account of, the Swiss Borrower.

 

“Mandatory Cost” is
described in Schedule 2.02.

 

“Material
Adverse Effect” means a material adverse effect on (a) the
business, assets, property or condition (financial or otherwise) of the Company
and the Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement or any and all other Loan Documents or the
rights or remedies of the Administrative Agent and the Lenders thereunder.

 

“Material
Indebtedness” means any Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Swap Agreements,
of any one or more of the Company and its Subsidiaries in an aggregate
principal amount exceeding $5,000,000. 
For purposes of determining Material Indebtedness, the “principal amount”
of the obligations of the Company or any Subsidiary in respect of any Swap
Agreement at any time shall be the maximum aggregate amount (giving effect to
any netting agreements) that the Company or such Subsidiary would be required
to pay if such Swap Agreement were terminated at such time.

 

“Material
Subsidiary” means each Subsidiary (i) which, in the case of a
Foreign Subsidiary (other than the Swiss Borrower), has received, following the
Effective Date, an aggregate amount equal to or in excess of $10,000,000,
whether in the form of an investment, loan or other type of advance, from
another Loan Party, (ii) which, as of the most recent fiscal quarter of
the Company, for the period of four consecutive fiscal quarters then ended, for
which financial statements have been delivered pursuant to Section 5.01,
contributed greater than five percent (5%), in the case of a Domestic
Subsidiary, or ten percent (10%), in the case of a Foreign Subsidiary, of the
Company’s Consolidated EBITDA for such period or (iii) which contributed
greater than five percent (5%), in the case of a Domestic Subsidiary, or ten
percent (10%), in the case of a Foreign Subsidiary, of the Company’s
Consolidated Total Assets as of such date; provided that, if at any time
the aggregate amount of the Company’s Consolidated EBITDA or Company’s
Consolidated Total Assets attributable to Subsidiaries that are not Subsidiary
Guarantors exceeds twenty-five percent (25%) of the Company’s Consolidated
EBITDA for any such period or twenty-five percent (25%) of the Company’s
Consolidated Total Assets as of the end of any such fiscal quarter, the Company
(or, in the event the Company has failed to do so within ten days,

 

14

 

the Administrative Agent)
shall designate sufficient Subsidiaries as “Material Subsidiaries” to eliminate
such excess, and such designated Subsidiaries shall for all purposes of this
Agreement constitute Material Subsidiaries.

 

“Maturity
Date” means June 13, 2013.

 

“Moody’s”
means Moody’s Investors Service, Inc.

 

“Multiemployer
Plan” means a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.

 

“New Money Credit Event”
means with respect to any Issuing Bank, any increase (directly or indirectly)
in such Issuing Bank’s exposure (whether by way of additional credit or banking
facilities or otherwise, including as part of a restructuring) to any Borrower
or any Governmental Authority in any Borrower’s or any applicable Letter of
Credit beneficiary’s country occurring by reason of (i) any law, action or
requirement of any Governmental Authority in such Borrower’s or such Letter of
Credit beneficiary’s country, or (ii) any request in respect of external
indebtedness of borrowers in such Borrower’s or such Letter of Credit
beneficiary’s country applicable to banks generally which conduct business with
such borrowers, or (iii) any agreement in relation to clause (i) or
(ii), in each case to the extent calculated by reference to the aggregate
Revolving Credit Exposures outstanding prior to such increase.

 

“Obligations” means
all unpaid principal of and accrued and unpaid interest on the Loans, all LC
Exposure, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations and indebtedness (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether allowed or allowable in such
proceeding), obligations and liabilities of any of the Company and its
Subsidiaries to any of the Lenders, the Administrative Agent, the Issuing Banks
or any indemnified party, individually or collectively, existing on the
Effective Date or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise,
arising or incurred under this Credit Agreement or any of the other Loan
Documents or in respect of any of the Loans made or reimbursement or other
obligations incurred or any of the Letters of Credit or other instruments at
any time evidencing any thereof.

 

“Other
Taxes” means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.

 

“Overnight Foreign
Currency Rate” means, for any amount payable in a Foreign Currency, the
rate of interest per annum as reasonably determined by the Administrative Agent
at which overnight or weekend deposits in the relevant currency (or if such
amount due remains unpaid for more than three (3) Business Days, then for
such other period of time as the Administrative Agent may reasonably elect) for
delivery in immediately available and freely transferable funds would be
offered by the Administrative Agent to major banks in the interbank market upon
request of such major banks for the relevant currency as determined above and
in an amount comparable to the unpaid principal amount of the related Credit
Event, plus any taxes, levies, imposts, duties, deductions, charges or
withholdings imposed upon, or charged to, the Administrative Agent by any
relevant correspondent bank in respect of such amount in such relevant currency.

 

“Participant”
has the meaning set forth in Section 9.04.

 

15

 

“PBGC”
means the Pension Benefit Guaranty Corporation referred to and defined in ERISA
and any successor entity performing similar functions.

 

“Permitted
Acquisition” means any acquisition (whether by purchase, merger,
consolidation or otherwise) or series of related acquisitions by the Company or
any Subsidiary of (i) all or substantially all the assets of or (ii) all
or substantially all the Equity Interests in, a Person or division or line of
business of a Person, if, at the time of and immediately after giving effect
thereto, (a) no Default has occurred and is continuing or would arise
after giving effect thereto, (b) such Person or division or line of
business is engaged in the same or a similar line of business as the Company
and the Subsidiaries or business reasonably related thereto, (c) all
actions required to be taken with respect to such acquired or newly formed
Subsidiary under Sections 5.09 shall have been taken, (d) the Company and
the Subsidiaries are in compliance, on a pro forma basis reasonably acceptable
to the Administrative Agent after giving effect to such acquisition (but
without giving effect to any synergies or cost savings), with the covenants
contained in Section 6.10 recomputed as of the last day of the most
recently ended fiscal quarter of the Company for which financial statements are
available, as if such acquisition (and any related incurrence or repayment of
Indebtedness, with any new Indebtedness being deemed to be amortized over the
applicable testing period in accordance with its terms) had occurred on the
first day of each relevant period for testing such compliance and, if the
aggregate consideration paid in respect of such acquisition exceeds
$10,000,000, the Company shall have delivered to the Administrative Agent a
certificate of a Financial Officer of the Company to such effect, together with
all relevant financial information, statements and projections reasonably
requested by the Administrative Agent, (e) in the case of an acquisition
or merger involving the Company or a Subsidiary, the Company or such Subsidiary
is the surviving entity of such merger and/or consolidation and (f) the
aggregate consideration paid in respect of such acquisition, when taken
together with the aggregate consideration paid in respect of all other
acquisitions and the aggregate amount of investments in joint ventures as
permitted under Section 6.04(f), does not exceed the Permitted Acquisition/JV
Amount during the term of this Agreement.

 

“Permitted Acquisition/JV
Amount” means $50,000,000 in the aggregate for all Permitted Acquisitions
and investments in joint ventures.

 

“Permitted
Encumbrances” means:

 

(a)  Liens imposed by
law for taxes that are not yet due or are being contested in compliance with Section 5.04;

 

(b)  carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
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;

 

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

 

(d)  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;

 

(e)  judgment liens in
respect of judgments that do not constitute an Event of Default under clause (k) of
Article VII; and

 

(f)  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

 

16

 

obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the Company
or any Subsidiary;

 

provided that the term “Permitted Encumbrances” shall
not include any Lien securing Indebtedness.

 

“Permitted
Investments” means:

 

(a)  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;

 

(b)  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;

 

(c)  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;

 

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

 

(e)  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; and

 

(f)  investments made
in compliance with the Investment Policy.

 

“Person”
means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, Governmental Authority or other
entity.

 

“Plan”
means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Company or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.

 

“Pledge Subsidiary”
means (i) each Domestic Subsidiary, (ii) each First-Tier Foreign
Subsidiary which is a Material Subsidiary and (iii) each other Foreign
Subsidiary the Equity Interests in which are required to be pledged to the
Administrative Agent pursuant to Section 5.09 upon the occurrence of a
Foreign Pledge Trigger Event.

 

“Prime
Rate” means the rate of interest per annum publicly announced from
time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as
being effective.

 

17

 

“Register”
has the meaning set forth in Section 9.04.

 

“Related
Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

 

“Required
Lenders” means, at any time, Lenders having Revolving Credit
Exposures and unused Commitments representing more than 50% of the sum of the
total Revolving Credit Exposures and unused Commitments at such time.

 

“Restricted Payment”
means any dividend or other distribution (whether in cash, securities or other
property) with respect to any Equity Interests in the Company or any
Subsidiary, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in the Company or any option, warrant or other right to
acquire any such Equity Interests in the Company.

 

“Revolving
Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Revolving Loans and
its LC Exposure and Swingline Exposure at such time.

 

“Revolving
Loan” means a Loan made pursuant to Section 2.01.

 

“S&P”
means Standard & Poor’s.

 

“Sale and Leaseback
Transaction” means any sale or other transfer of any property or asset by
any Person with the intent to lease such property or asset as lessee.

 

“Secured Obligations”
means all Obligations, together with all Swap Obligations, Banking Services
Obligations and up to $12,500,000 of Foreign Facility Obligations owing to one
or more Lenders or their respective Affiliates.

 

“Security Agreement”
means that certain Pledge and Security Agreement (including any and all
supplements thereto), dated as of the date hereof, between the Domestic Loan
Parties and the Administrative Agent, for the benefit of the Administrative
Agent and the other Holders of Secured Obligations, and any other pledge or
security agreement entered into, after the date of this Agreement by any other
Loan Party (as required by this Agreement or any other Loan Document), or any
other Person, as the same may be amended, restated or otherwise modified from
time to time.

 

“Solvent” means, in
reference to any Borrower, (i) the fair value of the assets of such
Borrower, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (ii) the present fair saleable
value of the property of such Borrower will be greater than the amount that
will be required to pay the probable liability of its debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (iii) such Borrower will be able
to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (iv) such
Borrower will not have unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted after the Effective Date.

 

“Statutory
Reserve Rate” means, with respect to any currency, a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one

 

18

 

minus the aggregate of the
maximum reserve, liquid asset, fees or similar requirements (including any
marginal, special, emergency or supplemental reserves or other requirements)
established by any central bank, monetary authority, the Board, the Financial
Services Authority, the European Central Bank or other Governmental Authority
for any category of deposits or liabilities customarily used to fund loans in
such currency, expressed in the case of each such requirement as a
decimal.  Such reserve, liquid asset,
fees or similar requirements shall, in the case of Dollar denominated Loans,
include those imposed pursuant to Regulation D of the Board.  Eurocurrency Loans shall be deemed to be
subject to such reserve, liquid asset, fee or similar requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under any applicable law, rule or
regulation, including Regulation D of the Board.  The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve,
liquid asset or similar requirement.

 

“Subordinated
Indebtedness” means any Indebtedness of the Company or any Subsidiary the
payment of which is subordinated to payment of the obligations under the Loan
Documents.

 

“Subordinated
Indebtedness Documents” means any document, agreement or instrument
evidencing any Subordinated Indebtedness or entered into in connection with any
Subordinated Indebtedness.

 

“subsidiary”
means, with respect to any Person (the “parent”)
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held,
or (b) that is, as of such date, otherwise Controlled, by the parent or
one or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent.

 

“Subsidiary”
means any subsidiary of the Company.

 

“Subsidiary
Guarantor” means each Material Subsidiary (other than an Affected
Foreign Subsidiary as relates to any of the Loans made to, or any other
Obligation incurred solely by or on behalf of, the Company or any Domestic
Subsidiary).  The Subsidiary Guarantors
on the Effective Date are identified as such in Schedule 3.01 hereto.

 

“Subsidiary
Guaranty” means that certain Guaranty dated as of the Effective Date
(including any and all supplements thereto) and executed by each Subsidiary
Guarantor party thereto, and, in the case of any guaranty by a Foreign
Subsidiary, any other guaranty agreements as are reasonably requested by the
Administrative Agent and its counsel, in each case as amended, restated,
supplemented or otherwise modified from time to time.

 

“Swap
Agreement” means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies, commodities, equity or
debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions; provided
that no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Company or the Subsidiaries shall be a Swap Agreement.

 

19

 

“Swap
Obligations” means any and all obligations of the Company or any
Subsidiary, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
Swap Agreements permitted hereunder with a Lender or an Affiliate of a Lender,
and (b) any and all cancellations, buy backs, reversals, terminations or
assignments of any such Swap Agreement transaction.

 

“Swingline
Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time. 
The Swingline Exposure of any Lender at any time shall be its Applicable
Percentage of the total  Swingline
Exposure at such time.

 

“Swingline
Lender” means JPMorgan Chase Bank, N.A., in its capacity as lender
of Swingline Loans hereunder.

 

“Swingline
Loan” means a Loan made pursuant to Section 2.05.

 

“Swiss Borrower”
means Hardinge Holdings GmbH, a Swiss corporation.

 

“Swiss Borrower Sublimit”
means $50,000,000.

 

“Swiss
Code of Obligations” mean the Swiss Code of Obligations” of 30 Mars 1911
(Schweizerisches Obligationenrecht vom 30. März 1911).

 

“Swiss
Federal Debt Enforcement and Bankruptcy Act” means the Swiss Federal Debt
Enforcement and Bankruptcy Act of 11 April 1889 (Bundesgesetz über
Schuldbetreibung und Konkurs vom 11. April 1889).

 

“Swiss
Federal Withholding Tax”
means a tax under the Swiss Federal Withholding Tax Act.

 

“Swiss Federal
Withholding Tax Act” means the Swiss Federal Act on the Withholding Tax of
13 October 1965 (Bundesgesetz vom 13. Oktober 1965 über die
Verrechnungssteuer).

 

“Swiss Francs” means
the lawful currency of Switzerland.

 

“Swiss Non-Qualifying Bank” means a financial institution or
other entity which does not qualify as a Swiss Qualifying Bank.

 

“Swiss Qualifying Bank” means a financial institution which (i) qualifies
as a bank pursuant to the banking laws in force in its country of
incorporation, (ii) carries on a true banking activity in such
jurisdiction as its main purpose, and (iii) has personnel, premises,
communication devices and decision-making authority of its own, all as per the
Swiss Federal Withholding Tax Act and per explanatory notes of the Swiss
Federal Tax Administration No. S-02-123(9.86) and S 02.128(1.2000) or
legislation or explanatory notes addressing the same issues which are in force
at such time.

 

“Swiss Subsidiary” means any Subsidiary incorporated in
Switzerland and/or having its registered office in Switzerland and/or
qualifying as a Swiss resident pursuant to Art. 9 of the Swiss Federal
Withholding Tax Act.

 

“Swiss Twenty Non-Bank
Regulations” means the regulations pursuant to the explanatory notes
S-02.122.1(4.99), S-02.122.2(4.1999) and S-02.128(1.2000) of the Swiss Federal
Tax

 

20

 

Administration (or legislation or explanatory notes addressing the same
issues which are in force at such time) pursuant to which the aggregate number
of persons and legal entities, which are Swiss Non-Qualifying Banks and to
which the Swiss Borrower directly or indirectly owes interest-bearing borrowed
money under all interest-bearing instruments including, inter alia,
this Agreement, taken together, shall not exceed twenty at any time in order to
not trigger Swiss Federal Withholding Tax.

 

“Syndication Agent”
means Bank of America, N.A. in its capacity as syndication agent for the credit
facility evidenced by this Agreement.

 

“TARGET” means the
Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET)
payment system (or, if such payment system ceases to be operative, such other
payment system (if any) reasonably determined by the Administrative Agent
to be a suitable replacement) for the settlement of payments in euro.

 

“Tax Deduction” means
a deduction or withholding for or on account of Tax from a payment under a Loan
Document.

 

“Taxes”
means any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any Governmental Authority.

 

“Transactions”
means the execution, delivery and performance by the Loan Parties of this
Agreement and the other Loan Documents, the borrowing of Loans and other credit
extensions, the use of the proceeds thereof and the issuance of Letters of
Credit hereunder.

 

“Type”,
when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined
by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

 

“UCC” means the
Uniform Commercial Code as in effect from time to time in the State of New York
or any other state the laws of which are required to be applied in connection
with the issue of perfection of security interests.

 

“Unliquidated Obligations”
means, at any time, any Secured Obligations (or portion thereof) that are
contingent in nature or unliquidated at such time, including any Secured
Obligation that is: (i) an obligation to reimburse a bank for drawings not
yet made under a letter of credit issued by it; (ii) any other obligation
(including any guarantee) that is contingent in nature at such time; or (iii) an
obligation to provide collateral to secure any of the foregoing types of obligations.

 

“Withdrawal
Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

 

SECTION 1.02.  Classification of Loans
and Borrowings.  For purposes of this Agreement, Loans may be
classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurocurrency
Loan”) or by Class and Type (e.g., a “Eurocurrency
Revolving Loan”).  Borrowings also may be
classified and referred to by Class (e.g.,
a “Revolving Borrowing”) or by Type (e.g.,
a “Eurocurrency Borrowing”) or by Class and Type (e.g.,
a “Eurocurrency Revolving Borrowing”).

 

SECTION 1.03.  Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and

 

21

 

“including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, restated, supplemented or otherwise
modified (subject to any restrictions on such amendments, restatements,
supplements or modifications set forth herein), (b) any reference herein
to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the
words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.

 

SECTION 1.04.  Accounting Terms;
GAAP.  Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided that, if the Company notifies the
Administrative Agent that the Company requests an amendment to any provision
hereof to eliminate the effect of any change occurring after the date hereof in
GAAP or in the application thereof on the operation of such provision (or if
the Administrative Agent notifies the Company that the Required Lenders request
an amendment to any provision hereof for such purpose), regardless of whether
any such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have become
effective until such notice shall have been withdrawn or such provision  amended in accordance herewith.

 

ARTICLE II

 

The Credits

 

SECTION 2.01.  Commitments.  Subject to the terms and conditions set forth
herein, each Lender agrees to make Revolving Loans to the Borrowers in Agreed
Currencies from time to time during the Availability Period in an aggregate
principal amount that will not result in (a) the Dollar Amount of such
Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment, (b) subject
to Section 2.04, the sum of the Dollar Amount of the total Revolving
Credit Exposures exceeding the Aggregate Commitment, (c) subject to Section 2.04,
the Dollar Amount of the total outstanding Revolving Loans and LC Exposure, in
each case denominated in Foreign Currencies, exceeding the Foreign Currency
Sublimit or (d) subject to Section 2.04, the Dollar Amount of the
total outstanding Revolving Loans made to the Swiss Borrower exceeding the
Swiss Borrower Sublimit.  Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrowers may borrow, prepay and reborrow Revolving Loans.

 

SECTION 2.02.  Loans and Borrowings.  (a)  Each Revolving Loan (other than a
Swingline Loan) shall be made as part of a Borrowing consisting of Revolving
Loans made by the Lenders ratably in accordance with their respective
Commitments.  The failure of any Lender
to make any Loan required to be made by it shall not relieve any other Lender
of its obligations hereunder; provided that the Commitments of the
Lenders are several and no Lender shall be responsible for any other Lender’s
failure to make Loans as required.  Any
Swingline Loan shall be made in accordance with the procedures set forth in Section 2.05.

 

22

 

(b)  Subject to Section 2.14,
each Revolving Borrowing shall be comprised entirely of ABR Loans or
Eurocurrency Loans as the relevant Borrower may request in accordance herewith;
provided that each ABR Loan shall only be made in Dollars and shall only
be made to the Company.  Each Swingline
Loan shall be an ABR Loan.  Each Lender
at its option may make any Eurocurrency Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan (and in the case of an
Affiliate, the provisions of Sections 2.14, 2.15, 2.16 and 2.17 shall apply to
such Affiliate to the same extent as to such Lender); provided that any
exercise of such option shall not affect the obligation of the relevant
Borrower to repay such Loan in accordance with the terms of this Agreement.

 

(c)  At the
commencement of each Interest Period for any Eurocurrency Revolving Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $3,000,000 (or the Approximate Equivalent Amount
of each such amount if such Borrowing is denominated in a Foreign
Currency).  At the time that each ABR
Revolving Borrowing is made, such Borrowing shall be in an aggregate amount
that is an integral multiple of $1,000,000 and not less than $2,000,000; provided that an ABR Revolving Borrowing may be
in an aggregate amount that is equal to the entire unused balance of the
Aggregate Commitment or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.06(e).  Each Swingline Loan shall be in an amount
that is an integral multiple of $1,000,000 and not less than $2,000,000.  Borrowings of more than one Type and Class may
be outstanding at the same time; provided
that there shall not at any time be more than a total of ten (10) Eurocurrency
Revolving Borrowings outstanding.

 

(d)  Notwithstanding
any other provision of this Agreement, no Borrower shall be entitled to
request, or to elect to convert or continue, any Borrowing if the Interest
Period requested with respect thereto would end after the Maturity Date.

 

SECTION 2.03.  Requests for
Revolving Borrowings.  To
request a Revolving Borrowing, the applicable Borrower, or the Company on
behalf of the Swiss Borrower, shall notify the Administrative Agent of such
request (a) by telephone in the case of a Eurocurrency Borrowing, not
later than 12:00 noon, Local Time, three (3) Business Days (in the case of
a Eurocurrency Borrowing denominated in Dollars to the Company) or by
irrevocable written notice (via a written Borrowing Request in a form approved
by the Administrative Agent (in its good faith, reasonable judgment) and signed
by such Borrower, or the Company on its behalf) not later than four (4) Business
Days (in the case of a Eurocurrency Borrowing denominated in a Foreign Currency
or a Eurocurrency Borrowing to the Swiss Borrower), in each case before the
date of the proposed Borrowing or (b) by telephone in the case of an ABR
Borrowing, not later than 12:00 noon, New York City time, one (1) Business
Day before the date of the proposed Borrowing; provided that any such
notice of an ABR Revolving Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.06(e) may be given not
later than 10:00 a.m., New York City time, on the date of the proposed
Borrowing.  Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent (in its good faith, reasonable
judgment) and signed by the applicable Borrower, or the Company on behalf of
the Swiss Borrower.  Each such telephonic
and written Borrowing Request shall specify the following information in
compliance with Section 2.02:

 

(i)  the aggregate amount of the
requested Borrowing;

 

(ii)  the date of such Borrowing, which
shall be a Business Day;

 

(iii)  whether such Borrowing is to be
an ABR Borrowing or a Eurocurrency Borrowing;

 

23

 

(iv)  in the case of a Eurocurrency
Borrowing, the Agreed Currency and initial Interest Period to be applicable
thereto, which shall be a period contemplated by the definition of the term “Interest
Period”; and

 

(v)  the location and number of the applicable
Borrower’s account to which funds are to be disbursed, which shall comply with
the requirements of Section 2.07.

 

If no election as to the
Type of Revolving Borrowing is specified, then, in the case of a Borrowing
denominated in Dollars to the Company, the requested Revolving Borrowing shall
be an ABR Borrowing.  If no Interest
Period is specified with respect to any requested Eurocurrency Revolving
Borrowing, then the relevant Borrower shall be deemed to have selected an
Interest Period of one month’s duration. 
Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

 

SECTION 2.04.  Determination of
Dollar Amounts.  The
Administrative Agent will reasonably determine the Dollar Amount of:

 

(a)  each Eurocurrency
Borrowing as of the date three (3) Business Days prior to the date of such
Borrowing or, if applicable, the date of conversion/continuation of any
Borrowing as a Eurocurrency Borrowing,

 

(b)  the LC Exposure as
of the date of each request for the issuance, amendment, renewal or extension
of any Letter of Credit, and

 

(c)  all outstanding
Credit Events on and as of the last Business Day of each calendar quarter and,
during the continuation of an Event of Default, on any other Business Day
elected by the Administrative Agent in its discretion or upon instruction by
the Required Lenders.

 

Each day upon or as of which the Administrative Agent determines Dollar
Amounts as described in the preceding clauses (a), (b) and (c) is
herein described as a “Computation Date” with respect to each Credit Event for
which a Dollar Amount is determined on or as of such day.

 

SECTION 2.05.  Swingline Loans.  (a)  Subject to the terms and conditions
set forth herein, the Swingline Lender agrees to make Swingline Loans in
Dollars to the Company from time to time during the Availability Period, in an
aggregate principal amount at any time outstanding that will not result in (i) the
aggregate principal amount of outstanding Swingline Loans exceeding $5,000,000
or (ii) the Dollar Amount of the total Revolving Credit Exposures
exceeding the Aggregate Commitment; provided
that the Swingline Lender shall not be required to make a Swingline Loan to
refinance an outstanding Swingline Loan. 
Within the foregoing limits and subject to the terms and conditions set
forth herein, the Company may borrow, prepay and reborrow Swingline Loans.

 

(b)  To request a
Swingline Loan, the Company shall notify the Administrative Agent of such
request by telephone (confirmed by telecopy), not later than 12:00 noon, New
York City time, on the day of a proposed Swingline Loan.  Each such notice shall be irrevocable and
shall specify the requested date (which shall be a Business Day) and amount of
the requested Swingline Loan.  The
Administrative Agent will promptly advise the Swingline Lender of any such
notice received from the Company.  The
Swingline Lender shall make each Swingline Loan available to the Company by
means of a credit to the general deposit account of the Company with the
Swingline Lender (or, in the case of a Swingline Loan made to finance the
reimbursement of an LC Disbursement as provided in Section 2.06(e), by
remittance

 

24

 

to the relevant Issuing Bank) by 3:00 p.m., New York City time, on
the requested date of such Swingline Loan.

 

(c)  The Swingline
Lender may by written notice given to the Administrative Agent not later than
10:00 a.m., New York City time, on any Business Day require the Lenders to
acquire participations on such Business Day in all or a portion of the
Swingline Loans outstanding.  Such notice
shall specify the aggregate amount of Swingline Loans in which Lenders will
participate.  Promptly upon receipt of
such notice, the Administrative Agent will give notice thereof to each  Lender, specifying in such notice such Lender’s
Applicable Percentage of such Swingline Loan or Loans.  Each Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to the
Administrative Agent, for the account of the Swingline Lender, such Lender’s
Applicable Percentage of such Swingline Loan or Loans.  Each Lender acknowledges and agrees that its
obligation to acquire participations in Swingline Loans pursuant to this
paragraph is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever.  Each Lender shall comply
with its obligation under this paragraph by wire transfer of immediately
available funds, in the same manner as provided in Section 2.07 with
respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis  mutandis,
to the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the Swingline Lender the amounts so received by it from the
Lenders.  The Administrative Agent shall
notify the Company of any participations in any Swingline Loan acquired
pursuant to this paragraph, and thereafter payments in respect of such
Swingline Loan shall be made to the Administrative Agent and not to the
Swingline Lender.  Any amounts received
by the Swingline Lender from the Company (or other party on behalf of the
Company) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Lenders
that shall have made their payments pursuant to this paragraph and to the
Swingline Lender, as their interests may appear; provided that any such
payment so remitted shall be repaid to the Swingline Lender or to the
Administrative Agent, as applicable, if and to the extent such payment is
required to be refunded to the Company for any reason.  The purchase of participations in a Swingline
Loan pursuant to this paragraph shall not relieve the Company of any default in
the payment thereof.

 

SECTION 2.06.  Letters of Credit.  (a) General.  Subject to the terms and conditions set forth
herein, the Company may request the issuance of Letters of Credit denominated
in Agreed Currencies for its own account (or for the account of any
Subsidiary), in a form reasonably acceptable to the Administrative Agent and
the relevant Issuing Bank, at any time and from time to time during the
Availability Period.  In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by the Company to, or entered into by the Company with, the relevant
Issuing Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control; provided, however, if such Issuing Bank is requested
to issue Letters of Credit with respect to a jurisdiction such Issuing Bank
deems, in its reasonable judgment, may at any time subject it to a New Money
Credit Event or a Country Risk Event, the Company shall, at the request of such
Issuing Bank, guaranty and indemnify such Issuing Bank against any and all
costs, liabilities and losses resulting from such New Money Credit Event or
Country Risk Event, in each case in a form and substance reasonably
satisfactory to such Issuing Bank.  The
letters of credit identified on Schedule 2.06 shall be deemed to be “Letters
of Credit” issued on the Effective Date for all purposes of the Loan Documents.

 

(b)  Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions.  To request the
issuance of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the Company shall hand deliver or telecopy (or
transmit by electronic communication, if

 

25

 

arrangements for doing so have been approved by the relevant Issuing
Bank) to an Issuing Bank and the Administrative Agent (reasonably in advance of
the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with paragraph (c) of
this Section), the amount of such Letter of Credit, the Agreed Currency
applicable thereto, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit.  If requested by the
relevant Issuing Bank, the Company also shall submit a letter of credit
application on such Issuing Bank’s standard form in connection with any request
for a Letter of Credit.  A Letter of
Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit the Company
shall be deemed to represent and warrant that), after giving effect to such
issuance, amendment, renewal or extension (i) the Dollar Amount of the LC
Exposure shall not exceed $10,000,000, (ii) subject to Section 2.04,
the sum of the Dollar Amount of the total Revolving Credit Exposures shall not
exceed the Aggregate Commitment and (iii) subject to Section 2.04,
the Dollar Amount of the total outstanding Revolving Loans and LC Exposure, in
each case denominated in Foreign Currencies, shall not exceed the Foreign
Currency Sublimit.

 

(c)  Expiration Date. 
Each Letter of Credit shall expire at or prior to the close of business
on the earlier of (i) the date one year after the date of the issuance of
such Letter of Credit (or, in the case of any renewal or extension thereof, one
year after such renewal or extension) and (ii) the date that is five (5) Business
Days prior to the Maturity Date.

 

(d)  Participations. 
By the issuance of a Letter of Credit (or an amendment to a Letter of
Credit increasing the amount thereof) and without any further action on the
part of the relevant Issuing Bank or the Lenders, such Issuing Bank hereby
grants to each Lender, and each Lender hereby acquires from such Issuing Bank,
a participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate Dollar Amount available to be drawn under such
Letter of Credit.  In consideration and
in furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the relevant Issuing Bank, such Lender’s Applicable Percentage of each LC
Disbursement made by such Issuing Bank and not reimbursed by the Company on the
date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Company for any
reason.  Each Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this paragraph
in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a
Default or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.

 

(e)  Reimbursement. 
If any Issuing Bank shall make any LC Disbursement in respect of a
Letter of Credit, the Company shall reimburse such LC Disbursement by paying to
the Administrative Agent in Dollars the Dollar Amount equal to such LC
Disbursement, calculated as of the date such Issuing Bank made such LC
Disbursement (or if such Issuing Bank shall so elect in its sole discretion by
notice to the Company, in such other Agreed Currency which was paid by such
Issuing Bank pursuant to such LC Disbursement in an amount equal to such LC
Disbursement) not later than 12:00 noon, Local Time, on the date that such LC
Disbursement is made, if the Company shall have received notice of such LC
Disbursement prior to 10:00 a.m., Local Time, on such date, or, if such
notice has not been received by the Company prior to such time on such date,
then not later than 12:00 noon, Local Time, on (i) the Business Day that
the Company receives such notice, if such notice is received prior to 10:00 a.m.,
Local Time, on the day of receipt, or (ii) the Business Day immediately
following the day that the Company receives such notice, if such notice is not
received prior to such time on the day of receipt; provided
that,

 

26

 

if such LC Disbursement is not less than the Dollar Amount of
$1,000,000, the Company may, subject to the conditions to borrowing set forth
herein, request in accordance with Section 2.03 or 2.05 that such payment
be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent
Dollar Amount of such LC Disbursement and, to the extent so financed, the Company’s
obligation to make such payment shall be discharged and replaced by the
resulting ABR Revolving Borrowing or Swingline Loan.  If the Company fails to make such payment
when due, the Administrative Agent shall notify each Lender of the applicable
LC Disbursement, the payment then due from the Company in respect thereof and
such Lender’s Applicable Percentage thereof. 
Promptly following receipt of such notice, each Lender shall pay to the
Administrative Agent its Applicable Percentage of the payment then due from the
Company, in the same manner as provided in Section 2.07 with respect to
Loans made by such Lender (and Section 2.07 shall apply, mutatis  mutandis,
to the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to such Issuing Bank the amounts so received by it from the
Lenders.  Promptly following receipt by
the Administrative Agent of any payment from the Company pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the
relevant Issuing Bank or, to the extent that Lenders have made payments
pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders
and such Issuing Bank as their interests may appear.  Any payment made by a Lender pursuant to this
paragraph to reimburse any Issuing Bank for any LC Disbursement (other than the
funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall
not constitute a Loan and shall not relieve the Company of its obligation to
reimburse such LC Disbursement.  If the
Company’s reimbursement of, or obligation to reimburse, any amounts in any
Foreign Currency would subject the Administrative Agent, any Issuing Bank or
any Lender to any stamp duty, ad valorem charge or similar tax that would not
be payable if such reimbursement were made or required to be made in Dollars,
the Company shall, at its option, either (x) pay the amount of any such
tax requested by the Administrative Agent, the relevant Issuing Bank or the
relevant Lender or (y) reimburse each LC Disbursement made in such Foreign
Currency in Dollars, in an amount equal to the Equivalent Amount, calculated
using the applicable exchange rates, on the date such LC Disbursement is made,
of such LC Disbursement.

 

(f)  Obligations Absolute.  The Company’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability
of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any
draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by an Issuing Bank
under a Letter of Credit against presentation of a draft or other document that
does not comply with the terms of such Letter of Credit, or (iv) any other
event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of, or provide a right of setoff against, the
Company’s obligations hereunder.  Neither
the Administrative Agent, the Lenders nor the Issuing Banks, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of
the relevant Issuing Bank; provided that
the foregoing shall not be construed to excuse any Issuing Bank from liability
to the Company to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Company to the
extent permitted by applicable law) suffered by the Company that are caused by
such Issuing Bank’s failure to exercise care when determining whether drafts
and other documents presented under a Letter of Credit comply with the terms
thereof.  The parties hereto expressly
agree that, in the absence of gross negligence

 

27

 

or willful misconduct on the part of any Issuing Bank (as finally
determined by a court of competent jurisdiction), such Issuing Bank shall be
deemed to have exercised care in each such determination.  In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, each Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

(g)  Disbursement Procedures.  Each Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit.  Such
Issuing Bank shall promptly notify the Administrative Agent and the Company by
telephone (confirmed by telecopy) of such demand for payment and whether such
Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in
giving such notice shall not relieve the Company of its obligation to reimburse
such Issuing Bank and the Lenders with respect to any such LC Disbursement.

 

(h)  Interim Interest. 
If any Issuing Bank shall make any LC Disbursement, then, unless the
Company shall reimburse such LC Disbursement in full on the date such LC
Disbursement is made, the unpaid amount thereof shall bear interest, for each
day from and including the date such LC Disbursement is made to but excluding
the date that the Company reimburses such LC Disbursement, at the rate per
annum then applicable to ABR Revolving Loans (or in the case such LC
Disbursement is denominated in a Foreign Currency, at the Overnight Foreign
Currency Rate for such Agreed Currency plus the then effective
Applicable Rate with respect to Eurocurrency Revolving Loans); provided that, if the Company fails to reimburse
such LC Disbursement when due pursuant to paragraph (e) of this Section,
then Section 2.13(c) shall apply. 
Interest accrued pursuant to this paragraph shall be for the account of
the relevant Issuing Bank, except that interest accrued on and after the date
of payment by any Lender pursuant to paragraph (e) of this Section to
reimburse such Issuing Bank shall be for the account of such Lender to the
extent of such payment.

 

(i)  Replacement of the Issuing Bank.  Any Issuing Bank may be replaced at any time
by written agreement among the Company, the Administrative Agent, the replaced
Issuing Bank and the successor Issuing Bank. 
The Administrative Agent shall notify the Lenders of any such
replacement of an Issuing Bank.  At the
time any such replacement shall become effective, the Company shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b).  From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit to be issued thereafter and (ii) references herein to the term “Issuing
Bank” shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require.  After the replacement of an
Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of an Issuing Bank
under this Agreement with respect to Letters of Credit then outstanding and
issued by it prior to such replacement, but shall not be required to issue
additional Letters of Credit.

 

(j)  Cash Collateralization.  If any Event of Default shall occur and be
continuing, on the Business Day that the Company receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 50% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to
this paragraph, the Company shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders (the “LC Collateral Account”), an amount in cash equal to 105%
of the Dollar Amount of the LC Exposure as of such date plus any accrued and
unpaid

 

28

 

interest thereon; provided that (i) the portions of such
amount attributable to undrawn Foreign Currency Letters of Credit or LC
Disbursements in a Foreign Currency that the Company is not late in reimbursing
shall be deposited in the applicable Foreign Currencies in the actual amounts
of such undrawn Letters of Credit and LC Disbursements and (ii) the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Company described in clause (h) or (i) of Article VII.  For the purposes of this paragraph, the
Foreign Currency LC Exposure shall be calculated using the applicable exchange
rates of the Administrative Agent on the date notice demanding cash
collateralization is delivered to the Company. 
The Company also shall deposit cash collateral pursuant to this paragraph
as and to the extent required by Section 2.11(b).  Such deposit shall be held by the
Administrative Agent as collateral for the payment and performance of the
Secured Obligations consisting of the reimbursement of any LC Exposure.  The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account and the Company hereby grants the Administrative Agent a security
interest in the LC Collateral Account. 
Other than any interest earned on the investment of such deposits, which
investments shall be made at the option and sole discretion of the
Administrative Agent and at the Company’s risk and expense, such deposits shall
not bear interest.  Interest or profits,
if any, on such investments shall accumulate in such account.  Moneys in such account shall be applied by
the Administrative Agent to reimburse the relevant Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Company for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Lenders with LC
Exposure  representing greater than 50%
of the total LC Exposure), be applied to satisfy other Secured
Obligations.  If the Company is required
to provide an amount of cash collateral hereunder as a result of the occurrence
of an Event of Default, such amount (to the extent not applied as aforesaid)
shall be returned to the Company within three (3) Business Days after all
Events of Default have been cured or waived.

 

(k)  Conversion.  In the event that the Loans become
immediately due and payable on any date pursuant to Article VII, all
amounts (i) that the Company is at the time or thereafter becomes required
to reimburse or otherwise pay to the Administrative Agent in respect of LC
Disbursements made under any Foreign Currency Letter of Credit (other than
amounts in respect of which the Company has deposited cash collateral pursuant
to paragraph (j) above, if such cash collateral was deposited in the
applicable Foreign Currency to the extent so deposited or applied), (ii) that
the Lenders are at the time or thereafter become required to pay to the
Administrative Agent and the Administrative Agent is at the time or thereafter
becomes required to distribute to the relevant Issuing Bank pursuant to
paragraph (e) of this Section in respect of unreimbursed LC
Disbursements made under any Foreign Currency Letter of Credit and (iii) of
each Lender’s participation in any Foreign Currency Letter of Credit under
which an LC Disbursement has been made shall, automatically and with no further
action required, be converted into the Dollar Amount, calculated using the
Administrative Agent’s currency exchange rates on such date (or in the case of
any LC Disbursement made after such date, on the date such LC Disbursement is
made), of such amounts.  On and after
such conversion, all amounts accruing and owed to the Administrative Agent, any
Issuing Bank or any Lender in respect of the obligations described in this
paragraph shall accrue and be payable in Dollars at the rates otherwise
applicable hereunder.

 

(l)  Issuing Bank
Agreements.  Each Issuing Bank agrees
that, unless otherwise requested by the Administrative Agent, such Issuing Bank
shall report in writing to the Administrative Agent (i) on the first
Business Day of each week, the daily activity (set forth by day) in respect of
Letters of Credit during the immediately preceding week, including all
issuances, extensions, amendments and renewals, all expirations and
cancellations and all disbursements and reimbursements, (ii) on or prior
to each Business Day on which such Issuing Bank expects to issue, amend, renew
or extend any Letter of Credit, the date of such issuance, amendment, renewal
or extension, and the aggregate face amount of the Letters

 

29

 

of Credit to be issued, amended, renewed or extended by it and
outstanding after giving effect to such issuance, amendment, renewal or
extension occurred (and whether the amount thereof changed), it being
understood that such Issuing Bank shall not permit any issuance, renewal,
extension or amendment resulting in an increase in the amount of any Letter of
Credit to occur without first obtaining written confirmation from the
Administrative Agent that it is then permitted under this Agreement, (iii) on
each Business Day on which such Issuing Bank makes any LC Disbursement, the
date of such LC Disbursement and the amount of such LC Disbursement, (iv) on
any Business Day on which the Company fails to reimburse an LC Disbursement
required to be reimbursed to such Issuing Bank on such day, the date of such
failure and the amount and currency of such LC Disbursement and (v) on any
other Business Day, such other information as the Administrative Agent shall
reasonably request.

 

SECTION 2.07.  Funding of
Borrowings.  (a)  Each
Lender shall make each Loan to be made by it hereunder on the proposed date thereof
by wire transfer of immediately available funds (i) in the case of Loans
denominated in Dollars to the Company, by 1:00 pm, New York City time, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders and (ii) in the case of each Loan
denominated in a Foreign Currency or to the Swiss Borrower, by 12:00 noon,
Local Time, in the city of the Administrative Agent’s Eurocurrency Payment
Office for such currency and Borrower and at such Eurocurrency Payment Office
for such currency and Borrower; provided
that Swingline Loans shall be made as provided in Section 2.05.  The Administrative Agent will make such Loans
available to the relevant Borrower by promptly crediting the amounts so
received, in like funds, to (x) an account of the Company maintained with
the Administrative Agent in New York City or Chicago and designated by the
Company in the applicable Borrowing Request, in the case of Loans denominated
in Dollars to the Company and (y) an account of such Borrower in the
relevant jurisdiction and designated by such Borrower in the applicable
Borrowing Request, in the case of Loans denominated in a Foreign Currency or to
the Swiss Borrower; provided that ABR
Revolving Loans made to finance the reimbursement of an LC Disbursement as
provided in Section 2.06(e) shall be remitted by the Administrative
Agent to the relevant Issuing Bank.

 

(b)  Unless the
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender’s share of such Borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with paragraph (a) of this Section and may, in reliance
upon such assumption, make available to the relevant Borrower a corresponding
amount.  In such event, if a Lender has
not in fact made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and such Borrower severally agree to pay to
the Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to such Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of
the Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation
(including without limitation the Overnight Foreign Currency Rate in the case
of Loans denominated in a Foreign Currency) or (ii) in the case of such
Borrower, the interest rate applicable to ABR Loans.  If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender’s Loan
included in such Borrowing.

 

SECTION 2.08.  Interest Elections.  (a)  Each Revolving Borrowing initially
shall be of the Type specified in the applicable Borrowing Request and, in the
case of a Eurocurrency Revolving Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request. 
Thereafter, the relevant Borrower may elect to convert such Borrowing to
a different Type or to continue such Borrowing and, in the case of a
Eurocurrency Revolving Borrowing, may elect Interest Periods therefor, all as
provided in this Section.  A Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding

 

30

 

the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing.  This Section shall not apply to
Swingline Borrowings, which may not be converted or continued.

 

(b)  To make an
election pursuant to this Section, a Borrower, or the Company on its behalf,
shall notify the Administrative Agent of such election (by telephone in the
case of a Borrowing denominated in Dollars or by irrevocable written notice
(via an Interest Election Request in a form approved by the Administrative
Agent and signed by such Borrower, or the Company on its behalf) in the case of
a Borrowing denominated in a Foreign Currency by the time that a Borrowing Request
would be required under Section 2.03 if such Borrower were requesting a
Revolving Borrowing of the Type resulting from such election to be made on the
effective date of such election.  Each
such telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of
a written Interest Election Request in a form approved by the Administrative
Agent (in its good faith, reasonable judgment) and signed by the relevant
Borrower, or the Company on its behalf. 
Notwithstanding any contrary provision herein, this Section shall
not be construed to permit any Borrower to (i) change the currency of any
Borrowing, (ii) elect an Interest Period for Eurocurrency Loans that does
not comply with Section 2.02(d) or (iii) convert any Borrowing
to a Borrowing of a Type not available under the Class of Commitments
pursuant to which such Borrowing was made.

 

(c)  Each telephonic
and written Interest Election Request shall specify the following information
in compliance with Section 2.02:

 

(i)  the Borrowing to which such
Interest Election Request applies and, if different options are being elected
with respect to different portions thereof, the portions thereof to be
allocated to each resulting Borrowing (in which case the information to be
specified pursuant to clauses (iii) and (iv) below shall be specified
for each resulting Borrowing);

 

(ii)  the effective date of the election
made pursuant to such Interest Election Request, which shall be a Business Day;

 

(iii)  whether the resulting Borrowing
is to be an ABR Borrowing or a Eurocurrency Borrowing; and

 

(iv)  if the resulting Borrowing is a
Eurocurrency Borrowing, the Interest Period and Agreed Currency to be
applicable thereto after giving effect to such election, which Interest Period
shall be a period contemplated by the definition of the term “Interest Period”.

 

If any such Interest
Election Request requests a Eurocurrency Borrowing but does not specify an
Interest Period, then the applicable Borrower shall be deemed to have selected
an Interest Period of one month’s duration.

 

(d)  Promptly following
receipt of an Interest Election Request, the Administrative Agent shall advise
each Lender of the details thereof and of such Lender’s portion of each
resulting Borrowing.

 

(e)  If the relevant
Borrower fails to deliver a timely Interest Election Request with respect to a
Eurocurrency Revolving Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein,
at the end of such Interest Period (i) in the case of a Borrowing
denominated in Dollars borrowed by the Company, such Borrowing shall be
converted to an ABR Borrowing and (ii) in the case of a Borrowing
denominated in a Foreign Currency (or in Dollars by the Swiss Borrower) in
respect of which the applicable Borrower shall have failed to deliver an

 

31

 

Interest Election Request prior to the third (3rd) Business
Day preceding the end of such Interest Period, such Borrowing shall
automatically continue as a Eurocurrency Borrowing in the same Agreed Currency
with an Interest Period of one month unless such Eurocurrency Borrowing is or
was repaid in accordance with Section 2.11.  Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Required Lenders, so notifies the
Company, then, so long as an Event of Default is continuing (i) no
outstanding Revolving Borrowing borrowed by the Company may be converted to or
continued as a Eurocurrency Borrowing, (ii) unless repaid, each
Eurocurrency Revolving Borrowing borrowed by the Company shall be converted to
an ABR Borrowing (and any such Eurocurrency Revolving Borrowing in a Foreign
Currency shall be redenominated in Dollars at the time of such conversion) at
the end of the Interest Period applicable thereto and (iii) unless repaid,
each Eurocurrency Revolving Borrowing by the Swiss Borrower shall automatically
be continued as a Eurocurrency Borrowing with an Interest Period of one month.

 

SECTION 2.09.  Termination and
Reduction of Commitments.  (a) 
Unless previously terminated, the Commitments shall terminate on the Maturity
Date.

 

(b)  The Company may at
any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of $1,000,000
and not less than $5,000,000 and (ii) the Company shall not terminate or
reduce the Commitments if, after giving effect to any concurrent prepayment of
the Loans in accordance with Section 2.11, the Dollar Amount of the sum of
the Revolving Credit Exposures would exceed the Aggregate Commitment.

 

(c)  The Company shall
notify the Administrative Agent of any election to terminate or reduce the
Commitments under paragraph (b) of this Section at least three
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof.  Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof.  Each notice delivered by the Company pursuant
to this Section shall be irrevocable; provided
that a notice of termination of the Commitments delivered by the Company may
state that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Company (by notice
to the Administrative Agent on or prior to the specified effective date) if
such condition is not satisfied.  Any
termination or reduction of the Commitments shall be permanent.  Each reduction of the Commitments shall be
made ratably among the Lenders in accordance with their respective Commitments.

 

SECTION 2.10.  Repayment of Loans;
Evidence of Debt.  (a) Each
Borrower hereby unconditionally promises to pay (i) to the Administrative
Agent for the account of each Lender the then unpaid principal amount of each
Revolving Loan made to such  Borrower on
the Maturity Date in the currency of such Loan and (ii) in the case of the
Company, to the Swingline Lender the then unpaid principal amount of each
Swingline Loan on the earlier of the Maturity Date and the first date after
such Swingline Loan is made that is the 15th or
last day of a calendar month and is at least two Business Days after such
Swingline Loan is made; provided that on
each date that a Revolving Borrowing is made, the Company shall repay all
Swingline Loans then outstanding.

 

(b)  Each Lender shall maintain
in accordance with its usual practice an account or accounts evidencing the
indebtedness of each Borrower to such Lender resulting from each Loan made by
such Lender, including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder.

 

(c)  The Administrative
Agent shall maintain accounts in which it shall record (i) the amount of
each Loan made hereunder, the Class, Agreed Currency and Type thereof and the
Interest

 

32

 

Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from each Borrower to
each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each Lender’s
share thereof.

 

(d)  The entries made
in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall
be prima  facie
evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not
in any manner affect the obligation of any Borrower to repay the Loans in
accordance with the terms of this Agreement.

 

(e)  Any Lender may
request that Loans made by it to any Borrower be evidenced by a promissory
note.  In such event, the relevant
Borrower shall prepare, execute and deliver to such Lender a promissory note
payable to the order of such Lender (or, if requested by such Lender, to such
Lender and its registered assigns) and in a form approved by the Administrative
Agent (in its good faith, reasonable judgment). 
Thereafter, the Loans evidenced by such promissory note and interest thereon
shall at all times (including after assignment pursuant to Section 9.04)
be represented by one or more promissory notes in such form payable to the
order of the payee named therein (or, if any such promissory note is a
registered note, to such payee and its registered assigns).

 

SECTION 2.11.  Prepayment of Loans.

 

(a)  Any Borrower shall
have the right at any time and from time to time to prepay any Borrowing in
whole or in part, subject to prior notice in accordance with the provisions of
this Section 2.11(a).  The
applicable Borrower, or the Company on behalf of the Swiss Borrower, shall
notify the Administrative Agent (and, in the case of prepayment of a Swingline
Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any
prepayment hereunder (i) in the case of prepayment of a Eurocurrency
Revolving Borrowing, not later than 12:00 noon, Local Time, three (3) Business
Days (in the case of a Eurocurrency Borrowing denominated in Dollars) or four (4) Business
Days (in the case of a Eurocurrency Borrowing denominated in a Foreign
Currency), in each case before the date of prepayment, (ii) in the case of
prepayment of an ABR Revolving Borrowing, not later than 12:00 noon., New York
City time, one (1) Business Day before the date of prepayment or (iii) in
the case of prepayment of a Swingline Loan, not later than 1:00 p.m., New
York City time, on the date of prepayment. 
Each such notice shall be irrevocable and shall specify the prepayment
date and the principal amount of each Borrowing or portion thereof to be
prepaid; provided that, if a notice of prepayment is given in connection
with a conditional notice of termination of the Commitments as contemplated by Section 2.09,
then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.09. 
Promptly following receipt of any such notice relating to a Revolving
Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof.  Each partial prepayment of any
Revolving Borrowing shall be in an amount that would be permitted in the case
of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02.  Each prepayment of a Revolving Borrowing
shall be applied ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by (i) accrued
interest to the extent required by Section 2.13 and (ii) break
funding payments pursuant to Section 2.16.

 

(b)  If at any time, (i) other
than as a result of fluctuations in currency exchange rates, the sum of the
aggregate principal Dollar Amount of all of the Revolving Credit Exposures
(calculated, with respect to those Credit Events denominated in Foreign
Currencies, as of the most recent Computation Date with respect to each such
Credit Event) exceeds the Aggregate Commitment or, with respect to Revolving
Loans made to the Swiss Borrower, exceeds the Swiss Borrower Sublimit and (ii) solely
as a result of fluctuations in currency exchange rates, the sum of the
aggregate principal Dollar Amount of all of the outstanding Revolving Loans and
LC Exposure, in each case denominated in Foreign Currencies

 

33

 

(collectively, “Foreign Currency Exposure”), as of the most
recent Computation Date with respect to each such Credit Event, exceeds 5% of
the Foreign Currency Sublimit, the Borrowers shall immediately repay Borrowings
or cash collateralize LC Exposure in an account with the Administrative Agent
pursuant to Section 2.06(j), as applicable, in an aggregate principal
amount sufficient to cause (x) the aggregate Dollar Amount of all
Revolving Credit Exposures (so calculated) to be less than or equal to the
Aggregate Commitment and (y) the Foreign Currency Exposure to be less than
or equal to the Foreign Currency Sublimit.

 

SECTION 2.12.  Fees.  (a)  The Company agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at the Applicable Rate on the average daily amount of the
Available Revolving Commitment of such Lender during the period from and including
the Effective Date to but excluding the date on which such Commitment
terminates; provided that, if such Lender continues to have any Revolving
Credit Exposure after its Commitment terminates, then such commitment fee shall
continue to accrue on the amount of such Lender’s Commitment from and including
the date on which its Commitment terminates to but excluding the date on which
such Lender ceases to have any Revolving Credit Exposure.  Accrued commitment fees shall be payable in
arrears on the last day of March, June, September and December of
each year and on the date on which the Commitments terminate, commencing on the
first such date to occur after the date hereof; provided that any commitment
fees accruing after the date on which the Commitments terminate shall be
payable on demand.  All commitment fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).

 

(b)  The Company agrees
to pay (i) to the Administrative Agent for the account of each Lender a
participation fee with respect to its participations in Letters of Credit,
which shall accrue at the same Applicable Rate used to determine the interest
rate applicable to Eurocurrency Revolving Loans on the average daily Dollar
Amount of such Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to the relevant Issuing Bank a fronting fee, which
shall accrue at the rate of 0.125% per annum on the average daily Dollar Amount
of the LC Exposure (excluding any portion thereof attributable to unreimbursed
LC Disbursements) attributable to Letters of Credit issued by such Issuing Bank
during the period from and including the Effective Date to but excluding the
later of the date of termination of the Commitments and the date on which there
ceases to be any LC Exposure, as well as such Issuing Bank’s standard fees and
commissions with respect to the issuance, amendment, cancellation, negotiation,
transfer, presentment, renewal or extension of any Letter of Credit or
processing of drawings thereunder. 
Unless otherwise specified above, participation fees and fronting fees
accrued through and including the last day of March, June, September and December of
each year shall be payable on the third (3rd) Business Day following such last day,
commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on
the date on which the Commitments terminate and any such fees accruing after
the date on which the Commitments terminate shall be payable on demand.  Any other fees payable to any Issuing Bank
pursuant to this paragraph shall be payable within ten (10) days after
demand.  All participation fees and
fronting fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day).

 

(c)  The Company agrees
to pay to the Administrative Agent, for its own account, fees payable in the
amounts and at the times separately agreed upon between the Company and the
Administrative Agent.

 

(d)  All fees payable
hereunder shall be paid on the dates due, in Dollars (except as otherwise
expressly provided in this Section 2.12) and immediately available funds,
to the Administrative

 

34

 

Agent (or to the relevant Issuing Bank, in the case of fees payable to
it) for distribution, in the case of commitment fees and participation fees, to
the Lenders.  Fees paid shall not be
refundable under any circumstances.

 

SECTION 2.13.  Interest.  (a)  The Loans comprising each ABR
Borrowing (including each Swingline Loan) shall bear interest at the Alternate
Base Rate plus the Applicable Rate.

 

(b)  The Loans
comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO
Rate for the Interest Period in effect for such Borrowing plus the Applicable
Rate.

 

(c)  Notwithstanding
the foregoing, if any principal of or interest on any Loan or any fee or other
amount payable by any Borrower hereunder is not paid when due, whether at
stated maturity, upon acceleration or otherwise, such overdue amount shall bear
interest, after as well as before judgment, at a rate per annum equal to (i) in
the case of overdue principal of any Loan, 2% plus the rate otherwise
applicable to such Loan as provided in the preceding paragraphs of this Section or
(ii) in the case of any other amount, 2% plus the rate applicable to ABR
Loans as provided in paragraph (a) of this Section.

 

(d)  Accrued interest
on each Loan shall be payable in arrears on each Interest Payment Date for such
Loan and, in the case of Revolving Loans, upon termination of the Commitments; provided that (i) interest accrued pursuant
to paragraph (c) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than a prepayment
of an ABR Revolving Loan prior to the end of the Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment and (iii) in the event of any conversion
of any Eurocurrency Revolving Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.

 

(e)  All interest
hereunder shall be computed on the basis of a year of 360 days, except that (i) interest
computed by reference to the Alternate Base Rate at times when the Alternate
Base Rate is based on the Prime Rate shall be computed on the basis of a year
of 365 days (or 366 days in a leap year) and (ii) interest for Borrowings
denominated in British Pounds Sterling shall be computed on the basis of a year
of 365 days, and in each case shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).  The applicable Alternate Base Rate, Adjusted
LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and
such determination shall be conclusive absent manifest error.

 

(f)  The parties hereto
have assumed that the interest payable under this Agreement is not and will not
become subject to Swiss Federal Withholding Tax.  If a Tax Deduction is required by law in
respect of any interest payable by the Swiss Borrower under a Loan Document and
should it be unlawful for the Swiss Borrower to comply with Section 2.17
for any reason taking into account the exclusions set out in Section 2.17:  (i) then the applicable interest rate in
relation to that interest payment shall be the interest rate which would have
applied to that interest payment as provided for in this Section 2.13 (as
provided for in the absence of this paragraph (f)) divided by the following: 1 minus
the relevant Tax Deduction is required to be made under Swiss domestic tax law
and/or applicable double taxation treaties (where the rate at which the
relevant Tax Deduction required to be made is, for this purpose, expressed as a
fraction of one (1)), and (ii) the Swiss Borrower shall pay the relevant
interest at the adjusted rate in accordance with the preceding clause (i), make
the Tax Deduction on the interest so recalculated and all references to a rate
of interest under the Loan Documents shall be construed accordingly.

 

SECTION 2.14.  Alternate Rate of
Interest.  If prior to the
commencement of any Interest Period for a Eurocurrency Borrowing:

 

35

 

(a)  the Administrative Agent determines
(which determination shall be conclusive absent manifest error) that adequate
and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or
the LIBO Rate, as applicable, for such Interest Period; or

 

(b)  the Administrative Agent is advised
by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as
applicable, for such Interest Period will not adequately and fairly reflect the
cost to such Lenders (or Lender) of making or maintaining their Loans (or its
Loan) included in such Borrowing for such Interest Period;

 

then the Administrative
Agent shall give notice thereof to the applicable Borrower and the Lenders by
telephone or telecopy as promptly as practicable thereafter and, until the Administrative
Agent notifies the applicable Borrower and the Lenders that the circumstances
giving rise to such notice no longer exist, (i) any Interest Election
Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurocurrency Borrowing shall be
ineffective and shall be repaid on the last day of the then current Interest
Period applicable thereto, (ii) any Eurocurrency Borrowing by the Swiss
Borrower that is requested to be continued shall be repaid on the last day of
the then current Interest Period applicable thereto and (iii) if any
Borrowing Request by the Company requests a Eurocurrency Revolving Borrowing in
Dollars, such Borrowing shall be made as an ABR Borrowing (and if any
Borrowing  Request requests a
Eurocurrency Revolving Borrowing by the Swiss Borrower or denominated in a
Foreign Currency, such Borrowing Request shall be ineffective); provided
that if the circumstances giving rise to such notice affect only one Type of
Borrowings, then the other Type of Borrowings shall be permitted.

 

SECTION 2.15.  Increased Costs.  (a)  If any Change in Law shall:

 

(i)  impose, modify or deem applicable
any reserve, special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank;
or

 

(ii)  impose on any Lender or any
Issuing Bank or the London interbank market any other condition affecting this
Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or
participation therein;

 

and the result of any of the
foregoing shall be to increase the cost to such Lender of making or maintaining
any Eurocurrency Loan or of maintaining its obligation to make any such Loan
(including, without limitation, pursuant to any conversion of any Borrowing
denominated in an Agreed Currency into a Borrowing denominated in any other
Agreed Currency) or to increase the cost to such Lender or such Issuing Bank of
participating in, issuing or maintaining any Letter of Credit (including,
without limitation, pursuant to any conversion of any Borrowing denominated in
an Agreed Currency into a Borrowing denominated in any other Agreed Currency)
or to reduce the amount of any sum received or receivable by such Lender or
such Issuing Bank hereunder, whether of principal, interest or otherwise
(including, without limitation, pursuant to any conversion of any Borrowing
denominated in an Agreed Currency into a Borrowing denominated in any other
Agreed Currency), then the applicable Borrower will pay to such Lender or such
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or such Issuing Bank, as the case may be, for such
additional costs incurred or reduction suffered.

 

(b)  If any Lender or
any Issuing Bank determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on
such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s
or such Issuing Bank’s holding company, if any,

 

36

 

as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by such Issuing Bank, to a level below that which such Lender or
such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could
have achieved but for such Change in Law (taking into consideration such Lender’s
or such Issuing Bank’s policies and the policies of such Lender’s or such
Issuing Bank’s holding company with respect to capital adequacy), then from
time to time the applicable Borrower will pay to such Lender or such Issuing
Bank, as the case may be, such additional amount or amounts as will compensate
such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s
holding company for any such reduction suffered.

 

(c)  A certificate of a
Lender or an Issuing Bank setting forth the amount or amounts necessary to
compensate such Lender or such Issuing Bank or its holding company, as the case
may be, together with a reasonably detailed calculation and description of such
amounts owing as specified in paragraph (a) or (b) of this Section shall
be delivered to the Company and shall be conclusive absent manifest error.  In determining any such additional amounts,
such Lender or an Issuing Bank may use any method of averaging and attribution
that it (in its good faith, reasonable credit judgment) shall deem
applicable.  The Company shall pay, or
cause the other Borrowers to pay, such Lender or such Issuing Bank, as the case
may be, the amount shown as due on any such certificate within 10 days after receipt
thereof.

 

(d)  Failure or delay
on the part of any Lender or any Issuing Bank to demand compensation pursuant
to this Section shall not constitute a waiver of such Lender’s or such
Issuing Bank’s right to demand such compensation; provided
that the Company shall not be required to compensate a Lender or an Issuing
Bank pursuant to this Section for any increased costs or reductions
incurred more than 180 days prior to the date that such Lender or such Issuing
Bank, as the case may be, notifies the Company of the Change in Law giving rise
to such increased costs or reductions and of such Lender’s or such Issuing Bank’s
intention to claim compensation therefor; provided
further that, if the Change in Law giving
rise to such increased costs or reductions is retroactive, then the 180-day
period referred to above shall be extended to include the period of retroactive
effect thereof.

 

SECTION 2.16.  Break Funding
Payments.  In the event of (a) the
payment of any principal of any Eurocurrency Loan other than on the last day of
an Interest Period applicable thereto (including as a result of an Event of
Default or as a result of any prepayment pursuant to Section 2.11), (b) the
conversion of any Eurocurrency Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurocurrency Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(a) and
is revoked in accordance therewith) or (d) the assignment of any
Eurocurrency Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Company pursuant to Section 2.19,
then, in any such event, the Borrowers shall compensate each Lender for the
loss, cost and expense attributable to such event.  Such loss, cost or expense to any Lender
shall be deemed to include an amount reasonably determined by such Lender to be
the excess, if any, of (i) the amount of interest which would have accrued
on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the commencement
of such period, for deposits in the relevant currency of a comparable amount
and period from other banks in the eurocurrency market.  A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this Section together
with a reasonably detailed calculation and description of such amounts owing
pursuant to this Section, shall
be delivered to the applicable Borrower and shall be

 

37

 

conclusive absent manifest error. 
The applicable Borrower shall pay such Lender the amount shown as due on
any such certificate within ten (10) days after receipt thereof.

 

SECTION 2.17.  Taxes.  (a)  Any and all payments by or on
account of any obligation of each Borrower hereunder shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if any Borrower shall be required
to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the
sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent, Lender or Issuing Bank (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such deductions and (iii) such
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.

 

(b)  In addition, each
Borrower shall pay any Other Taxes related to such Borrower and imposed on or
incurred by the Administrative Agent, a Lender or any Issuing Bank to the
relevant Governmental Authority in accordance with applicable law.

 

(c)  The relevant
Borrower shall indemnify the Administrative Agent, each Lender and any Issuing
Bank, within ten (10) days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative
Agent, such Lender or such Issuing Bank, as the case may be, on or with respect
to any payment by or on account of any obligation of such Borrower hereunder
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment
or liability delivered to the Company by a Lender or an Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or an Issuing
Bank, shall be conclusive absent manifest error.

 

(d)  As soon as
practicable after any payment of Indemnified Taxes or Other Taxes by any
Borrower to a Governmental Authority, such Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.

 

(e)  Any Foreign Lender
that is entitled to an exemption from or reduction of withholding tax under the
law of the jurisdiction in which a Borrower is located, or any treaty to which
such jurisdiction is a party, with respect to payments under this Agreement
shall deliver to such Borrower (with a copy to the Administrative Agent), at
the time or times prescribed by applicable law, such properly completed and
executed documentation prescribed by applicable law or reasonably requested by
such Borrower as will permit such payments to be made without withholding or at
a reduced rate.

 

(f)  If the
Administrative Agent or a Lender determines, in its sole discretion, that it
has received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrowers or with respect to which a Borrower has paid
additional amounts pursuant to this Section 2.17, it shall pay over such
refund to such Borrower (but only to the extent of indemnity payments made, or
additional amounts paid, by such Borrower under this Section 2.17 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
reasonable out-of-pocket expenses of the Administrative Agent or such Lender
and without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund); provided, that such Borrower,
upon the request of the Administrative Agent or such Lender, agrees to repay
the amount paid over to such Borrower (plus any penalties, interest or other

 

38

 

charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or
such Lender is required to repay such refund to such Governmental Authority.
This Section shall not be construed to require the Administrative Agent or any
Lender to make available its tax returns (or any other information relating to
its taxes which it deems confidential) to any Borrower or any other Person.

 

(g)  To the extent that
interest payable by the Swiss Borrower under a Loan Document becomes subject to
Swiss Federal Withholding Tax, each relevant Lender and the Swiss Borrower
shall promptly cooperate in completing any procedural formalities (including
submitting forms and documents required by the appropriate tax authorities) to
the extent possible and necessary for the Swiss Borrower to obtain
authorization to make interest payments without them being subject to Swiss
Federal Withholding Tax or to being subject to Swiss Federal Withholding Tax at
a rate reduced under an applicable double taxation treaty.

 

SECTION 2.18.  Payments Generally;
Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs.

 

(a)  Each Borrower
shall make each payment required to be made by it hereunder (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts
payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to (i) in
the case of payments denominated in Dollars by the Company, 1:00 pm, New York
City time and (ii) in the case of payments denominated in a Foreign
Currency or by the Swiss Borrower, 1:00 pm, Local Time, in the city of the
Administrative Agent’s Eurocurrency Payment Office for such currency, in each
case on the date when due, in immediately available funds, without set-off or
counterclaim.  Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes
of calculating interest thereon.  All
such payments shall be made (i) in the same currency in which the
applicable Credit Event was made (or where such currency has been converted to
euro, in euro) and (ii) to the Administrative Agent at its offices at 10
South Dearborn Street, Chicago, Illinois 60603 or, in the case of a Credit
Event denominated in a Foreign Currency or to the Swiss Borrower, the
Administrative Agent’s Eurocurrency Payment Office for such currency, except
payments to be made directly to an Issuing Bank or Swingline Lender as
expressly provided herein and except that payments pursuant to Sections 2.15,
2.16, 2.17 and 9.03 shall be made directly to the Persons entitled
thereto.  The Administrative Agent shall
distribute any such payments denominated in the same currency received by it
for the account of any other Person to the appropriate recipient promptly
following receipt thereof.  If any
payment hereunder shall be due on a day that is not a Business Day, the date
for payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable for
the period of such extension.  Notwithstanding
the foregoing provisions of this Section, if, after the making of any Credit
Event in any Foreign Currency, currency control or exchange regulations are
imposed in the country which issues such currency with the result that the type
of currency in which the Credit Event was made (the “Original Currency”)
no longer exists or any Borrower is not able to make payment to the
Administrative Agent for the account of the Lenders in such Original Currency,
then all payments to be made by such Borrower hereunder in such currency shall
instead be made when due in Dollars in an amount equal to the Dollar Amount (as
of the date of repayment) of such payment due, it being the intention of the
parties hereto that the Borrowers take all risks of the imposition of any such
currency control or exchange regulations.

 

(b)  Any proceeds of
Collateral received by the Administrative Agent (i) not constituting a
specific payment of principal, interest, fees or other sum payable under the
Loan Documents (which shall be applied as specified by the Company) or (ii) after
an Event of Default has occurred and is continuing and the Administrative Agent
so elects or the Required Lenders so direct, such funds shall be applied, to
the extent such funds represent proceeds of Collateral securing (or intending
to secure) the

 

39

 

payment thereof, ratably first, to pay any fees, indemnities, or
expense reimbursements including amounts then due to the Administrative Agent
and the Issuing Banks from any Borrower (other than in connection with Banking
Services Obligations, Swap Obligations and Foreign Facility Obligations), second,
to pay any fees or expense reimbursements then due to the Lenders from any
Borrower (other than in connection with Banking Services Obligations, Swap
Obligations and Foreign Facility Obligations), third, to pay interest
then due and payable on the Loans ratably, fourth, to prepay principal
on the Loans and unreimbursed LC Disbursements ratably, fifth, to pay an
amount to the Administrative Agent equal to one hundred five percent (105%) of
the aggregate undrawn face amount of all outstanding Letters of Credit and the
aggregate amount of any unpaid LC Disbursements, to be held as cash collateral
for such Obligations, sixth, to payment of any amounts owing with
respect to Banking Services Obligations, Swap Obligations and Foreign Facility
Obligations, and seventh, to the payment of any other Secured Obligation
due to the Administrative Agent or any Lender by any Borrower.  Notwithstanding anything to the contrary
contained in this Agreement, unless so directed by the Company, or unless a
Default is in existence, none of the Administrative Agent or any Lender shall
apply any payment which it receives to any Eurocurrency Loan of a Class, except
(a) on the expiration date of the Interest Period applicable to any such
Eurocurrency Loan or (b) in the event, and only to the extent, that there
are no outstanding ABR Loans of the same Class and, in any event, the
Borrowers shall pay the break funding payment required in accordance with Section 2.16.  The Administrative Agent and the Lenders
shall have the continuing and exclusive right to apply and reverse and reapply
any and all such proceeds and payments to any portion of the Secured Obligations.

 

(c)  At the election of
the Administrative Agent, all payments of principal, interest, LC
Disbursements, fees, premiums, reimbursable expenses (including, without
limitation, all reimbursement for fees and expenses pursuant to Section 9.03),
and other sums payable under the Loan Documents, may be paid from the proceeds
of Borrowings made hereunder whether made following a request by a Borrower (or
the Company on behalf of a Borrower) pursuant to Section 2.03 or a deemed
request as provided in this Section or may be deducted from any deposit
account of such Borrower maintained with the Administrative Agent.  Each Borrower hereby irrevocably authorizes (i) the
Administrative Agent to make a Borrowing for the purpose of paying each payment
of principal, interest and fees as it becomes due hereunder or any other amount
due under the Loan Documents and agrees that all such amounts charged shall
constitute Loans (including Swingline Loans) and that all such Borrowings shall
be deemed to have been requested pursuant to Sections 2.03, 2.04 or 2.05, as
applicable and (ii) the Administrative Agent to charge any deposit account
of the relevant Borrower maintained with the Administrative Agent for each
payment of principal, interest and fees as it becomes due hereunder or any
other amount due under the Loan Documents.

 

(d)  If any Lender
shall, by exercising any right of set-off or counterclaim or otherwise, obtain
payment in respect of any principal of or interest on any of its Revolving
Loans or participations in LC Disbursements or Swingline Loans resulting in
such Lender receiving payment of a greater proportion of the aggregate amount
of its Revolving Loans and participations in LC Disbursements and Swingline
Loans and accrued interest thereon than the proportion received by any other
Lender, then the Lender receiving such greater proportion shall purchase (for
cash at face value) participations in the Revolving Loans and participations in
LC Disbursements and Swingline Loans of other Lenders to the extent necessary
so that the benefit of all such payments shall be shared by the Lenders ratably
in accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans and participations in LC Disbursements and
Swingline Loans; provided that (i) if any such participations are
purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment
made by any Borrower pursuant to and in accordance with the express terms of
this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or

 

40

 

participations in LC Disbursements and Swingline Loans to any assignee
or participant, other than to the Company or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply).  Each Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against such Borrower rights of set-off and counterclaim with respect
to such participation as fully as if such Lender were a direct creditor of such
Borrower in the amount of such participation.

 

(e)  Unless the
Administrative Agent shall have received notice from the relevant Borrower
prior to the date on which any payment is due to the Administrative Agent for
the account of the Lenders or the Issuing Banks hereunder that such Borrower
will not make such payment, the Administrative Agent may assume that such
Borrower has made such payment on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders or the Issuing Banks,
as the case may be, the amount due.  In
such event, if such Borrower has not in fact made such payment, then each of
the Lenders or each Issuing Bank, as the case may be, severally agrees to repay
to the Administrative Agent forthwith on demand the amount so distributed to
such Lender or such Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date
of payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate reasonably determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation
(including without limitation the Overnight Foreign Currency Rate in the case
of Loans denominated in a Foreign Currency).

 

(f)  If any Lender
shall fail to make any payment required to be made by it pursuant to Section 2.05(c),
2.06(d) or (e), 2.07(b), 2.18(e) or 9.03(c), then the Administrative
Agent may, in its discretion (notwithstanding any contrary provision hereof),
apply any amounts thereafter received by the Administrative Agent for the account
of such Lender to satisfy such Lender’s obligations under such Sections until
all such unsatisfied obligations are fully paid.

 

SECTION 2.19.  Mitigation
Obligations; Replacement of Lenders. 
(a)  If any Lender requests compensation under Section 2.15,
or if any Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section 2.17,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as
the case may be, in the future and (ii) would not subject such Lender to
any unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender.  The Company hereby agrees
to pay all reasonable costs and expenses incurred by any Lender in connection
with any such designation or assignment.

 

(b)  If any Lender
requests compensation under Section 2.15, or if any Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.17, or if any Lender defaults
in its obligation to fund Loans hereunder, then the Company may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance
with and subject to the restrictions contained in Section 9.04), all its
interests, rights and obligations under the Loan Documents to an assignee that
shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment); provided
that (i) the Company shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, (ii) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements and Swingline
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee (to the extent of such outstanding principal
and accrued interest and fees) or the Company (in the case of all other
amounts) and (iii) in the case of any

 

41

 

such assignment resulting from a claim for compensation under Section 2.15
or payments required to be made pursuant to Section 2.17, such assignment will
result in a reduction in such compensation or payments.  A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Company to require
such  assignment and delegation cease to
apply.

 

SECTION 2.20.  Expansion Option.  The Company may from time to time elect to
increase the Commitments or enter into one or more tranches of term loans (each
an “Incremental Term Loan”), in each case in minimum increments of
$10,000,000 so long as, after giving effect thereto, the aggregate amount of
such increases and all such Incremental Term Loans does not exceed
$50,000,000.  The Company may arrange for
any such increase or tranche to be provided by one or more Lenders (each Lender
so agreeing to an increase in its Commitment, or to participate in such
Incremental Term Loans, an “Increasing Lender”), or by one or more new
banks, financial institutions or other entities (each such new bank, financial
institution or other entity, an “Augmenting Lender”), to increase their
existing Commitments, or to participate in such Incremental Term Loans, or
extend Commitments, as the case may be; provided that (i) each
Augmenting Lender, shall be subject to the approval of the Company and the
Administrative Agent and (ii) (x) in the case of an Increasing
Lender, the Company and such Increasing Lender execute an agreement
substantially in the form of Exhibit C hereto, and (y) in the
case of an Augmenting Lender, the Company and such Augmenting Lender execute an
agreement substantially in the form of Exhibit D hereto.  Increases and new Commitments and Incremental
Term Loans created pursuant to this Section 2.20 shall become effective on
the date agreed by the Company, the Administrative Agent and the relevant
Increasing Lenders or Augmenting Lenders and the Administrative Agent shall
notify each Lender thereof.  Notwithstanding
the foregoing, no increase in the Commitments (or in the Commitment of any
Lender) or tranche of Incremental Term Loans shall become effective under this
paragraph unless, (i) on the proposed date of the effectiveness of such
increase or Incremental Term Loans, (A) the conditions set forth in
paragraphs (a) and (b) of Section 4.02 shall be satisfied or
waived by the Required Lenders and the Administrative Agent shall have received
a certificate to that effect dated such date and executed by a Financial
Officer of the Company and (B) the Company shall be in compliance (on a
pro forma basis reasonably acceptable to the Administrative Agent) with the
covenants contained in Section 6.10 and (ii) the Administrative Agent
shall have received documents consistent with those delivered on the Effective
Date as to the corporate power and authority of the Borrowers to borrow
hereunder after giving effect to such increase. 
On the effective date of any increase in the Commitments or any
Incremental Term Loans being made, (i) each relevant Increasing Lender and
Augmenting Lender shall make available to the Administrative Agent such amounts
in immediately available funds as the Administrative Agent shall determine, for
the benefit of the other Lenders, as being required in order to cause, after
giving effect to such increase and the use of such amounts to make payments to
such other Lenders, each Lender’s portion of the outstanding Revolving Loans of
all the Lenders to equal its Applicable Percentage of such outstanding
Revolving Loans, and (ii) except in the case of any Incremental Term
Loans, the Borrowers shall be deemed to have repaid and reborrowed all
outstanding Revolving Loans as of the date of any increase in the Commitments
(with such reborrowing to consist of the Types of Revolving Loans, with related
Interest Periods if applicable, specified in a notice delivered by the Company,
or the Company on behalf of the Swiss Borrower, in accordance with the
requirements of Section 2.03).  The
deemed payments made pursuant to clause (ii) of the immediately preceding
sentence shall be accompanied by payment of all accrued interest on the amount
prepaid and, in respect of each Eurocurrency Loan, shall be subject to
indemnification by the Borrowers pursuant to the provisions of Section 2.16
if the deemed payment occurs other than on the last day of the related Interest
Periods.  The Incremental Term Loans (a) shall
rank pari passu in right of payment with the Revolving Loans, (b) shall
not mature earlier than the Maturity Date (but may have amortization prior to
such date) and (c) shall be treated substantially the same as (and in any
event no more favorably than) the Revolving Loans; provided that (i) the
terms and conditions applicable to any tranche of Incremental Term Loans
maturing after the Maturity Date may provide for material additional or
different financial or other

 

42

 

covenants or prepayment requirements applicable only during periods
after the Maturity Date and (ii) the Incremental Term Loans may be priced
differently than the Revolving Loans. 
Incremental Term Loans may be made hereunder pursuant to an amendment or
restatement (an “Incremental Term Loan Amendment”) of this Agreement
and, as appropriate, the other Loan Documents, executed by the Borrowers, each
Augmenting Lender participating in such tranche, if any, and the Administrative
Agent.  The Incremental Term Loan
Amendment may, without the consent of any other Lenders, effect such amendments
to this Agreement and the other Loan Documents as may be necessary or
appropriate, in the reasonable opinion of the Administrative Agent, to effect
the provisions of this Section 2.20.

 

SECTION 2.21.  Market Disruption.  Notwithstanding the satisfaction of all
conditions referred to in Article II and Article IV with respect to
any Credit Event to be effected in any Foreign Currency, if (i) there
shall occur on or prior to the date of such Credit Event any change in national
or international financial, political or economic conditions or currency
exchange rates or exchange controls which would in the reasonable opinion of
the Administrative Agent, the relevant Issuing Bank (if such Credit Event is a
Letter of Credit) or the Required Lenders make it impracticable for the
Eurocurrency Borrowings or Letters of Credit comprising such Credit Event to be
denominated in the Agreed Currency specified by the applicable Borrower or (ii) an
Equivalent Amount of such currency is not readily calculable, then the
Administrative Agent shall forthwith give notice thereof to such Borrower, the
Lenders and, if such Credit Event is a Letter of Credit, the relevant Issuing
Bank, and such Credit Events shall not be denominated in such Agreed Currency
but shall, except as otherwise set forth in Section 2.07, be made on the
date of such Credit Event in Dollars, (a) if such Credit Event is a
Borrowing, in an aggregate principal amount equal to the Dollar Amount of the
aggregate principal amount specified in the related request for a Credit Event
or Interest Election Request, as the case may be, as ABR Loans, unless such
Borrower notifies the Administrative Agent at least one Business Day before
such date that (i) it elects not to borrow on such date or (ii) it
elects to borrow on such date in a different Agreed Currency, as the case may
be, in which the denomination of such Loans would in the reasonable opinion of
the Administrative Agent and the Required Lenders be practicable and in an
aggregate principal amount equal to the Dollar Amount of the aggregate
principal amount specified in the related request for a Credit Event or
Interest Election Request, as the case may be or (b) if such Credit Event
is a Letter of Credit, in a face amount equal to the Dollar Amount of the face
amount specified in the related request or application for such Letter of
Credit, unless such Borrower notifies the Administrative Agent at least one (1) Business
Day before such date that (i) it elects not to request the issuance of
such Letter of Credit on such date or (ii) it elects to have such Letter
of Credit issued on such date in a different Agreed Currency, as the case may
be, in which the denomination of such Letter of Credit would in the reasonable
opinion of the relevant Issuing Bank, the Administrative Agent and the Required
Lenders be practicable and in face amount equal to the Dollar Amount of the
face amount specified in the related request or application for such Letter of
Credit, as the case may be.

 

SECTION 2.22.  Judgment Currency.  If for the purposes of obtaining judgment in
any court it is necessary to convert a sum due from any Borrower hereunder in
the currency expressed to be payable herein (the “specified currency”)
into another currency, the parties hereto agree, to the fullest extent that
they may effectively do so, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Administrative Agent
could purchase the specified currency with such other currency at the
Administrative Agent’s main New York City office on the Business Day preceding
that on which final, non-appealable judgment is given.  The obligations of each Borrower in respect
of any sum due to any Lender or the Administrative Agent hereunder shall,
notwithstanding any judgment in a currency other than the specified currency,
be discharged only to the extent that on the Business Day following receipt by
such Lender or the Administrative Agent (as the case may be) of any sum
adjudged to be so due in such other currency such Lender or the Administrative
Agent (as the case may be) may in accordance with normal, reasonable banking
procedures purchase the specified currency with such other currency.  If the amount of the specified currency so
purchased is less than the sum

 

43

 

originally due to such Lender or the Administrative Agent, as the case
may be, in the specified currency, each Borrower agrees, to the fullest extent
that it may effectively do so, as a separate obligation and notwithstanding any
such judgment, to indemnify such Lender or the Administrative Agent, as the
case may be, against such loss, and if the amount of the specified currency so
purchased exceeds (a) the sum originally due to any Lender or the
Administrative Agent, as the case may be, in the specified currency and (b) any
amounts shared with other Lenders as a result of allocations of such excess as
a disproportionate payment to such Lender under Section 2.18, such Lender
or the Administrative Agent, as the case may be, agrees to remit such excess to
such Borrower.

 

SECTION 2.23.  Senior Debt.  The Company hereby designates all Secured
Obligations now or hereinafter incurred or otherwise outstanding, and agrees
that the Secured Obligations shall at all times constitute, senior indebtedness
and designated senior indebtedness, or terms of similar import, which are
entitled to the benefits of the subordination provisions of all Subordinated
Indebtedness.

 

ARTICLE III

 

Representations and Warranties

 

Each Borrower represents and
warrants to the Lenders that:

 

SECTION 3.01.  Organization;
Powers; Subsidiaries.  Each of
the Company and its Subsidiaries is duly organized, validly existing and in
good standing (to the extent such concept is applicable in the relevant
jurisdiction) under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing (to the extent such concept is
applicable) in, every jurisdiction where such qualification is required.  Schedule 3.01 hereto (as supplemented
from time to time) identifies each Subsidiary, noting whether such Subsidiary
is a Material Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by
the Company and the other Subsidiaries and, if such percentage is not 100%
(excluding directors’ qualifying shares as required by law), a description of
each class issued and outstanding.  All
of the outstanding shares of capital stock and other equity interests of each
Subsidiary are validly issued and outstanding and fully paid and nonassessable
and all such shares and other equity interests indicated on Schedule 3.01
as owned by the Company or another Subsidiary are owned, beneficially and of
record, by the Company or any Subsidiary free and clear of all Liens, other
than Liens created under the Loan Documents. 
There are no outstanding commitments or other obligations of the Company
or any Subsidiary to issue, and no options, warrants or other rights of any
Person to acquire, any shares of any class of capital stock or other equity
interests of the Company or any Subsidiary.

 

SECTION 3.02.  Authorization;
Enforceability.  The
Transactions are within each Loan Party’s corporate powers and have been duly
authorized by all necessary corporate and, if required, shareholder
action.  The Loan Documents to which each
Loan Party is a party have been duly executed and delivered by such Loan Party
and constitute a legal, valid and binding obligation of such Loan Party,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.

 

SECTION 3.03.  Governmental
Approvals; No Conflicts.  The
Transactions (a) do not require any consent or approval of, registration
or filing with, or any other action by, any Governmental

 

44

 

Authority, except such as have been obtained or made and are in full
force and effect and except for filings necessary to perfect Liens created
pursuant to the Loan Documents, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of the
Company or any of its Subsidiaries or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or other
instrument binding upon the Company or any of its Subsidiaries or its assets,
or give rise to a right thereunder to require any payment to be made by the
Company or any of its Subsidiaries, and (d) will not result in the
creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries, other than Liens created under the Loan Documents.

 

SECTION 3.04.  Financial Condition;
No Material Adverse Change.  (a) 
The Company has heretofore furnished to the Lenders its consolidated balance
sheet and statements of income, stockholders equity and cash flows (i) as
of and for the fiscal year ended December 31, 2007 reported on by Ernst &
Young LLP, independent public accountants, and (ii) as of and for the
fiscal quarter and the portion of the fiscal year ended March 31, 2008,
certified by its chief financial officer. 
Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the Company and
its consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clause (ii) above.

 

(b)  Since December 31,
2007, there has been no material adverse change in the business, assets,
operations or condition, financial or otherwise, of the Company and its
Subsidiaries, taken as a whole.

 

SECTION 3.05.  Properties.  (a) Each of the Company and its
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for Liens permitted
pursuant to Section 6.02 or minor defects in title that do not interfere
with its ability to conduct its business as currently conducted or to utilize
such properties for their intended purposes.

 

(b)  Each of the
Company and its Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property material to its
business, and the use thereof by the Company and its Subsidiaries does not
infringe upon the rights of any other Person, except for any such infringements
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.

 

SECTION 3.06.  Litigation and
Environmental Matters.  (a) There
are no actions, suits, proceedings or investigations by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of
any Borrower, threatened against or affecting the Company or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect or (ii) that involve this Agreement or the Transactions.  There are no labor controversies pending
against or, to the knowledge of the Company, threatened against or affecting
the Company or any of its Subsidiaries (i) which could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect, or (ii) that involve this Agreement or the Transactions.

 

(b)  Except with
respect to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Company nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received notice of any
claim with respect to any Environmental Liability or (iv) knows of any
basis for any Environmental Liability.

 

45

 

(c)  Neither the
Company nor any Subsidiary is party or subject to any law, regulation, rule or
order, or any obligation under any agreement or instrument, that has a Material
Adverse Effect.

 

SECTION 3.07.  Compliance with Laws
and Agreements.  Each of the
Company and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.  The Swiss Borrower represents and warrants
that it does not have at any time outstanding loans in relation to which the
total number of all creditors which are Swiss Non-Qualifying Banks exceeds
twenty under the Swiss Twenty Non-Bank Regulations.

 

SECTION 3.08.  Investment Company
Status.  Neither the Company
nor any of its Subsidiaries is an “investment company” as defined in, or
subject to regulation under, the Investment Company Act of 1940.

 

SECTION 3.09.  Taxes.  Each of the Company and its Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Company or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the
extent that the failure to do so could not reasonably be expected to result in
a Material Adverse Effect.

 

SECTION 3.10.  ERISA.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.

 

SECTION 3.11.  Disclosure.  The Company has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.  Neither the
Information Memorandum nor any of the other reports, financial statements,
certificates or other information furnished by or on behalf of the Company or
any Subsidiary to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with
respect to projected financial information, the Borrowers represent only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time.

 

SECTION 3.12. 
Federal Reserve Regulations.  No part of the proceeds of any
Loan have been used or will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations T, U and X.

 

SECTION 3.13. 
Liens.  There
are no Liens on any of the real or personal properties of the Company or any
Subsidiary except for Liens permitted by Section 6.02.

 

SECTION 3.14.  No Default.  Each Borrower is in full compliance with this
Agreement and no Default or Event of Default has occurred and is continuing.

 

SECTION 3.15.  No Burdensome
Restrictions.  No Borrower is subject to any Burdensome
Restrictions except Burdensome Restrictions permitted under Section 6.08.

 

46

 

SECTION 3.16.  Security Interest in Collateral.  The provisions of this
Agreement and the other Loan Documents create legal and valid Liens on all the
Collateral in favor of the Administrative Agent, for the benefit of the Holders
of Secured Obligations, and such Liens constitute perfected and continuing
Liens on the Collateral (to the extent, in the case of assets covered by the
Security Agreement, that the Collateral consists of the type of property in
which a security interest may be perfected by possession or control, by filing
a financing statement under the UCC as enacted in any relevant jurisdiction or
by a filing of a grant of security interest in the respective form attached to
the Security Agreement in the United States Patent and Trademark Office or in
the United States Copyright Office, in each case as and to the extent provided
in the Security Agreement), securing the Secured Obligations, enforceable
against the applicable Loan Party and all third parties, and having priority
over all other Liens on the Collateral except in the case of (a) Liens
permitted by Section 6.02 and (b) Liens perfected only by possession
(including possession of any certificate of title) to the extent the
Administrative Agent has not obtained or does not maintain possession of such
Collateral.

 

ARTICLE IV

 

Conditions

 

SECTION 4.01.  Effective Date.  The obligations of the Lenders to make Loans
and of any Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 9.02):

 

(a)  The Administrative
Agent (or its counsel) shall have received from (i) each party hereto
either (A) a counterpart of this Agreement signed on behalf of such party
or (B) written evidence satisfactory to the Administrative Agent (which
may include telecopy or electronic transmission of a signed signature page of
this Agreement) that such party has signed a counterpart of this Agreement and (ii) duly
executed copies of the Loan Documents and such other legal opinions,
certificates, documents, instruments and agreements as the Administrative Agent
shall reasonably request in connection with the Transactions, all in form and
substance satisfactory to the Administrative Agent and its counsel and as
further described in the list of closing documents attached as Exhibit E.

 

(b) 
The Administrative Agent shall have received a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated the Effective
Date) of each of (i) Squire, Sanders & Dempsey L.L.P., special
U.S. counsel for the Loan Parties, substantially in the form of Exhibit B-1,
(ii) Staiger, Schwald & Partner AG, special Swiss counsel for the
Loan Parties, substantially in the form of Exhibit B-2, and (iii) Squire,
Sanders & Dempsey L.L.P., special U.K. counsel for the Loan Parties,
substantially in the form of Exhibit B-3 and, in each case,
covering such other matters relating to the Loan Parties, the Loan Documents or
the Transactions as the Administrative Agent shall reasonably request.  The Company hereby requests such counsels to
deliver such opinions.

 

(c) 
The Administrative Agent shall have received the following items: (i) copies
of the Company’s Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the fiscal years ended December 31, 2006 and December 31,
2007, respectively, (ii) copies of the Company’s Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission for the fiscal quarter ended March 31,
2008, and (iii) financial statement projections through and including the
Company’s 2013 fiscal year (including a detailed description of the assumptions
used in preparing such projections), as set forth in the Information
Memorandum.

 

47

 

(d) 
The Administrative Agent shall have received such documents and certificates as
the Administrative Agent or its counsel may reasonably request relating to the
organization, existence and good standing of the initial Loan Parties, the
authorization of the Transactions and any other legal matters relating to such
Loan Parties, the Loan Documents or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel and as further described
in the list of closing documents attached as Exhibit E.

 

(e)  The Administrative
Agent shall have received a certificate, dated the Effective Date and signed by
the President, a Vice President or a Financial Officer of the Company,
confirming compliance with the conditions set forth in paragraphs (a) and (b) of
Section 4.02.

 

(f)  The Administrative
Agent shall have received evidence satisfactory to it that any credit facility
currently in effect for the Company shall have been terminated and cancelled
and all indebtedness thereunder shall have been fully repaid (except to the
extent being so repaid with the initial Revolving Loans) and any and all liens
thereunder shall have been terminated.

 

(g)  The Administrative
Agent shall have received evidence reasonably satisfactory to it that all
governmental and third party approvals necessary or, in the discretion of the
Administrative Agent, advisable in connection with the Transactions and the
continuing operations of the Company and its Subsidiaries have been obtained
and are in full force and effect.

 

(h)  The Administrative
Agent shall have received all fees and other amounts due and payable on or
prior to the Effective Date, including, to the extent invoiced, reimbursement
or payment of all reasonable out-of-pocket expenses required to be reimbursed
or paid by the Company pursuant to Section 9.03(a)(i).

 

(i)  The Administrative
Agent shall have received the results of a recent lien search in each of the
jurisdictions where the Domestic Loan Parties are organized, and such search
shall reveal no liens on any of the assets of the Domestic Loan Parties except
for liens permitted by Section 6.02 or discharged on or prior to the
Effective Date pursuant to a pay-off letter or other documentation satisfactory
to the Administrative Agent.

 

(j)   The Administrative Agent shall have received (i) the
certificates representing the shares of Equity Interests pledged pursuant to
the Security Agreement, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of the pledgor
thereof and (ii) each promissory note (if any) pledged to the
Administrative Agent pursuant to the Security Agreement endorsed (without
recourse) in blank (or accompanied by an executed transfer form in blank) by
the pledgor thereof.

 

(k)   Each document (including any UCC financing
statement) required by the Collateral Documents or under law or reasonably
requested by the Administrative Agent to be filed, registered or recorded in
order to create in favor of the Administrative Agent, for the benefit of the
Holders of Secured Obligations, a perfected Lien on the Collateral described
therein and being provided on the Effective Date, prior and superior in right
to any other Person (other than with respect to Liens expressly permitted by Section 6.02),
shall be in proper form for filing, registration or recordation.

 

(l)   The Administrative Agent shall have received
evidence of insurance coverage in form, scope, and substance reasonably
satisfactory to the Administrative Agent and otherwise in compliance with the
terms of Section 5.05.

 

48

 

The
Administrative Agent shall notify the Company and the Lenders of the Effective
Date, and such notice shall be conclusive and binding.

 

SECTION 4.02.  Each Credit Event.  The obligation of each Lender to make a Loan
on the occasion of any Borrowing, and of any Issuing Bank to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:

 

(a)  The
representations and warranties of the Borrowers set forth in this Agreement
shall be true and correct on and as of the date of such Borrowing or the date
of issuance, amendment, renewal or extension of such Letter of Credit, as applicable,
except to the extent that any representation or warranty expressly relates to
an earlier date (in which case such representation or warranty shall relate to
such earlier date).

 

(b)  At the time of and
immediately after giving effect to such Borrowing or the issuance, amendment,
renewal or extension of such Letter of Credit, as applicable, no Default shall
have occurred and be continuing.

 

(c)  No law or
regulation shall prohibit, and no order, judgment or decree of any Governmental
Authority shall enjoin, prohibit or restrain, any Lender from making the
requested Loan or the relevant Issuing Bank or any Lender from issuing,
renewing, extending or increasing the face amount of or participating in the
Letter of Credit requested to be issued, renewed, extended or increased.

 

Each Borrowing and each issuance, amendment,
renewal or extension of a Letter of Credit shall be deemed to constitute a
representation and warranty by the Borrowers on the date thereof as to the
matters specified in paragraphs (a) and (b) of this Section.

 

ARTICLE V

 

Affirmative Covenants

 

Until
the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Company covenants and agrees with
the Lenders that:

 

SECTION 5.01.  Financial Statements
and Other Information.  The
Company will furnish to the Administrative Agent and each Lender:

 

(a) 
within ninety (90) days after the end of each fiscal year of the Company, its
audited consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal
year, all reported on by Ernst & Young LLP or other independent public
accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Company and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied;

 

(b) 
within forty-five (45) days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, its consolidated balance sheet and
related statements of

 

49

 

operations, stockholders’
equity and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Company and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;

 

(c) 
concurrently with any delivery of financial statements under clause (a) or
(b) above, a certificate of a Financial Officer of the Company (i) certifying
as to whether a Default has occurred and, if a Default has occurred, specifying
the details thereof and any action taken or proposed to be taken with respect
thereto, (ii) setting forth reasonably detailed calculations demonstrating
compliance with Section 6.10 and (iii) stating whether any change in
GAAP or in the application thereof has occurred since the date of the audited
financial statements referred to in Section 3.04 and, if any such change
has occurred, specifying the effect of such change on the financial statements
accompanying such certificate;

 

(d) 
concurrently with any delivery of financial statements under clause (a) above,
a certificate of the accounting firm that reported on such financial statements
stating whether they obtained knowledge during the course of their examination
of such financial statements of any Default (which certificate may be limited
to the extent required by accounting rules or guidelines);

 

(e) 
as soon as available, but in any event not more than thirty (30) days after the
end of each fiscal year of the Company, a copy of the plan and forecast
(including a projected consolidated and consolidating balance sheet, income
statement and funds flow statement) of the Company for each month of such
fiscal year in form reasonably satisfactory to the Administrative Agent;

 

(f) 
promptly after the same become publicly available, copies of all periodic and
other reports, proxy statements and other materials filed by the Company or any
Subsidiary with the Securities and Exchange Commission, or any Governmental
Authority succeeding to any or all of the functions of said Commission, or with
any national securities exchange, or distributed by the Company to its
shareholders generally, as the case may be; and

 

(g) 
promptly following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Company or any
Subsidiary, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.

 

Reports, documents or financial information
required to be delivered pursuant to Sections 5.01(a), 5.01(b) or 5.01(e) (to
the extent any such financial statements, reports, proxy statements or other
materials are included in materials otherwise filed with the Securities and
Exchange Commission) may be delivered electronically and if so, shall be deemed
to have been delivered on the date on which Borrower files such materials or
provides a link thereto on its website on the internet; provided that Borrower
shall provide paper copies to the Administrative Agent of the compliance
certificates required by Section 5.01(c). Notwithstanding the foregoing,
the Borrower shall deliver paper copies of any financial statement referred to
in Section 5.01 to the Administrative Agent if the Administrative Agent
requests the Borrower to furnish such paper copies until written notice to
cease delivering such paper copies is given by the Administrative Agent.

 

50

 

SECTION 5.02.  Notices of Material
Events.  The Company will
furnish to the Administrative Agent and each Lender prompt written notice of
the following:

 

(a) 
the occurrence of any Default;

 

(b)  the filing or
commencement of any action, suit or proceeding by or before any arbitrator or
Governmental Authority against or affecting the Company or any Affiliate
thereof that, if adversely determined, could reasonably be expected to result
in a Material Adverse Effect;

 

(c) 
the occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, could reasonably be expected to result in a Material
Adverse Effect; and

 

(d) 
any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.

 

Each notice delivered under this Section shall be accompanied by a
statement of a Financial Officer or other executive officer of the Company
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.

 

SECTION 5.03.  Existence; Conduct
of Business.  The Company
will, and will cause each of its Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, qualifications, licenses, permits, privileges,
franchises, governmental authorizations and intellectual property rights
material to the conduct of its business, and maintain all requisite authority
to conduct its business in each jurisdiction in which its business is
conducted; provided that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution
permitted under Section 6.03.

 

SECTION 5.04.  Payment of
Obligations.  The Company
will, and will cause each of its Subsidiaries to, pay its obligations,
including Tax liabilities, that, if not paid, could result in a Material
Adverse Effect before the same shall become delinquent or in default, except
where (a) the validity or amount thereof is being contested in good faith
by appropriate proceedings, (b) the Company or such Subsidiary has set
aside on its books adequate reserves with respect thereto in accordance with GAAP
and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.

 

SECTION 5.05.  Maintenance of
Properties; Insurance.  The
Company will, and will cause each of its Subsidiaries to, (a) keep and
maintain all property material to the conduct of its business in good working
order and condition, ordinary wear and tear excepted, and (b) maintain
with financially sound and reputable carriers (i) insurance in such
amounts (with no greater risk retention) and against such risks (including loss
or damage by fire and loss in transit; theft, burglary, pilferage, larceny,
embezzlement, and other criminal activities; business interruption; and general
liability) and such other hazards, as is customarily maintained by companies of
established repute engaged in the same or similar businesses operating in the
same or similar locations and (ii) all insurance required pursuant to the
Collateral Documents.  The Company will
furnish to the Lenders, upon request of the Administrative Agent, information
in reasonable detail as to the insurance so maintained.  The Company shall deliver to the
Administrative Agent endorsements (x) to all “All Risk” physical damage
insurance policies on all of the Domestic Loan Parties’ tangible personal
property and assets and business interruption insurance policies naming the
Administrative Agent as lender loss payee, and (y) to all general
liability and other liability policies naming the Administrative Agent an
additional insured.  In the event the
Company or any of its Subsidiaries at any time or times hereafter shall fail to
obtain or maintain any of the policies or

 

51

 

insurance required herein or to pay any premium in whole or in part
relating thereto, then the Administrative Agent, without waiving or releasing
any obligations or resulting Default hereunder, may at any time or times
thereafter (but shall be under no obligation to do so) obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto which the Administrative Agent deems advisable (in its good
faith, reasonable credit judgment).  All
sums so disbursed by the Administrative Agent shall constitute part of the
Obligations, payable as provided in this Agreement.  The Company will furnish to the
Administrative Agent and the Lenders prompt written notice of any casualty or
other insured damage to any material portion of the Collateral or the
commencement of any action or proceeding for the taking of any material portion
of the Collateral or interest therein under power of eminent domain or by
condemnation or similar proceeding.

 

SECTION 5.06.  Books and Records;
Inspection Rights.  The
Company will, and will cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities.  The Company will, and will cause each of its
Subsidiaries to, permit any representatives designated by the Administrative
Agent or any Lender, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably
requested.  The Company acknowledges that
the Administrative Agent, after exercising its rights of inspection, may prepare
and distribute to the Lenders certain reports pertaining to the Company and its
Subsidiaries’ assets for internal use by the Administrative Agent and the
Lenders.

 

SECTION 5.07.  Compliance with Laws
and Material Contractual Obligations.  The Company will, and will cause each of its
Subsidiaries to, (i) comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property (including
without limitation Environmental Laws) and (ii) perform in all material
respects its obligations under material agreements to which it is a party, in
each case except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.  The Swiss Borrower shall at all times ensure
that it complies with the Swiss Twenty Non-Bank Regulations.

 

SECTION 5.08.  Use of Proceeds.  The proceeds of the Loans will be used only
to finance the working capital needs, and for general corporate purposes, of
the Company and its Subsidiaries in the ordinary course of business.  No part of the proceeds of any Loan will be
used, whether directly or indirectly, for any purpose that entails a violation
of any of the Regulations of the Board, including Regulations T, U and X.

 

SECTION 5.09.  Subsidiary
Guarantors; Pledges; Additional Collateral; Further Assurances.

 

(a)  As promptly as
possible but in any event within thirty (30) days (or such later date as may be
agreed upon by the Administrative Agent) after any Person becomes a Subsidiary
or any Subsidiary qualifies independently as, or is designated by the Company
or the Administrative Agent as, a Subsidiary Guarantor pursuant to the
definitions of “Material Subsidiary” and “Subsidiary Guarantor”, the Company
shall provide the Administrative Agent with written notice thereof setting
forth information in reasonable detail describing the material assets of such
Person and shall cause each such Subsidiary which also qualifies as a
Subsidiary Guarantor to deliver to the Administrative Agent a joinder to the
Subsidiary Guaranty or, in the case of a Foreign Subsidiary, such other
guarantee agreements as may be requested by the Administrative Agent and (in
the case of a Domestic Loan Party) the Security Agreement (in each case in the
form contemplated thereby) pursuant to which such Subsidiary agrees to be bound
by the terms and provisions thereof, such joinder to the Subsidiary Guaranty
and the Security Agreement to be accompanied by appropriate corporate
resolutions, other corporate documentation and

 

52

 

legal opinions in
form and substance reasonably satisfactory to the Administrative Agent and its
counsel.  Notwithstanding the foregoing,
no such Subsidiary Guaranty from the Company’s Taiwanese Subsidiary (or any
other Foreign Subsidiary which is the successor by merger to the Taiwanese
Subsidiary) shall be required hereunder until the date which is sixty (60) days
after the Effective Date (or such later date as the Administrative Agent may
agree in the exercise of its reasonable discretion with respect thereto).

 

(b)   The Company will cause, and will cause each
other Domestic Loan Party to cause, all of its owned property (whether
personal, tangible, intangible, or mixed but excluding real property and any
other property which the Administrative Agent determines, in its good faith,
reasonable credit judgment, does not provide material credit support for the
benefit of the Holders of Secured Obligations) to be subject at all times to
first priority, perfected Liens in favor of the Administrative Agent for the
benefit of the Holders of Secured Obligations to secure the Secured Obligations
in accordance with the terms and conditions of the Collateral Documents,
subject in any case to Liens permitted by Section 6.02.  Further, without limiting the generality of
the foregoing, the Company will cause the Applicable Pledge Percentage of the
issued and outstanding Equity Interests of each Pledge Subsidiary directly
owned by the Company or any other Loan Party to be subject at all times to a
first priority, perfected Lien in favor of the Administrative Agent to secure
the Secured Obligations in accordance with the terms and conditions of the
Collateral Documents or such other security documents as the Administrative
Agent shall reasonably request.  Notwithstanding
the foregoing, no such pledge agreement in respect of the Equity Interests of a
Foreign Subsidiary directly owned by a Foreign Loan Party shall be required
hereunder (A) until the occurrence of a Foreign Pledge Trigger Event with
respect to such Foreign Subsidiary or such later date as the Administrative
Agent may agree in the exercise of its reasonable discretion with respect
thereto, and (B) to the extent the Administrative Agent or its counsel
determines that such pledge would not provide material credit support for the
benefit of the Holders of Secured Obligations pursuant to legally valid,
binding and enforceable pledge agreements.

 

(c)  Without
limiting the foregoing, the Company will, and will cause each Subsidiary to,
execute and deliver, or cause to be executed and delivered, to the
Administrative Agent such documents, agreements and instruments, and will take
or cause to be taken such further actions (including the filing and recording
of financing statements, fixture filings, and other documents and such other
actions or deliveries of the type required by Section 4.01, as
applicable), which may be required by law or which the Administrative Agent
may, from time to time, reasonably request to carry out the terms and
conditions of this Agreement and the other Loan Documents and to ensure
perfection and priority of the Liens created or intended to be created by the
Collateral Documents, all at the expense of the Company.

 

(d)  If any assets
(excluding real property and any other property which the Administrative Agent
determines, in its good faith, reasonable credit judgment, does not provide
material credit support for the benefit of the Holders of Secured Obligations)
are acquired by a Domestic Loan Party after the Effective Date (other than
assets constituting Collateral under the Security Agreement that become subject
to the Lien under the Security Agreement upon acquisition thereof), the Company
will notify the Administrative Agent thereof, and, if requested by the
Administrative Agent in accordance with the Security Agreement, the Company
will cause such assets to be subjected to a Lien securing the Secured
Obligations and will take, and cause the other Loan Parties to take, such
actions as shall be necessary or reasonably requested by the Administrative
Agent to grant and perfect such Liens, including actions described in paragraph
(c) of this Section, all at the expense of the Company.

 

(e)  Notwithstanding
the foregoing, nothing in
a Collateral Document shall oblige the Swiss Borrower to make any payment in
respect of such Collateral Document for any other Loan Party which is not a
Subsidiary of the Swiss Borrower unless such payments are limited to the amount
of the freely disposable shareholders equity of the Swiss Borrower at the time
of the enforcement of the obligations and liabilities under such Collateral
Document.  The freely disposable
shareholder equity shall

 

53

 

be determined in accordance with Swiss law and Swiss accounting principles
and shall correspond to the Swiss Borrower’s total shareholder equity less the
total of (i) its aggregate share capital and (ii) its statutory
reserves (including reserves for own shares and revaluations as well as agio)
to the extent such reserves are not available for distribution at the time of
the enforcement of the obligations and liabilities of the Swiss Borrower under
such Collateral Document for the obligations under the Loan Documents of any
other Loan Party which is not a subsidiary of the Swiss Borrower, which amount
shall be (a) determined on the basis of an audited annual or interim
balance sheet of the Swiss Borrower, (b) approved by the auditors of the
Swiss Borrower as distributable amount and (c) approved by a shareholders’
resolution of the Swiss Borrower in accordance with the provisions of the Swiss
Code of Obligations.

 

ARTICLE VI

 

Negative Covenants

 

Until
the Commitments have expired or terminated and the principal of and interest on
each Loan and all fees payable hereunder have been paid in full and all Letters
of Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Company covenants and agrees with the Lenders that:

 

SECTION 6.01.  Indebtedness.  The Company will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:

 

(a) 
the Secured Obligations;

 

(b) 
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 and
extensions, renewals and replacements of any such Indebtedness with
Indebtedness of a similar type that does not increase the outstanding principal
amount thereof;

 

(c) 
Indebtedness of the Company to any Subsidiary and of any Subsidiary to the
Company or any other Subsidiary; provided (i) that Indebtedness of
any Subsidiary that is not a Loan Party to any Loan Party shall be subject to
the limitations set forth in Section 6.04(d) and (ii) Indebtedness
consisting of intercompany loans and advances to any Subsidiary of the Swiss
Borrower which are funded with the proceeds of any Loans hereunder shall be
borrowed by the Swiss Borrower until the Swiss Borrower Sublimit is fully
utilized and thereafter by the Company;

 

(d) 
Guarantees by the Company of Indebtedness of any Subsidiary and by any
Subsidiary of Indebtedness of the Company or any other Subsidiary;

 

(e) 
Indebtedness of the Company or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien 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 (e) shall not exceed $10,000,000 at
any time outstanding;

 

54

 

(f) 
Indebtedness of the Company or any Subsidiary as an account party in respect of
trade letters of credit;

 

(g) 
Indebtedness of Foreign Subsidiaries in an aggregate principal amount not
exceeding $7,500,000 at any time outstanding;

 

(h) 
Indebtedness of the Company or any Subsidiary secured by a Lien on any asset of
the Company or any Subsidiary; provided that the aggregate outstanding
principal amount of Indebtedness permitted by this clause (h) shall not in
the aggregate exceed $10,000,000 at any time; provided, further,
that any Subordinated Indebtedness incurred in reliance on this clause (h) shall
be on terms and conditions reasonably satisfactory to the Administrative Agent;

 

(i) 
Indebtedness with respect to Swap Obligations permitted under Section 6.05
or with respect to Banking Services Obligations;

 

(j) 
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

 

(k) 
unsecured Indebtedness in an aggregate principal amount not exceeding
$10,000,000 at any time outstanding; provided, that any Subordinated
Indebtedness incurred in reliance on this clause (k) shall be on terms and
conditions reasonably satisfactory to the Administrative Agent.

 

SECTION 6.02.  Liens.  The Company will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable) or rights in respect of any
thereof, except:

 

(a) 
Liens created pursuant to any Loan Document;

 

(b) 
Permitted Encumbrances;

 

(c) 
any Lien on any property or asset of the Company or any Subsidiary existing on
the date hereof and set forth in Schedule 6.02; provided that (i) such
Lien shall not apply to any other property or asset of the Company or any
Subsidiary and (ii) such Lien shall secure only those obligations which it
secures on the date hereof and extensions, renewals and replacements thereof
that do not increase the outstanding principal amount thereof;

 

(d) 
any Lien existing on any property or asset prior to the acquisition thereof by
the Company or any Subsidiary or existing on any property or asset of any
Person that becomes a Subsidiary after the date hereof prior to the time such
Person becomes a Subsidiary; provided that (i) such Lien is not
created in contemplation of or in connection with such acquisition or such
Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not
apply to any other property or assets of the Company or any Subsidiary and (iii) such
Lien shall secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as the case may be,
and extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;

 

(e) 
Liens and rights of set-off of financial institutions on deposit accounts and
securities accounts maintained with such financial institutions;

 

55

 

(f) 
Liens on fixed or capital assets acquired, constructed or improved by the
Company or any Subsidiary; provided that (i) such security
interests secure Indebtedness permitted by clause (e) of Section 6.01,
(ii) such security interests and the Indebtedness secured thereby are
incurred prior to or within ninety (90) days after such acquisition or the
completion of such construction or improvement, (iii) the Indebtedness
secured thereby does not exceed the cost of acquiring, constructing or
improving such fixed or capital assets and (iv) such security interests
shall not apply to any other property or assets of the Company or any
Subsidiary;

 

(g) 
Liens securing Indebtedness permitted under Section 6.01(j) so long
as such security interest shall only encumber the proposed manufacturing and
distribution center in Taiwan or China; and

 

(h) 
Liens on assets of the Company and its Subsidiaries not otherwise permitted
above so long as the aggregate principal amount of the Indebtedness subject to
such Liens does not at any time exceed $10,000,000.

 

SECTION 6.03.  Fundamental Changes
and Asset Sales.  (a) The
Company will not, and will not permit any Subsidiary to, merge into or
consolidate with any other Person, or permit any other Person to merge into or
consolidate with it, or sell, transfer, lease or otherwise dispose of (in one
transaction or in a series of transactions) any of its assets, (including
pursuant to a Sale and Leaseback Transaction), or any of the Equity Interests
of any of its Subsidiaries (in each case, whether now owned or hereafter
acquired), or liquidate or dissolve, except that, if at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be
continuing:

 

(i)  any Person may
merge into the Company in a transaction in which the Company is the surviving
corporation;

 

(ii)  any Subsidiary
may merge into a Loan Party in a transaction in which the surviving entity is
such Loan Party (provided that any such merger involving the Company must
result in the Company as the surviving entity);

 

(iii)  any Subsidiary
may sell, transfer, lease or otherwise dispose of its assets to a Loan Party;
and

 

(iv)  the Company and
its Subsidiaries may (A) sell inventory in the ordinary course of
business, (B) effect sales, trade-ins or dispositions of used equipment
for value in the ordinary course of business consistent with past practice, (C) enter
into licenses of technology in the ordinary course of business, and (D) make
any other sales, transfers, leases or dispositions that, together with all
other property of the Company and its Subsidiaries previously leased, sold or
disposed of as permitted by this clause (D) during any fiscal year of the
Company, does not exceed $5,000,000.

 

(b) 
The Company will not, and will not permit any of its Subsidiaries to, engage to
any material extent in any business other than businesses of the type conducted
by the Company and its Subsidiaries on the date of execution of this Agreement
and businesses reasonably related thereto.

 

(c) 
The Company will not, nor will it permit any of its Subsidiaries to, change its
fiscal year from the basis in effect on the Effective Date.

 

SECTION 6.04.  Investments, Loans,
Advances, Guarantees and Acquisitions.  The Company will not, and will not permit any
of its Subsidiaries to, purchase, hold or acquire (including

 

56

 

pursuant to any merger with any Person that was not a wholly owned
Subsidiary prior to such merger) any capital stock, evidences of indebtedness
or other securities (including any option, warrant or other right to acquire
any of the foregoing) of, make or permit to exist any loans or advances to,
Guarantee any obligations of, or make or permit to exist any investment or any
other interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any Person or any assets of any other
Person constituting a business unit, except:

 

(a) 
Permitted Investments;

 

(b) 
Permitted Acquisitions;

 

(c) 
investments by the Company and its Subsidiaries existing on the date hereof in
the capital stock of the Subsidiaries;

 

(d) 
investments, loans or advances made by the Company in or to any Subsidiary and
made by any Subsidiary to the Company (provided that (i) not more than an
aggregate amount of $7,500,000 in investments, loans or advances or capital
contributions may be made and remain outstanding, during the term of this
Agreement, by Loan Parties to Subsidiaries which are not Loan Parties and (ii) investments,
loans and advances to any Subsidiary of the Swiss Borrower which are funded
with the proceeds of any Loans hereunder shall be borrowed by the Swiss
Borrower until the Swiss Borrower Sublimit is fully utilized and thereafter by
the Company);

 

(e) 
Guarantees constituting Indebtedness permitted by Section 6.01;

 

(f) 
investments in joint ventures so long as the aggregate amount of all such
investments, when aggregated with the aggregate consideration paid in respect
of Permitted Acquisitions, does not exceed the Permitted Acquisition/JV Amount
during the term of this Agreement; and

 

(g)   any other investment, loan or advance (other
than acquisitions) so long as the aggregate amount of all such investments,
loans and advances does not exceed $5,000,000 during the term of this
Agreement.

 

SECTION 6.05.  Swap Agreements.  The Company will not, and will not permit any
of its Subsidiaries to, enter into any Swap Agreement, except (a) Swap
Agreements entered into to hedge or mitigate risks to which the Company or any
Subsidiary has actual exposure (other than those in respect of Equity Interests
of the Company or any of its Subsidiaries), and (b) Swap Agreements
entered into in order to effectively cap, collar or exchange interest rates
(from fixed to floating rates, from one floating rate to another floating rate
or otherwise) with respect to any interest-bearing liability or investment of
the Company or any Subsidiary.

 

SECTION 6.06.  Transactions with Affiliates.  The Company will not, and will not permit any
of its Subsidiaries to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except (a) in the ordinary course of business at prices and on terms and
conditions not less favorable to the Company or such Subsidiary than could be
obtained on an arm’s-length basis from unrelated third parties, (b) transactions
between or among the Company and its wholly owned Subsidiaries not involving
any other Affiliate and (c)  any Restricted Payment permitted by Section 6.07.

 

SECTION 6.07.  Restricted Payments.  The Company will not, and will not permit any
of its Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, except, so long as no Default or Event of
Default has occurred and is continuing prior to making

 

57

 

such Restricted Payment or would arise after giving effect (including
pro forma effect) thereto, (a) the Company may declare and pay dividends
with respect to its Equity Interests payable solely in additional shares of its
common stock, (b) Subsidiaries may declare and pay dividends ratably with
respect to their Equity Interests, (c) the Company may make Restricted
Payments pursuant to and in accordance with stock option plans or other benefit
plans for management or employees of the Company and its Subsidiaries, (d) the
Company may pay regularly scheduled dividends with respect to its common stock,
(e) the Company may redeem Equity Interests owned by any executive of the
Company, if such Equity Interests were acquired by such executive pursuant to
the Hardinge 2002 Stock Incentive Plan, and any such executive has the right to
require the Company to redeem such Equity Interests to discharge tax
liabilities resulting from the acquisition or ownership of such Equity
Interests and (f) the Company and its Subsidiaries may make any other
repurchase of its common stock so long as the aggregate amount of all such
stock repurchases during the term of this Agreement does not exceed
$10,000,000.

 

SECTION 6.08.  Restrictive Agreements.  The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Company or any Subsidiary to
create, incur or permit to exist any Lien upon any of its property or assets,
or (b) the ability of any Subsidiary to pay dividends or other
distributions with respect to holders of its Equity Interests or to make or
repay loans or advances to the Company or any other Subsidiary or to Guarantee
Indebtedness of the Company or any other Subsidiary; provided that (i) the
foregoing shall not apply to restrictions and conditions imposed by law or by
any Loan Document, (ii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iii) clause (a) of the foregoing shall not apply to restrictions or
conditions imposed by any agreement relating to secured Indebtedness permitted
by this Agreement if such restrictions or conditions apply only to the property
or assets securing such Indebtedness and (iv) clause (a) of the foregoing
shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof.

 

SECTION 6.09.  Subordinated Indebtedness and Amendments
to Subordinated Indebtedness Documents. 
The Company will not, and will not permit any Subsidiary to, directly or
indirectly voluntarily prepay, defease or in substance defease, purchase,
redeem, retire or otherwise acquire, any Subordinated Indebtedness or any
Indebtedness from time to time outstanding under the Subordinated Indebtedness Documents.  Furthermore, the Company will not, and will
not permit any Subsidiary to, amend the Subordinated Indebtedness Documents or
any document, agreement or instrument evidencing any Indebtedness incurred
pursuant to the Subordinated Indebtedness Documents (or any replacements,
substitutions, extensions or renewals thereof) or pursuant to which such
Indebtedness is issued where such amendment, modification or supplement
provides for the following or which has any of the following effects:

 

(a)           increases the overall principal
amount of any such Indebtedness or increases the amount of any single scheduled
installment of principal or interest;

 

(b)           shortens or accelerates the date upon
which any installment of principal or interest becomes due or adds any additional
mandatory redemption provisions;

 

(c)           shortens the final maturity date of
such Indebtedness or otherwise accelerates the amortization schedule with
respect to such Indebtedness;

 

(d)           increases the rate of interest
accruing on such Indebtedness;

 

58

 

(e)           provides for the payment of additional fees or increases
existing fees;

 

(f)            amends or modifies any financial or negative covenant (or
covenant which prohibits or restricts the Company or any Subsidiary from taking
certain actions) in a manner which is more onerous or more restrictive in any
material respect to the Company or such Subsidiary or which is otherwise
materially adverse to the Company, any Subsidiary and/or the Lenders or, in the
case of any such covenant, which places material additional restrictions on the
Company or such Subsidiary or which requires the Company or such Subsidiary to
comply with more restrictive financial ratios or which requires the Company to
better its financial performance, in each case from that set forth in the existing
applicable covenants in the Subordinated Indebtedness Documents or the
applicable covenants in this Agreement; or

 

(g)           amends, modifies or adds any affirmative covenant in a
manner which (i) when taken as a whole, is materially adverse to the
Company, any Subsidiary and/or the Lenders or (ii) is more onerous than
the existing applicable covenant in the Subordinated Indebtedness Documents or
the applicable covenant in this Agreement.

 

SECTION 6.10.  Financial Covenants.

 

(a)  Maximum
Leverage Ratio.   The Company will
not permit the ratio (the “Leverage Ratio”), determined as of the end of
each of its fiscal quarters ending on and after June 30, 2008, of (i) Consolidated
Funded Indebtedness to (ii) Consolidated EBITDA for the period of four (4) consecutive
fiscal quarters ending with the end of such fiscal quarter, all calculated for
the Company and its Subsidiaries on a consolidated basis, to be greater than
3.00 to 1.00.

 

(b)  Minimum Fixed
Charge Coverage Ratio.  The Company
will not permit the ratio (the “Fixed Charge Coverage Ratio”),
determined as of the end of each of its fiscal quarters ending on and after June 30,
2008, of (i) Consolidated EBITDA minus Capital Expenditures minus
cash Taxes paid to (ii) Consolidated Fixed Charges, in each case for the
period of four (4) consecutive fiscal quarters ending with the end of such
fiscal quarter, all calculated for the Company and its Subsidiaries on a
consolidated basis, to be less than 1.25 to 1.00.

 

ARTICLE VII

 

Events of Default

 

If any of the following
events (“Events of Default”)
shall occur:

 

(a)  any Borrower shall
fail to pay any principal of any Loan or any reimbursement obligation in
respect of any LC Disbursement when and as the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment
thereof or otherwise;

 

(b)  any Borrower shall
fail to pay any interest on any Loan or any fee or any other amount (other than
an amount referred to in clause (a) of this Article) payable under this
Agreement, when and as the same shall become due and payable, and such failure
shall continue unremedied for a period of three (3) Business Days;

 

(c)  any representation
or warranty made or deemed made by or on behalf of any Borrower or any
Subsidiary in or in connection with this Agreement or any other Loan Document
or any amendment or modification hereof or thereof or waiver hereunder or
thereunder, or in any report,

 

59

 

certificate, financial statement or other document furnished pursuant
to or in connection with this Agreement or any other Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have
been incorrect in any material respect when made or deemed made;

 

(d)  any Borrower shall
fail to observe or perform any covenant, condition or agreement contained in Section 5.02,
5.03 (with respect to any Borrower’s existence), 5.08 or 5.09, in Article VI
or in Article X;

 

(e)  any Borrower or
any Subsidiary Guarantor, as applicable, shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Article) or any other
Loan Document, and such failure shall continue unremedied for a period of
thirty (30) days after notice thereof from the Administrative Agent to the
Company (which notice will be given at the request of any Lender);

 

(f)  the Company or any
Subsidiary shall fail to make any payment (whether of principal or interest and
regardless of amount) in respect of any Material Indebtedness, when and as the
same shall become due and payable (subject to any applicable grace or cure
periods applicable to such Material Indebtedness);

 

(g)  any event or
condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits (with or without the
giving of notice, the lapse of time or both) the holder or holders of any
Material Indebtedness or any trustee or agent on its or their behalf to cause any
Material Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; provided
that this clause (g) shall not apply to secured Indebtedness that becomes
due as a result of the voluntary sale or transfer of the property or assets
securing such Indebtedness;

 

(h)  an involuntary
proceeding shall be commenced or an involuntary petition shall be filed seeking
(i) liquidation, reorganization or other relief in respect of the Company
or any Subsidiary or its debts, or of a substantial part of its assets, under
any Federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Company or any Subsidiary or for a substantial part of its assets, and, in any
such case, such proceeding or petition shall continue undismissed for 60 days
or an order or decree approving or ordering any of the foregoing shall be
entered;

 

(i)  the Company or any
Subsidiary shall (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other relief under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
described in clause (h) of this Article, (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Company or any Subsidiary or for a substantial part
of its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;

 

(j)  the Company or any
Subsidiary shall become unable, admit in writing its inability or fail
generally to pay its debts as they become due;

 

(k)  prejudice to the
provisions of clauses (h) to (j) inclusive, any of the following
occurs in respect of the Swiss Borrower or a Swiss Subsidiary: (i) it is deemed
unable or admits inability to pay its debts as they fall due or is deemed to or
declared to be unable to pay its debts or insolvent

 

60

 

(zahlungsunfähig)
under applicable law, (ii) it ceases or suspends making payments on any of
its debts or announces any intention to do so (or is so deemed for the purposes
of any law applicable to it), (iii) by reason of actual or anticipated
financial difficulties, it commences negotiations with one or more of its
creditors with a view to rescheduling any of its indebtedness or (iv) it
files a petition for the opening of bankruptcy proceedings because of
insolvency (Zahlungsunfähigkeit) pursuant to Section 191(1) of
the Swiss Federal Debt Enforcement and Bankruptcy Act;

 

(l)  one or more
judgments for the payment of money in an aggregate amount in excess of
$5,000,000 shall be rendered against the Company, any Subsidiary or any
combination thereof and the same shall remain undischarged for a period of
thirty (30) consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach
or levy upon any assets of the Company or any Subsidiary to enforce any such
judgment;

 

(m)  an ERISA Event
shall have occurred that, in the opinion of the Required Lenders, when taken
together with all other ERISA Events that have occurred, could reasonably be
expected to result in a Material Adverse Effect;

 

(n)  a Change in
Control shall occur;

 

(o)  the occurrence of
any “default”, as defined in any Loan Document (other than this Agreement) or
the breach of any of the terms or provisions of any Loan Document (other than
this Agreement), which default or breach continues beyond any period of grace
therein provided;

 

(p)   any material provision of any Loan Document
for any reason ceases to be valid, binding and enforceable in accordance with
its terms (or the Company or any Subsidiary shall challenge the enforceability
of any Loan Document or shall assert in writing, or engage in any action or
inaction based on any such assertion, that any provision of any of the Loan
Documents has ceased to be or otherwise is not valid, binding and enforceable
in accordance with its terms); or

 

(q)  any Collateral
Document shall for any reason fail to create a valid and perfected first
priority security interest in any material portion of the Collateral purported
to be covered thereby, except as permitted by the terms of any Loan Document.

 

then, and in every such
event (other than an event with respect to the Company described in clause (h) or
(i) of this Article), and at any time thereafter during the continuance of
such event, the Administrative Agent may, and at the request of the Required
Lenders shall, by notice to the Company, take either or both of the following
actions, at the same or different times:  (i) terminate the Commitments, and
thereupon the Commitments shall terminate immediately, and (ii) declare
the Loans then outstanding to be due and payable in whole (or in part, in which
case any principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrowers accrued hereunder and under the
other Loan Documents, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers; and in case of any event with respect to any
Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
Secured Obligations accrued hereunder and under the other Loan Documents, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrowers.  Upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent may, and at the request
of the Required Lenders shall, exercise any rights and remedies provided to

 

61

 

the Administrative Agent
under the Loan Documents or at law or equity, including all remedies provided
under the UCC.

 

ARTICLE VIII

 

The Administrative Agent

 

Each of the Lenders and the
Issuing Banks hereby irrevocably appoints the Administrative Agent as its agent
and authorizes the Administrative Agent to take such actions on its behalf,
including execution of the other Loan Documents, and to exercise such powers as
are delegated to the Administrative Agent by the terms of the Loan Documents,
together with such actions and powers as are reasonably incidental thereto.

 

The bank serving as the
Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not the Administrative Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
Company or any Subsidiary or other Affiliate thereof as if it were not the
Administrative Agent hereunder.

 

The Administrative Agent
shall not have any duties or obligations except those expressly set forth in
the Loan Documents.  Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be
subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing, (b) the Administrative Agent shall
not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated by the Loan Documents that the Administrative Agent is required to
exercise in writing as directed by the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02), and (c) except as expressly set forth in
the Loan Documents, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Company or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates
in any capacity.  The Administrative
Agent shall not be liable for any action taken or not taken by it with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02) or in the absence of its own gross negligence or
willful misconduct.  The Administrative
Agent shall be deemed not to have knowledge of any Default unless and until
written notice thereof is given to the Administrative Agent by the Company or a
Lender, and the Administrative Agent shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with any Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or in
connection with any Loan Document, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth in any
Loan Document, (iv) the validity, enforceability, effectiveness or genuineness
of any Loan Document or any other agreement, instrument or document, (v) the
creation, perfection or priority of Liens on the Collateral or the existence of
the Collateral or (vi) the satisfaction of any condition set forth in Article IV
or elsewhere in any Loan Document, other than to confirm receipt of items
expressly required to be delivered to the Administrative Agent.

 

The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed
or sent by the proper Person.  The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. 
The

 

62

 

Administrative Agent may
consult with legal counsel (who may be counsel for the Company), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.

 

The Administrative Agent may
perform any and all its duties and exercise its rights and powers by or through
any one or more sub-agents appointed by the Administrative Agent.  The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. 
The exculpatory provisions of the preceding paragraphs shall apply to
any such sub-agent and to the Related Parties of the Administrative Agent and
any such sub-agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as
well as activities as Administrative Agent.

 

Subject to the appointment
and acceptance of a successor Administrative Agent as provided in this
paragraph, the Administrative Agent may resign at any time by notifying the
Lenders, the Issuing Banks and the Company. 
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Company, to appoint a successor.  If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Banks, appoint a successor Administrative Agent which shall be a bank with an
office in New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder.  The fees payable by any Borrower to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between such Borrower and such
successor.  After the Administrative
Agent’s resignation hereunder, the provisions of this Article and Section 9.03
shall continue in effect for the benefit of such retiring Administrative Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while it was acting as
Administrative Agent.

 

Each Lender (including each
Issuing Bank) acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement.  Each
Lender also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document or any related agreement or any document
furnished hereunder or thereunder.

 

None of the Lenders, if any,
identified in this Agreement as a Syndication Agent or Co-Documentation Agent
shall have any right, power, obligation, liability, responsibility or duty
under this Agreement other than those applicable to all Lenders as such.  Without limiting the foregoing, none of such
Lenders shall have or be deemed to have a fiduciary relationship with any
Lender.  Each Lender hereby makes the
same acknowledgments with respect to the relevant Lenders in their respective
capacities as Syndication Agent or Co-Documentation Agents, as applicable, as
it makes with respect to the Administrative Agent in the preceding paragraph.

 

Except with respect to the
exercise of setoff rights of any Lender, in accordance with Section 9.08,
the proceeds of which are applied in accordance with this Agreement, each
Lender agrees that it will not take any action, nor institute any actions or
proceedings, against any Borrower or with

 

63

 

respect to any Loan
Document, without the prior written consent of the Required Lenders or, as may
be provided in this Agreement or the other Loan Documents, with the consent of
the Administrative Agent.

 

The Lenders are not partners
or co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Administrative Agent)
authorized to act for, any other Lender. 
The Administrative Agent shall have the exclusive right on behalf of the
Lenders to enforce the payment of the principal of and interest on any Loan
after the date such principal or interest has become due and payable pursuant
to the terms of this Agreement.

 

In its capacity, the
Administrative Agent is a “representative” of the Holders of Secured
Obligations within the meaning of the term “secured party” as defined in the
New York Uniform Commercial Code.  Each
Lender authorizes the Administrative Agent to enter into each of the Collateral
Documents to which it is a party and to take all action contemplated by such
documents.  Each Lender agrees that no
Holder of Secured Obligations (other than the Administrative Agent) shall have
the right individually to seek to realize upon the security granted by any
Collateral Document, it being understood and agreed that such rights and
remedies may be exercised solely by the Administrative Agent for the benefit of
the Holders of Secured Obligations upon the terms of the Collateral
Documents.  In the event that any
Collateral is hereafter pledged by any Person as collateral security for the
Secured Obligations, the Administrative Agent is hereby authorized, and hereby
granted a power of attorney, to execute and deliver on behalf of the Holders of
Secured Obligations any Loan Documents necessary or appropriate to grant and
perfect a Lien on such Collateral in favor of the Administrative Agent on
behalf of the Holders of Secured Obligations. 
The Lenders hereby authorize the Administrative Agent, at its option and
in its discretion, to release any Lien granted to or held by the Administrative
Agent upon any Collateral (i) as described in Section 9.02(d), (ii) as
permitted by, but only in accordance with, the terms of the applicable Loan
Document; or (iii) if approved, authorized or ratified in writing by the
Required Lenders, unless such release is required to be approved by all of the
Lenders hereunder.  Upon request by the
Administrative Agent at any time, the Lenders will confirm in writing the
Administrative Agent’s authority to release particular types or items of
Collateral pursuant hereto.  Upon any
sale or transfer of assets constituting Collateral which is permitted pursuant
to the terms of any Loan Document, or consented to in writing by the Required
Lenders or all of the Lenders, as applicable, and upon at least five (5) Business
Days’ prior written request by the Company to the Administrative Agent, the
Administrative Agent shall (and is hereby irrevocably authorized by the Lenders
to) execute such documents as may be necessary to evidence the release of the
Liens granted to the Administrative Agent for the benefit of the Holders of
Secured Obligations herein or pursuant hereto upon the Collateral that was sold
or transferred; provided, however, that (i) the
Administrative Agent shall not be required to execute any such document on
terms which, in the Administrative Agent’s opinion, would expose the
Administrative Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in any manner discharge, affect or impair
the Secured Obligations or any Liens upon (or obligations of the Company or any
Subsidiary in respect of) all interests retained by the Company or any
Subsidiary, including (without limitation) the proceeds of the sale, all of
which shall continue to constitute part of the Collateral.

 

Each Borrower, on its behalf
and on behalf of its Subsidiaries, and each Lender, on its behalf and on the
behalf of its affiliated Holders of Secured Obligations, hereby irrevocably
constitute the Administrative Agent as the holder of an irrevocable power of
attorney (fondé de pouvoir within the meaning of Article 2692
of the Civil Code of Québec) in order to hold hypothecs and security granted by
each Borrower or any Subsidiary on property pursuant to the laws of the
Province of Quebec to secure obligations of any Borrower or any Subsidiary
under any bond, debenture or similar title of indebtedness issued by any
Borrower or any Subsidiary in connection with this Agreement, and agree that
the Administrative Agent may act as the bondholder and mandatary with respect to
any bond, debenture or similar title of indebtedness that may be issued by any
Borrower or any Subsidiary and pledged in favor

 

64

 

of the Holders of Secured
Obligations in connection with this Agreement. 
Notwithstanding the provisions of Section 32 of the An Act
respecting the special powers of legal persons (Quebec), JPMorgan Chase Bank,
N.A. as Administrative Agent may acquire and be the holder of any bond issued
by any Borrower or any Subsidiary in connection with this Agreement (i.e., the fondé de pouvoir may acquire and hold the first bond issued
under any deed of hypothec by any Borrower or any Subsidiary).

 

The Administrative Agent is
hereby authorized to execute and deliver any documents necessary or appropriate
to create and perfect the rights of pledge for the benefit of the Holders of
Secured Obligations including a right of pledge with respect to the
entitlements to profits, the balance left after winding up and the voting
rights of the Company as ultimate parent of any subsidiary of the Company which
is organized under the laws of the Netherlands and the Equity Interests of
which are pledged in connection herewith (a “Dutch Pledge”).  Without prejudice to the provisions of this
Agreement and the other Loan Documents, the parties hereto acknowledge and
agree with the creation of parallel debt obligations of the Company or any
relevant Subsidiary as will be described in any Dutch Pledge (the “Parallel
Debt”), including that any payment received by the Administrative Agent in
respect of the Parallel Debt will - conditionally upon such payment not
subsequently being avoided or reduced by virtue of any provisions or enactments
relating to bankruptcy, insolvency, preference, liquidation or similar laws of
general application - be deemed a satisfaction of a pro rata portion of the
corresponding amounts of the Obligations, and any payment to the Holders of
Secured Obligations in satisfaction of the Obligations shall - conditionally
upon such payment not subsequently being avoided or reduced by virtue of any
provisions or enactments relating to bankruptcy, insolvency, preference,
liquidation or similar laws of general application - be deemed as satisfaction
of the corresponding amount of the Parallel Debt.  The parties hereto acknowledge and agree
that, for purposes of a Dutch Pledge, any resignation by the Administrative
Agent is not effective until its rights under the Parallel Debt are assigned to
the successor Administrative Agent.

 

Without prejudice to the
provisions of this Agreement and the other Loan Documents, the parties hereto
acknowledge and agree for the purposes of taking and ensuring the continuing
validity of German law governed pledges (Pfandrechte)
with the creation of parallel debt obligations of the Company as will be
further described in a German law governed parallel debt undertaking.  The Administrative Agent shall (i) hold
such parallel debt undertaking as fiduciary agent (Treuhänder)
and (ii) administer and hold as fiduciary agent (Treuhänder)
any pledge created under a German law governed Foreign Pledge Agreement which
is created in favor of any Secured Party or transferred to any Secured Party
due to its accessory nature (Akzessorietät),
in each case in its own name and for the account of the Holders of Secured
Obligations.  Each Lender (on behalf of
itself and its affiliated Holders of Secured Obligations) hereby authorizes the
Administrative Agent to enter as its representative in its name and on its
behalf into any German law governed Foreign Pledge Agreement, accept as its
representative in its name and on its behalf any pledge under such Foreign
Pledge Agreement and to agree to and execute on its behalf as its
representative in its name and on its behalf amendments, supplements and other
alterations to any such Foreign Pledge Agreement and to release on behalf of
any such Lender or Holder of Secured Obligations any such Foreign Pledge
Agreement and any pledge created under any such Foreign Pledge Agreement in
accordance with the provisions herein and/or the provisions in such Foreign
Pledge Agreement.

 

Without prejudice to the
provisions of this Agreement and the other Loan Documents, the parties hereto
acknowledge and agree for the purposes of taking and ensuring the continuing
validity of Swiss law governed pledges, the Administrative Agent shall hold: (i) the
security that it holds under a Swiss law governed pledge that is accessory in
nature (akzessorisch) for itself and for and on
behalf of the Holders of Secured Obligations as a direct representative (direkte Stellvertretung) and (ii) the security that it
holds under a Swiss law governed pledge that is non-accessory in nature (nicht-akzessorisch) as an agent for the benefit of the
Holders of Secured Obligations (Halten unter einem Treuhandverhältnis).

 

65

 

With regards to each pledge
governed by Swiss law, each Lender (on behalf of itself and its affiliated
Holders of Secured Obligations) hereby appoints and authorizes the
Administrative Agent (i) to enter into, do all actions required in
connection with and enforce (all in accordance with this Agreement) each Loan
Document that is non-accessory in nature (nicht-akzessorisch)
in its own name, but for the benefit of the other Holders of Secured
Obligations, and (ii) to enter into, do all actions required in connection
with and enforce (all in accordance with this Agreement) each Loan Document
that is accessory in nature (akzessorisch)
for itself and for and on behalf of the other Holders of Secured Obligations as
a direct representative (direkter Stellvertreter)
and each of the Lenders (on behalf of itself and its affiliated Holders of
Secured Obligations) and the Borrowers acknowledge that each Holder of Secured
Obligations (including, without limitation, any future Holder of Secured
Obligations) will be a party to such Loan Document.

 

ARTICLE IX

 

Miscellaneous

 

SECTION 9.01.  Notices.  (a) Except in the case of notices and
other communications expressly permitted to be given by telephone (and subject
to paragraph (b) below), all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as
follows:

 

(i)  if to any
Borrower, to it c/o Hardinge Inc., One Hardinge Drive, Elmira, New York 14902,
Attention of Edward J. Gaio, Vice President and Chief Financial Officer
(Telecopy No. (607) 378-4055; Telephone No. (607) 378-4207);

 

(ii)  if to the
Administrative Agent, (A) in the case of Borrowings by the Company
denominated in Dollars, to JPMorgan Chase Bank, N.A., 10 South Dearborn, 7th
Floor, Chicago, IL 60603, Attention of Keely N. Scott (Telecopy No. (312)
385-7103) and (B) in the case of Borrowings by the Swiss Borrower or
Borrowings denominated in Foreign Currencies, to J.P. Morgan Europe Limited,
125 London Wall, London EC2Y 5AJ, Attention of Sue Dalton (Telecopy No. 44
207 777 2360), and in each case with a copy to JPMorgan Chase Bank, N.A., One
Chase Square T-9, Rochester, New York 14604, Attention of Thomas Strasenburgh
(Telecopy No. (585) 797-1850);

 

(iii)  if to an Issuing
Bank, to it at (A) JPMorgan Chase Bank, N.A., 10 South Dearborn, 7th
Floor, Chicago, IL 60603, Attention of Keely N. Scott (Telecopy No. (312)
385-7103) and (B) in the case of any other Issuing Bank, to it at the
address and telecopy number specified from time to time by such Issuing Bank to
the Company and the Administrative Agent;

 

(iv)  if to the
Swingline Lender, to it at JPMorgan Chase Bank, N.A., 10 South Dearborn, 7th
Floor, Chicago, IL 60603, Attention of Keely N. Scott (Telecopy No. (312)
385-7103); and

 

(v)  if to any other
Lender, to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.

 

(b)  Notices and other
communications to the Lenders (including any Issuing Bank) hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall
not apply to notices pursuant to Article II unless otherwise agreed by the
Administrative Agent and the applicable Lender. 
The Administrative Agent or the Company may, in its reasonable
discretion, agree to accept notices and other

 

66

 

communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may
be limited to particular notices or communications.

 

(c)  Any party hereto
may change its address or telecopy number for notices and other communications
hereunder by notice to the other parties hereto.  All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.

 

SECTION 9.02.  Waivers; Amendments.  (a)  No failure or delay by the
Administrative Agent, any Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document 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 rights and remedies
of the Administrative Agent, the Issuing Banks and the Lenders hereunder and
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have.  No waiver of any provision of any Loan Document
or consent to any departure by any Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this
Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.  Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or any Issuing Bank may have had notice or knowledge of such
Default at the time.

 

(b)  Except as provided
in Section 2.20 with respect to an Incremental Term Loan Amendment,
neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrowers and the Required Lenders or by the Borrowers and the
Administrative Agent with the consent of the Required Lenders; provided
that no such agreement shall (i) increase the Commitment of any Lender
without the written consent of such Lender, (ii) reduce the principal
amount of any Loan or LC Disbursement or reduce the rate of interest thereon,
or reduce any fees payable hereunder, without the written consent of each
Lender directly affected thereby, (iii) postpone the scheduled date of
payment of the principal amount of any Loan or LC Disbursement, or any interest
thereon, or any fees payable hereunder, or reduce the amount of, waive or
excuse any such payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender directly affected
thereby, (iv) change Section 2.18(b) or (d) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (v) change any of the provisions of this Section or
the definition of “Required Lenders” or any other provision hereof specifying
the number or percentage of Lenders required to waive, amend or modify any
rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender (it being understood that, solely
with the consent of the parties prescribed by Section 2.20 to be parties
to an Incremental Term Loan Amendment, Incremental Term Loans may be included
in the determination of Required Lenders on substantially the same basis as the
Commitments and the Revolving Loans are included on the Effective Date), (vi) release
the Company or all or substantially all of the Subsidiary Guarantors from their
obligations under Article X or the Subsidiary Guaranty without the written
consent of each Lender, or (vii) except as provided in clause (c) of
this Section or in any Collateral Document, release all or substantially
all of the Collateral, without the written consent of each Lender; provided
further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent, any Issuing Bank or the
Swingline Lender hereunder without the prior written consent of the
Administrative Agent, such Issuing Bank or the Swingline Lender, as the case
may be.

 

67

 

(c)  Notwithstanding
the foregoing, this Agreement and any other Loan Document may be amended (or
amended and restated) with the written consent of the Required Lenders, the
Administrative Agent and the Borrowers to each relevant Loan Document (x) to
add one or more credit facilities (in addition to the Incremental Term Loans
pursuant to an Incremental Term Loan Amendment) to this Agreement and to permit
extensions of credit from time to time outstanding thereunder and the accrued
interest and fees in respect thereof to share ratably in the benefits of this
Agreement and the other Loan Documents with the Revolving Loans, Incremental Term
Loans and the accrued interest and fees in respect thereof and (y) to
include appropriately the Lenders holding such credit facilities in any
determination of the Required Lenders and Lenders.

 

(d)  The Lenders hereby
irrevocably authorize the Administrative Agent, at its option and in its sole
discretion, to release any Liens granted to the Administrative Agent by the
Loan Parties on any Collateral (i) upon the termination of the all
Commitments, payment and satisfaction in full in cash of all Secured Obligations
(other than Unliquidated Obligations), and the cash collateralization of all
Unliquidated Obligations in a manner satisfactory to the Administrative Agent, (ii) constituting
property being sold or disposed of if the Company certifies to the Administrative
Agent that the sale or disposition is made in compliance with the terms of this
Agreement (and the Administrative Agent may rely conclusively on any such
certificate, without further inquiry), (iii) constituting property leased
to the Company or any Subsidiary under a lease which has expired or been
terminated in a transaction permitted under this Agreement, or (iv) as
required to effect any sale or other disposition of such Collateral in
connection with any exercise of remedies of the Administrative Agent and the
Lenders pursuant to Article VII. 
Any such release shall not in any manner discharge, affect, or impair
the Obligations or any Liens (other than those expressly being released) upon
(or obligations of the Loan Parties in respect of) all interests retained by
the Loan Parties, including the proceeds of any sale, all of which shall
continue to constitute part of the Collateral.

 

(e)   If, in connection with any proposed
amendment, waiver or consent requiring the consent of “each Lender” or “each
Lender affected thereby,” the consent of the Required Lenders is obtained, but
the consent of other necessary Lenders is not obtained (any such Lender whose
consent is necessary but not obtained being referred to herein as a “Non-Consenting
Lender”), then the Company may elect to replace a Non-Consenting Lender as
a Lender party to this Agreement, provided that, concurrently with such
replacement, (i) another bank or other entity which is reasonably
satisfactory to the Company, the Administrative Agent shall agree, as of such
date, to purchase for cash the Loans and other Obligations due to the
Non-Consenting Lender pursuant to an Assignment and Assumption and to become a
Lender for all purposes under this Agreement and to assume all obligations of the
Non-Consenting Lender to be terminated as of such date and to comply with the
requirements of clause (b) of Section 9.04, and (ii) each
Borrower shall pay to such Non-Consenting Lender in same day funds on the day
of such replacement (1) all interest, fees and other amounts then accrued
but unpaid to such Non-Consenting Lender by such Borrower hereunder to and
including the date of termination, including without limitation payments due to
such Non-Consenting Lender under Sections 2.15 and 2.17, and (2) an amount,
if any, equal to the payment which would have been due to such Lender on the
day of such replacement under Section 2.16 had the Loans of such
Non-Consenting Lender been prepaid on such date rather than sold to the
replacement Lender.

 

SECTION 9.03.  Expenses; Indemnity; Damage Waiver.  (a)  The Company shall pay (i) all
documented, reasonable out-of-pocket expenses incurred by the Administrative
Agent and its Affiliates, including the reasonable fees, charges and
disbursements of counsel for the Administrative Agent, in connection with the
syndication and distribution (including, without limitation, via the internet
or through a service such as Intralinks) of the credit facilities provided for
herein, the preparation and administration of this Agreement and the other Loan
Documents or any amendments, modifications or waivers of the provisions hereof
or thereof (whether or not the transactions contemplated hereby or

 

68

 

thereby shall be consummated), (ii) all documented, reasonable
out-of-pocket expenses incurred by any Issuing Bank in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all documented, reasonable out-of-pocket
expenses incurred by the Administrative Agent, any Issuing Bank or any Lender,
including the reasonable fees, charges and disbursements of any counsel for the
Administrative Agent, any Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement and
any other Loan Document, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder, including
all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

 

(b)  The Company shall
indemnify the Administrative Agent, each Issuing Bank and each Lender, and each
Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee, incurred by
or asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Loan Document or any
agreement or instrument contemplated thereby, the performance by the parties
hereto of their respective obligations thereunder or the consummation of the
Transactions or any other transactions contemplated hereby, (ii) any Loan
or Letter of Credit or the use of the proceeds therefrom (including any refusal
by any Issuing Bank to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged
presence or release of Hazardous Materials on or from any property owned or
operated by the Company or any of its Subsidiaries, or any Environmental
Liability related in any way to the Company or any of its Subsidiaries, or (iv) any
actual or prospective claim, litigation, investigation or proceeding relating
to any of the foregoing, whether based on contract, tort or any other theory
and regardless of whether any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.

 

(c)  To the extent that
the Company fails to pay any amount required to be paid by it to the
Administrative Agent, any Issuing Bank or the Swingline Lender under paragraph (a) or
(b) of this Section, each Lender severally agrees to pay to the
Administrative Agent, the relevant Issuing Bank or the Swingline Lender, as the
case may be, such Lender’s Applicable Percentage (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount (it being understood that the Company’s failure to pay any
such amount shall not relieve the Company of any default in the payment
thereof); provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred
by or asserted against the Administrative Agent, the relevant Issuing Bank or the
Swingline Lender in its capacity as such.

 

(d)  To the extent
permitted by applicable law, no Borrower shall assert, and each Borrower hereby
waives, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of
the proceeds thereof.

 

(e)  All amounts due
under this Section shall be payable not later than thirty (30) days after
written demand therefor.

 

69

 

SECTION 9.04.  Successors and Assigns.  (a)  The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
an Issuing Bank that issues any Letter of Credit), except that (i) no
Borrower may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by any Borrower without such consent shall be null and
void) and (ii) no Lender (including any Issuing Bank) may assign or
otherwise transfer its rights or obligations hereunder except in accordance
with this Section.  Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the relevant Issuing Bank that
issues any Letter of Credit), Participants (to the extent provided in paragraph
(c) of this Section) and, to the extent expressly contemplated hereby, the
Related Parties of each of the Administrative Agent, the Issuing Banks and the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

(b)(i)       Subject to the conditions set forth in paragraph
(b)(ii) below, any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it) with the prior
written consent (such consent not to be unreasonably withheld) of:

 

(A) the Company
(provided that the Company’s withholding consent to an assignment to a
distressed-debt fund or a vulture fund shall not be deemed to be unreasonable),
provided that no consent of the Company shall be required for an
assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an
Event of Default has occurred and is continuing, any other assignee; and

 

(B) the Administrative
Agent (provided that the Administrative Agent’s withholding consent to an
assignment to a distressed-debt fund or a vulture fund shall not be deemed to
be unreasonable).

 

(ii)  Assignments shall
be subject to the following additional conditions:

 

(A) except in the case
of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or
an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans of any Class, the amount of the Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Company and the Administrative Agent otherwise consent, provided that no
such consent of the Company shall be required if an Event of Default has
occurred and is continuing;

 

(B) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement, provided that this
clause shall not be construed to prohibit the assignment of a proportionate
part of all the assigning Lender’s rights and obligations in respect of one Class of
Commitments or Loans;

 

(C) the parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Assumption, together with a processing and recordation fee of $3,500, such
fee to be paid by either the assigning Lender or the assignee Lender or shared
between such Lenders;

 

70

 

(D) the assignee, if it
shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire; and

 

(E) a Lender may only
assign or transfer any of such Lender’s rights and benefits in respect of a
Loan made to the Swiss Borrower to an assignee which is a Swiss Qualifying
Bank.

 

For the purposes of this Section 9.04(b),
the term “Approved Fund” has the following meaning:

 

“Approved Fund” means
any Person (other than a natural person) that is engaged in making, purchasing,
holding or investing in bank loans and similar extensions of credit in the
ordinary course of its business and that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate
of an entity that administers or manages a Lender.

 

(iii)  Subject to
acceptance and recording thereof pursuant to paragraph (b)(iv) of this
Section, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections
2.15, 2.16, 2.17 and 9.03).  Any
assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this Section 9.04 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in accordance with paragraph (c) of this Section.

 

(iv)  The
Administrative Agent, acting for this purpose as an agent of each Borrower,
shall maintain at one of its offices a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses
of the Lenders, and the Commitment of, and principal amount of the Loans and LC
Disbursements owing to, each Lender pursuant to the terms hereof from time to time
(the “Register”).  The entries in
the Register shall be conclusive, and the Borrowers, the Administrative Agent,
the Issuing Banks and the Lenders may treat each Person whose name is recorded
in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Company, any Issuing Bank and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.

 

(v)  Upon its receipt
of a duly completed Assignment and Assumption executed by an assigning Lender
and an assignee, the assignee’s completed Administrative Questionnaire (unless
the assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in paragraph (b) of this Section and any written
consent to such assignment required by paragraph (b) of this Section, the
Administrative Agent shall accept such Assignment and Assumption and record the
information contained therein in the Register; provided that if either
the assigning Lender or the assignee shall have failed to make any payment
required to be made by it pursuant to Section 2.05(c), 2.06(d) or
(e), 2.07(b), 2.18(d) or 9.03(c), the Administrative Agent shall have no
obligation to accept such Assignment and Assumption and record the information
therein in the Register unless and until such payment shall have been made in
full, together with all accrued interest thereon.  No assignment shall be effective for purposes
of this Agreement unless it has been recorded in the Register as provided in
this paragraph.

 

71

 

(c)           (i)  Any Lender may, without the
consent of the Company, the Administrative Agent, any Issuing Bank or the Swingline
Lender, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of
such Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided that (A) such
Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (C) the Borrowers, the Administrative
Agent, the Issuing Banks and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and (D) a Lender or Participant, as the
case may be, may only sell participations to one or more Swiss Qualifying Banks
in respect of a Loan made to the Swiss Borrower.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant.  Subject to paragraph (c)(ii) of this
Section, each Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section.  To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 9.08
as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as
though it were a Lender.

 

(ii)           A Participant shall not be entitled
to receive any greater payment under Section 2.15 or 2.17 than the
applicable Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Company’s prior written consent.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.17
unless the Company is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Company, to comply with Section 2.17(e) as
though it were a Lender.

 

(d)           Any Lender may at any time pledge or
assign a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including without limitation
any pledge or assignment to secure obligations to a Federal Reserve Bank, and
this Section shall not apply to any such pledge or assignment of a
security interest; provided that no such pledge or assignment of a
security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.

 

SECTION 9.05.  Survival.  All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent, any Issuing
Bank or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and shall
continue in full force and effect as long as the principal of or any accrued
interest on any Loan or any fee or any other amount payable under this
Agreement or any other Loan Document is outstanding and unpaid or any Letter of
Credit is outstanding and so long as the Commitments have not expired or
terminated.  The provisions of Sections
2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any other Loan Document or any provision hereof or thereof.

 

72

 

SECTION 9.06.  Counterparts;
Integration; Effectiveness. 
This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.  This Agreement, the other Loan Documents and
any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this
Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.

 

SECTION 9.07.  Severability.  Any provision of any Loan Document held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions thereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

 

SECTION 9.08.  Right of Setoff.  If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final and in whatever currency denominated) at any time held and
other obligations at any time owing by such Lender or Affiliate to or for the
credit or the account of any Borrower or any Subsidiary Guarantor against any
of and all the Secured Obligations held by such Lender, irrespective of whether
or not such Lender shall have made any demand under the Loan Documents and
although such obligations may be unmatured. 
The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff) which such Lender
may have.

 

SECTION 9.09.  Governing Law;
Jurisdiction; Consent to Service of Process.  (a)  This Agreement shall be construed
in accordance with and governed by the law of the State of New York.

 

(b)  Each Borrower
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this
Agreement or any other Loan Document shall affect any right that the
Administrative Agent, any Issuing Bank or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan
Document against any Loan Party or its properties in the courts of any
jurisdiction.

 

(c)  Each Borrower
hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or any other Loan

 

73

 

Document in any court referred to in
paragraph (b) of this Section.  Each
of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.

 

(d)  Each party to this
Agreement irrevocably consents to service of process in the manner provided for
notices in Section 9.01.  The Swiss
Borrower irrevocably designates and appoints the Company, as its authorized
agent, to accept and acknowledge on its behalf, service of any and all process
which may be served in any suit, action or proceeding of the nature referred to
in Section 9.09(b) in any federal or New York State court sitting in
New York City.  The Company hereby
represents, warrants and confirms that the Company has agreed to accept such
appointment (and any similar appointment by a Subsidiary Guarantor which is a
Foreign Subsidiary).  Said designation
and appointment shall be irrevocable by the Swiss Borrower until all Loans, all
reimbursement obligations, interest thereon and all other amounts payable by
the Swiss Borrower hereunder and under the other Loan Documents shall have been
paid in full in accordance with the provisions hereof and thereof.  The Swiss Borrower hereby consents to process
being served in any suit, action or proceeding of the nature referred to in Section 9.09(b) in
any federal or New York State court sitting in New York City by service of
process upon the Company as provided in this Section 9.09(d); provided
that, to the extent lawful and possible, notice of said service upon such agent
shall be mailed by registered or certified air mail, postage prepaid, return
receipt requested, to the Company and (if applicable to) the Swiss Borrower to
the address of which the Swiss Borrower shall have given written notice to the
Administrative Agent (with a copy thereof to the Company).  The Swiss Borrower irrevocably waives, to the
fullest extent permitted by law, all claim of error by reason of any such
service in such manner and agrees that such service shall be deemed in every
respect effective service of process upon the Swiss Borrower in any such suit,
action or proceeding and shall, to the fullest extent permitted by law, be
taken and held to be valid and personal service upon and personal delivery to
the Swiss Borrower.  To the extent the
Swiss Borrower has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether from service or notice, attachment
prior to judgment, attachment in aid of execution of a judgment, execution or
otherwise), the Swiss Borrower hereby irrevocably waives such immunity in
respect of its obligations under the Loan Documents.  Nothing in this Agreement or any other Loan
Document will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

 

SECTION 9.10.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 9.11.  Headings.  Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.

 

SECTION 9.12.  Confidentiality.  Each of the Administrative Agent, the Issuing
Banks and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its
and its Affiliates’ directors, officers, employees and agents,

 

74

 

including accountants, legal counsel and
other advisors (it being understood that the Persons to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws
or regulations or by any subpoena or similar legal process, (d) to any
other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative
transaction relating to any Borrower and its obligations, (g) with the
consent of the Company or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, any Issuing Bank or any Lender on a
nonconfidential basis from a source other than the Company.  For the purposes of this Section, “Information” means all information received from
the Company relating to the Company or its business, other than any such
information that is available to the Administrative Agent, any Issuing Bank or
any Lender on a nonconfidential basis prior to disclosure by the Company.  Any Person required to maintain the
confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

SECTION 9.13.  USA PATRIOT Act.  Each Lender that is subject to the
requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”) hereby notifies each Loan Party
that pursuant to the requirements of the Act, it is required to obtain, verify
and record information that identifies such Loan Party, which information
includes the name and address of such Loan Party and other information that
will allow such Lender to identify such Loan Party in accordance with the Act.

 

SECTION 9.14.  Appointment for Perfection.  Each Lender hereby appoints each other Lender
as its agent for the purpose of perfecting Liens, for the benefit of the
Administrative Agent and the Holders of Secured Obligations, in assets which,
in accordance with Article 9 of the UCC or any other applicable law can be
perfected only by possession.  Should any
Lender (other than the Administrative Agent) obtain possession of any such
Collateral, such Lender shall notify the Administrative Agent thereof, and,
promptly upon the Administrative Agent’s request therefor shall deliver such
Collateral to the Administrative Agent or otherwise deal with such Collateral
in accordance with the Administrative Agent’s instructions.

 

ARTICLE X

 

Cross-Guarantee

 

In
order to induce the Lenders to extend credit to the other Borrowers hereunder,
but subject to the last sentence of this Article X, each Borrower,
irrespective of the validity of the Obligations, waiving all rights of
objection and defense arising from the Obligations, hereby irrevocably and
unconditionally guarantees, as a primary obligor and not merely as a surety,
the payment when and as due of the Obligations of such other Borrowers.  Each Borrower further agrees that the due and
punctual payment of such Obligations may be extended or renewed, in whole or in
part, without notice to or further assent from it, and that it will remain
bound upon its guarantee hereunder notwithstanding any such extension or
renewal of any such Obligation.

 

75

 

Each
Borrower waives presentment to, demand of payment from and protest to any
Borrower of any of the Obligations, and also waives notice of acceptance of its
obligations and notice of protest for nonpayment.  The obligations of each Borrower hereunder
shall not be affected by (a) the failure of the Administrative Agent, any
Issuing Bank or any Lender to assert any claim or demand or to enforce any
right or remedy against any Borrower under the provisions of this Agreement,
any other Loan Document or otherwise; (b) any extension or renewal of any
of the Obligations; (c) any rescission, waiver, amendment or modification
of, or release from, any of the terms or provisions of this Agreement, or any
other Loan Document or agreement; (d) any default, failure or delay,
willful or otherwise, in the performance of any of the Obligations; (e) the
failure of the Administrative Agent to take any steps to perfect and maintain
any security interest in, or to preserve any rights to, any security or
collateral for the Obligations, if any; (f) any change in the corporate,
partnership or other existence, structure or ownership of any Borrower or any
other guarantor of any of the Obligations; (g) the enforceability or
validity of the Obligations or any part thereof or the genuineness,
enforceability or validity of any agreement relating thereto or with respect to
any collateral securing the Obligations or any part thereof, or any other
invalidity or unenforceability relating to or against any Borrower or any other
guarantor of any of the Obligations, for any reason related to this Agreement,
any Swap Agreement, any other Loan Document, or any provision of applicable
law, decree, order or regulation of any jurisdiction purporting to prohibit the
payment by such Borrower or any other guarantor of the Obligations, of any of
the Obligations or otherwise affecting any term of any of the Obligations; or (h) any
other act, omission or delay to do any other act which may or might in any
manner or to any extent vary the risk of such Borrower or otherwise operate as
a discharge of a guarantor as a matter of law or equity or which would impair
or eliminate any right of such Borrower to subrogation.

 

Each
Borrower further agrees that its agreement hereunder constitutes a guarantee of
payment when due (whether or not any bankruptcy or similar proceeding shall
have stayed the accrual or collection of any of the Obligations or operated as
a discharge thereof) and not merely of collection, and waives any right to
require that any resort be had by the Administrative Agent, any Issuing Bank or
any Lender to any balance of any deposit account or credit on the books of the
Administrative Agent, any Issuing Bank or any Lender in favor of any Borrower
or any other Person.

 

The
obligations of each Borrower hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, and shall not be subject
to any defense or set-off, counterclaim, recoupment or termination whatsoever,
by reason of the invalidity, illegality or unenforceability of any of the
Obligations, any impossibility in the performance of any of the Obligations or
otherwise.

 

Each
Borrower further agrees that its obligations hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any Obligation is rescinded or must otherwise be restored by
the Administrative Agent, any Issuing Bank or any Lender upon the bankruptcy or
reorganization of any Borrower or otherwise.

 

In
furtherance of the foregoing and not in limitation of any other right which the
Administrative Agent, any Issuing Bank or any Lender may have at law or in
equity against any Borrower by virtue hereof, upon the failure of any other
Borrower to pay any Obligation when and as the same shall become due, whether at
maturity, by acceleration, after notice of prepayment or otherwise, each
Borrower hereby promises to and will, upon receipt of written demand by the
Administrative Agent, any Issuing Bank or any Lender, forthwith pay, or cause
to be paid, to the Administrative Agent, any Issuing Bank or any Lender in cash
an amount equal to the unpaid principal amount of such Obligations then
due, together with accrued and unpaid interest thereon.  Each Borrower further agrees that if payment
in respect of any Obligation shall be due in a currency other than Dollars
and/or at a place of payment other than New York, Chicago or any other
Eurocurrency Payment Office and if, by reason of any Change in Law, disruption
of currency or foreign exchange markets, war or civil disturbance or other
event, payment of such Obligation in such currency or at such place of payment
shall be impossible or, in the reasonable

 

76

 

judgment
of the Administrative Agent, any Issuing Bank or any Lender, disadvantageous to
the Administrative Agent, any Issuing Bank or any Lender in any material
respect, then, at the election of the Administrative Agent, such Borrower shall
make payment of such Obligation in Dollars (based upon the applicable Equivalent
Amount in effect on the date of payment) and/or in New York, Chicago or
such other Eurocurrency Payment Office as is designated by the Administrative
Agent and, as a separate and independent obligation, shall indemnify the
Administrative Agent, any Issuing Bank and any Lender against any losses or
reasonable out-of-pocket expenses that it shall sustain as a result of such
alternative payment.

 

Upon
payment by any Borrower of any sums as provided above, all rights of such
Borrower against any Borrower arising as a result thereof by way of right of
subrogation or otherwise shall in all respects be subordinated and junior in
right of payment to the prior indefeasible payment in full in cash of all the
Obligations owed by such Borrower to the Administrative Agent, the Issuing
Banks and the Lenders.

 

Nothing
shall discharge or satisfy the liability of any Borrower hereunder except the
full performance and payment of the Obligations.

 

Nothing
in this Article X shall oblige the Swiss Borrower to make any payment in
respect of this Article X for any other Loan Party which is not a
Subsidiary of the Swiss Borrower unless such payments are limited to the amount
of the freely disposable shareholders equity of the Swiss Borrower at the time
of the enforcement of the obligations and liabilities under this Article X.  The freely disposable shareholder equity
shall be determined in accordance with Swiss law and Swiss accounting
principles and shall correspond to the Swiss Borrower’s total shareholder
equity less the total of (i) its aggregate share capital and (ii) its
statutory reserves (including reserves for own shares and revaluations as well
as agio) to the extent such reserves are not available for distribution at the
time of the enforcement of the obligations and liabilities of the Swiss
Borrower under this Article X for the obligations under the Loan Documents
of any other Loan Party which is not a subsidiary of the Swiss Borrower, which
amount shall be (a) determined on the basis of an audited annual or
interim balance sheet of the Swiss Borrower, (b) approved by the auditors
of the Swiss Borrower as distributable amount and (c) approved by a
shareholders’ resolution of the Swiss Borrower in accordance with the
provisions of the Swiss Code of Obligations.

 

Notwithstanding
anything contained in this Article X to the contrary, the Swiss Borrower
(so long as it is and remains an Affected Foreign Subsidiary) shall not be
liable hereunder for any of the Loans made to, or any other Obligation incurred
solely by or on behalf of, the Company or any Subsidiary Guarantor which is a
Domestic Subsidiary.

 

[Signature
Pages Follow]

 

77

 

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

 

	
   

  	
  HARDINGE INC., as the Company

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ EDWARD J. GAIO

  
	
   

  	
   

  	
  Name: Edward J. Gaio

  
	
   

  	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARDINGE HOLDINGS GMBH, as the Swiss

  Borrower

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ PETER HURSCH

  
	
   

  	
   

  	
   Name:
  Peter Hursch

  
	
   

  	
   

  	
   Title:
  Managing Director

  

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A., individually

  as a Lender, as Swingline Lender, as an Issuing

  Bank and as Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By  

  	
  /S/ CHRISTINE M. DESCHAMPS

  
	
   

  	
   

  	
   Name:
  Christine M. Deschamps

  
	
   

  	
   

  	
   Title:
  Senior Vice President

  

 

 

	
   

  	
  BANK OF AMERICA. N.A., individually as a

  Lender, and as Syndication Agent.

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ COLLEEN O’BRIEN

  
	
   

  	
   

  	
   Name:
  Colleen O’Brien

  
	
   

  	
   

  	
   Title:
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC BANK USA, NATIONAL

  ASSOCIATION, individually as a Lender, and

  as a Co-Documentation Agent.

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ JAMES J. SNYDER

  
	
   

  	
   

  	
   Name:
  James J. Snyder

  
	
   

  	
   

  	
   Title:
  First Vice President

  

 

Signature Page to Credit
Agreement

Hardinge Inc. and
Hardinge Holdings GmbH

June 2008

 

 

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

 

	
   

  	
  KEYBANK NATIONAL ASSOCIATION,

  individually as a Lender, and as a Co-

  Documentation Agent.

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ CARL J. LUGER, JR.

  
	
   

  	
   

  	
   Name: Carl J. Luger, Jr.

  
	
   

  	
   

  	
   Title: Senior Vice President

  

 

 

	
   

  	
  WELLS FARGO HSBC TRADE BANK,

  NATIONAL ASSOCIATION, as a Lender.

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ JEFFREY A. WHITE

  
	
   

  	
   

  	
   Name: Jeffrey A. White

  
	
   

  	
   

  	
   Title: Vice President

  

 

	
   

  	
  CREDIT SUISSE, ZURICH/SWITZERLAND

  as a Lender.

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ CHRISTIAN KUNZ.

  
	
   

  	
   

  	
   Name: Christian Kunz

  
	
   

  	
   

  	
   Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ ALBERT ANGEHRN

  
	
   

  	
   

  	
   Name: Albert Angehrn

  
	
   

  	
   

  	
   Title: Managing Director

  

 

Signature Page to Credit
Agreement

Hardinge Inc. and
Hardinge Holdings GmbH

June 2008

 

 

SCHEDULE
2.01

 

COMMITMENTS

 

	
  LENDER  

  	
   

  	
  COMMITMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  JPMORGAN CHASE BANK, N.A.

  	
   

  	
  $

  	
  22,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BANK OF AMERICA, N.A.

  	
   

  	
  $

  	
  17,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  HSBC BANK USA, NATIONAL ASSOCIATION

  	
   

  	
  $

  	
  17,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  KEYBANK NATIONAL ASSOCIATION

  	
   

  	
  $

  	
  17,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  WELLS FARGO HSBC TRADE BANK N.A.

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CREDIT SUISSE

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  AGGREGATE COMMITMENT

  	
   

  	
  $

  	
  100,000,000

  	
   

  

 

2

 

SCHEDULE 2.02

 

MANDATORY COST

 

	
  1.

  	
   

  	
  The Mandatory Cost
  is an addition to the interest rate to compensate Lenders for the cost of
  compliance with (a) the requirements of the Bank of England and/or the
  Financial Services Authority (or, in either case, any other authority which
  replaces all or any of its functions) or (b) the requirements of the
  European Central Bank.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  On the first day of
  each Interest Period (or as soon as possible thereafter) the Administrative
  Agent shall calculate, as a percentage rate, a rate (the “Associated Costs
  Rate”) for each Lender, in accordance with the paragraphs set out below.
  The Mandatory Cost will be calculated by the Administrative Agent as a
  weighted average of the Lenders’ Associated Costs Rates (weighted in
  proportion to the percentage participation of each Lender in the relevant
  Loan) and will be expressed as a percentage rate per annum.

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  The Associated Costs
  Rate for any Lender lending from a Facility Office in a Participating Member
  State will be the percentage notified by that Lender to the Administrative
  Agent. This percentage will be certified by that Lender in its notice to the
  Administrative Agent to be its reasonable determination of the cost
  (expressed as a percentage of that Lender’s participation in all Loans made
  from that Facility Office) of complying with the minimum reserve requirements
  of the European Central Bank in respect of loans made from that Facility
  Office.

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  The Associated Costs
  Rate for any Lender lending from a Facility Office in the United Kingdom will
  be calculated by the Administrative Agent as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)

  	
   

  	
  in relation to a
  Loan in British Pounds Sterling:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  AB+C(B–D)+E x 0.01

  	
   per
  cent. per annum

  
	
   

  	
   

  	
   

  	
   

  	
  100–(A+C)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
   

  	
  in relation to a
  Loan in any currency other than British Pounds Sterling:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  E x 0.01

  	
   per cent. per
  annum.

  
	
   

  	
   

  	
   

  	
   

  	
  300

  
							

 

	
   

  	
   

  	
  Where:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A

  	
   

  	
  is the percentage of
  Eligible Liabilities (assuming these to be in excess of any stated minimum)
  which that Lender is from time to time required to maintain as an interest
  free cash ratio deposit with the Bank of England to comply with cash ratio
  requirements.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B

  	
   

  	
  is the percentage rate of
  interest (excluding the Applicable Rate and the Mandatory Cost and, if the
  Loan is an Unpaid Sum, the additional rate of interest specified in Section 2.13(c))
  payable for the relevant Interest Period on the Loan.

  

 

 

	
   

  	
   

  	
  C

  	
   

  	
  is the percentage (if any)
  of Eligible Liabilities which that Lender is required from time to time to
  maintain as interest bearing Special Deposits with the Bank of England.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  D

  	
   

  	
  is the percentage rate per
  annum payable by the Bank of England to the Administrative Agent on interest
  bearing Special Deposits.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E

  	
   

  	
  is designed to compensate
  Lenders for amounts payable under the Fees Rules and is calculated by
  the Administrative Agent as being the average of the most recent rates of
  charge supplied by the Reference Banks to the Administrative Agent pursuant
  to paragraph 7 below and expressed in pounds per £1,000,000.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  For the purposes of this
  Schedule:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)

  	
   

  	
  “Eligible Liabilities” and “Special
  Deposits” have the meanings given to them from time to time under
  or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the
  Bank of England;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
   

  	
  “Facility Office” means the office or offices notified by a
  Lender to the Administrative Agent in writing on or before the date it
  becomes a Lender (or, following that date, by not less than five Business
  Days’ written notice) as the office or offices through which it will perform
  its obligations under this Agreement.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)

  	
   

  	
  “Fees Rules” means the rules on periodic fees
  contained in the FSA Supervision Manual or such other law or regulation as
  may be in force from time to time in respect of the payment of fees for the
  acceptance of deposits;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)

  	
   

  	
  “Fee Tariffs” means the fee tariffs specified in the Fees
  Rules under the activity group A.1 Deposit acceptors (ignoring any
  minimum fee or zero rated fee required pursuant to the Fees Rules but
  taking into account any applicable discount rate);

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e)

  	
   

  	
  “Participating Member State” means any member state of the
  European Union that adopts or has adopted the euro as its lawful currency in
  accordance with legislation of the European Union relating to economic and
  monetary union.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (f)

  	
   

  	
  “Reference Banks” means, in relation to Mandatory Cost, the
  principal London offices of JPMorgan Chase Bank, N.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (g)

  	
   

  	
  “Tariff Base” has the meaning given to it in, and will be
  calculated in accordance with, the Fees Rules.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (h)

  	
   

  	
  “Unpaid Sum” means any sum due and payable but unpaid by
  any Borrower under the Loan Documents.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  In application of
  the above formulae, A, B, C and D will be included in the formulae as
  percentages (i.e. 5 per cent. will be included in the formula as 5 and not as
  0.05). A negative result obtained by subtracting D from B shall be taken as
  zero. The resulting figures shall be rounded to four decimal places.

  

 

2

 

	
  7.

  	
   

  	
  If
  requested by the Administrative Agent, each Reference Bank shall, as soon as
  practicable after publication by the Financial Services Authority, supply to
  the Administrative Agent, the rate of charge payable by that Reference Bank
  to the Financial Services Authority pursuant to the Fees Rules in
  respect of the relevant financial year of the Financial Services Authority
  (calculated for this purpose by that Reference Bank as being the average of
  the Fee Tariffs applicable to that Reference Bank for that financial year)
  and expressed in pounds per £1,000,000 of the Tariff Base of that Reference
  Bank.

  
	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Each Lender shall supply any
  information required by the Administrative Agent for the purpose of
  calculating its Associated Costs Rate. In particular, but without limitation,
  each Lender shall supply the following information on or prior to the date on
  which it becomes a Lender:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)

  	
   

  	
  the jurisdiction of
  its Facility Office; and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
   

  	
  any other
  information that the Administrative Agent may reasonably require for such
  purpose.

  

 

Each Lender shall promptly
notify the Administrative Agent of any change to the information provided by it
pursuant to this paragraph.

 

	
  9.

  	
   

  	
  The percentages of
  each Lender for the purpose of A and C above and the rates of charge of each
  Reference Bank for the purpose of E above shall be reasonably determined by
  the Administrative Agent based upon the information supplied to it pursuant
  to paragraphs 7 and 8 above and on the assumption that, unless a Lender
  notifies the Administrative Agent to the contrary, each Lender’s obligations
  in relation to cash ratio deposits and Special Deposits are the same as those
  of a typical bank from its jurisdiction of incorporation with a Facility
  Office in the same jurisdiction as its Facility Office.

  
	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  The Administrative
  Agent shall have no liability to any person if such determination results in
  an Associated Costs Rate which over or under compensates any Lender and shall
  be entitled to assume that the information provided by any Lender or
  Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in
  all respects.

  
	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  The Administrative
  Agent shall distribute the additional amounts received as a result of the
  Mandatory Cost to the Lenders on the basis of the Associated Costs Rate for
  each Lender based on the information provided by each Lender and each
  Reference Bank pursuant to paragraphs 3, 7 and 8 above.

  
	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  Any determination by
  the Administrative Agent pursuant to this Schedule in relation to a formula,
  the Mandatory Cost, an Associated Costs Rate or any amount payable to a
  Lender shall, in the absence of manifest error, be conclusive and binding on
  all parties hereto.

  
	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  The Administrative
  Agent may from time to time, after consultation with the Company and the
  relevant Lenders, determine and notify to all parties hereto any amendments
  which are required to be made to this Schedule 2.02 in order to comply with
  any change in law, regulation or any

  

 

3

 

	
   

  	
   

  	
  requirements from
  time to time imposed by the Bank of England, the Financial Services Authority
  or the European Central Bank (or, in any case, any other authority which
  replaces all or any of its functions) and any such determination shall, in
  the absence of manifest error, be conclusive and binding on all parties
  hereto.

  

 

4

 

 

SCHEDULE 2.06

 

EXISTING LETTERS OF CREDIT

 

	
  Account Party

  	
   

  	
  Issuer

  	
   

  	
  Beneficiary

  	
   

  	
  Expiration or Maturity Date

  	
   

  	
  Balance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge Inc.

  	
   

  	
  JPMorgan Chase Bank, N.A.

  	
   

  	
  Liberty Mutual

  	
   

  	
  03/31/2009

  	
   

  	
  $

  	
  1,626,601

  	
   

  
											

 

 

 

SCHEDULE 3.01

 

SUBSIDIARIES

 

	
  Name

  	
   

  	
  Material Subsidiary

  	
   

  	
  Subsidiary Guarantor

  	
   

  	
  Jurisdiction of Incorporation or Organization

  	
   

  	
  Equity Holder and Percentage

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Canadian Hardinge
  Machine Tools, Ltd.

  	
   

  	
  No

  	
   

  	
  No

  	
   

  	
  Ontario

  	
   

  	
  Hardinge Inc. (100%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge China Limited

  	
   

  	
  No

  	
   

  	
  No

  	
   

  	
  People’s Republic of
  China

  	
   

  	
  Hardinge Holdings GmbH
  (100%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge Holdings GmbH

  	
   

  	
  No

  	
   

  	
  No

  	
   

  	
  Switzerland

  	
   

  	
  Hardinge Inc. (100%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge Machine Tools
  Limited

  	
   

  	
  Yes

  	
   

  	
  Yes

  	
   

  	
  England

  	
   

  	
  Hardinge Holdings GmbH
  (100%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge, GmbH

  	
   

  	
  No

  	
   

  	
  No

  	
   

  	
  Federal Republic of
  Germany

  	
   

  	
  Hardinge Holdings GmbH
  (100%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge Machine
  (Shanghai) Co., Ltd.(1)

  	
   

  	
  No

  	
   

  	
  No

  	
   

  	
  People’s Republic of
  China

  	
   

  	
  Hardinge Holdings GmbH
  (100%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge Technology
  Systems, Inc.

  	
   

  	
  Yes

  	
   

  	
  Yes

  	
   

  	
  New York

  	
   

  	
  Hardinge Inc. (100%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  L.
  Kellenberger & Co. AG

  	
   

  	
  Yes

  	
   

  	
  Yes

  	
   

  	
  Switzerland

  	
   

  	
  Hardinge Holdings GmbH
  (100%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge Taiwan
  Precision Machinery Limited(2)

  	
   

  	
  No

  	
   

  	
  No

  	
   

  	
  People’s Republic of
  China (Taiwan)

  	
   

  	
  Hardinge Inc. (100%)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge Machine Tools,
  BV

  	
   

  	
  No

  	
   

  	
  No

  	
   

  	
  Netherlands

  	
   

  	
  Hardinge Machine Tools,
  Ltd. (100%)

  

 

(1) The
transfer of the equity ownership of Hardinge Machine (Shanghai) Co., Ltd. from
Hardinge Inc. to Hardinge Holdings GmbH is pending subject to obtaining final
approval by the appropriate governmental authorities of the People’s Republic
of China.

 

(2) Within
sixty (60) days following the Effective Date, the equity ownership of Hardinge
Taiwan Precision Machinery Limited may be transferred from Hardinge Inc. to a
newly-formed Subsidiary of Hardinge Holdings GmbH.

 

 

SCHEDULE 6.01

 

EXISTING INDEBTEDNESS

 

·                  Indebtedness described in
and incurred in connection with the Liens set forth on Schedule 6.02
hereto

 

·                  $3,000,000 unsecured demand
credit facility between Hardinge Inc. and Chemung Canal Trust Co; facility is
renewed annually

 

·                  CHF 7,500,000 unsecured
facility between L. Kellenberger & Co. AG (“Kellenberger”) and
Credit Suisse for working capital, bank guarantee and trade letter of credit
requirements

 

·                  Currently under revision
pursuant to the merger between HTT Hauser Tripet Tschudin, AG (“HTT”)
and Kellenberger (with Kellenberger as the surviving entity)  that was consummated May 1, 2008.

 

·                  CHF 7,500,000 loan agreement
between Kellenberger (as successor by merger to HTT) and UBS AG for bank
guarantee and letter of credit requirements; secured by mortgages on real
property located in Biel, Switzerland

 

·                  Currently under revision
pursuant to the merger between HTT and Kellenberger (with Kellenberger as the
surviving entity)  that was consummated May 1,
2008.

 

·                  153,000,000 Taiwan New
Dollars (approximately $4,700,000) mortgage loan between Hardinge Taiwan
Precision Machinery Limited and Mega International Commercial Bank; secured by
real estate

 

·                  The following intercompany
loans involving non-Loan Parties:

 

·                  $3,647,967 loan due to
Hardinge Taiwan Precision Machinery Limited from Hardinge Machine Tools Limited

·                  CHF 2,600,000 loan due to
Kellenberger from Hardinge GmbH

·                  $1,177,191 loan due to
Hardinge Taiwan Precision Machinery Limited from Hardinge GmbH

 

·                  Guarantee and Indebtedness described in and
incurred in connection with the Deed of Guarantee and Indemnity, dated on or
about the date hereof, by Hardinge Inc. to HMT Trustees Limited with respect to
the Hardinge Machine Tools Limited Staff Pension Scheme; liability under such
Deed shall not exceed £1,500,000

 

·                  The following items of indebtedness (amounts
current through May 30, 2008):  See
attached.

 

 

 

Open Letters of Credit or
Bank Guarantees

As of

5/30/08

 

	
   

  	
   

  	
  Bank or

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Financial

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Expiration or

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Institution

  	
   

  	
  Beneficiary

  	
   

  	
  Description

  	
   

  	
  Maturity Date

  	
   

  	
  Balance

  	
   

  	
   

  	
   

  
	
  Hardinge Inc.

  	
   

  	
  M&T

  	
   

  	
  Yibin Wuliangya Group I and E Co. Ltd.

  	
   

  	
  Standby letter of credit

  	
   

  	
  12/7/2008

  	
   

  	
  27,000.00

  	
   

  	
  USD

  	
   

  
	
  Hardinge Inc.

  	
   

  	
  M&T

  	
   

  	
  Shanghai Tian An Bearing

  	
   

  	
  Standby letter of credit

  	
   

  	
  1/21/2009

  	
   

  	
  26,400.00

  	
   

  	
  USD

  	
   

  
	
  Hardinge Inc.

  	
   

  	
  M&T

  	
   

  	
  Century Automotive

  	
   

  	
  Standby letter of credit

  	
   

  	
  10/30/2008

  	
   

  	
  75,602.00

  	
   

  	
  USD

  	
   

  
	
  Hardinge Inc.

  	
   

  	
  JP Morgan Chase

  	
   

  	
  Liberty Mutual

  	
   

  	
  Standby letter of credit

  	
   

  	
  3/31/2009

  	
   

  	
  1,626,601.00

  	
   

  	
  USD

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,755,603.00

  	
   

  	
   

  	
   

  
	
  Hardinge

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GmbH

  	
   

  	
  Deutsche Bank

  	
   

  	
  SG Equipment Finance

  	
   

  	
  Time payment contract

  	
   

  	
  7/31/2011

  	
   

  	
  26,129.18

  	
   

  	
  Euro

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge Machine

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tools

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Limited

  	
   

  	
  Natwest Bank Plc

  	
   

  	
  Hindustan Aeronautics Ltd

  	
   

  	
  Bank guarantee

  	
   

  	
  8/5/2008

  	
   

  	
  24,750.00

  	
   

  	
  USD

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HTT

  	
   

  	
  UBS Ag

  	
   

  	
  LuK Gmbh Buhl

  	
   

  	
  Performance Bond

  	
   

  	
  2/28/2009

  	
   

  	
  79,298.50

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  UBS Ag

  	
   

  	
  Zhuzhou Cemcented Carbide Group

  	
   

  	
  Performance Bond

  	
   

  	
  12/6/2008

  	
   

  	
  64,500.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  UBS Ag

  	
   

  	
  ACC Austria GmbH

  	
   

  	
  Performance Bond

  	
   

  	
  3/1/2010

  	
   

  	
  67,515.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  UBS Ag

  	
   

  	
  ACC Austria GmbH

  	
   

  	
  Performance Bond

  	
   

  	
  3/1/2010

  	
   

  	
  67,515.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  UBS Ag

  	
   

  	
  Eidg. Oberzolldirektion Bern

  	
   

  	
  Performance Bond

  	
   

  	
  Open-ended

  	
   

  	
  40,000.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  UBS Ag

  	
   

  	
  Berner Handelskammer Bern

  	
   

  	
  Performance Bond

  	
   

  	
  Open-ended

  	
   

  	
  50,000.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  UBS Ag

  	
   

  	
  Mould+ Matic Michldorf

  	
   

  	
  Downpayment Bond

  	
   

  	
  8/31/2008

  	
   

  	
  260,171.00

  	
   

  	
  CHF

  	
   

  

 

 

	
  HTT

  	
   

  	
  Credit Suisse

  	
   

  	
  HAWE Hydraulik Munchen

  	
   

  	
  Performance Bond

  	
   

  	
  8/24/2008

  	
   

  	
  22,830.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  Credit Suisse

  	
   

  	
  Grotz-Beckert KG Albstadt

  	
   

  	
  Performance Bond

  	
   

  	
  2/12/2009

  	
   

  	
  68,041.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  Credit Suisse

  	
   

  	
  Chongqing North Jianshe China

  	
   

  	
  Performance Bond

  	
   

  	
   

  	
   

  	
  80,000.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  Credit Suisse

  	
   

  	
  Shaeffler KG Herzogenaurach

  	
   

  	
  Downpayment Bond

  	
   

  	
  Open-ended

  	
   

  	
  379,314.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  Credit Suisse

  	
   

  	
  Seckler AG Pieterlen

  	
   

  	
  Downpayment Bond

  	
   

  	
  Open-ended

  	
   

  	
  200,000.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  Credit Suisse

  	
   

  	
  Knarr Rainer, Helmbrechts

  	
   

  	
  Downpayment Bond

  	
   

  	
  6/30/2008

  	
   

  	
  78,548.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  Credit Suisse

  	
   

  	
  Berner Handelskammer Bern

  	
   

  	
  Performance Bond

  	
   

  	
  Open-ended

  	
   

  	
  50,000.00

  	
   

  	
  CHF

  	
   

  
	
  HTT

  	
   

  	
  Credit Suisse

  	
   

  	
  China National Aero-Technology

  	
   

  	
  Performance Bond

  	
   

  	
   

  	
   

  	
  49,894.00

  	
   

  	
  CHF

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,557,626.50

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse or UBS

  	
   

  	
  Hermes-Kreditversicherung für PSFU

  	
   

  	
  customer guaranty

  	
   

  	
   

  	
   

  	
  7,726.50

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse or UBS

  	
   

  	
  Hermes-Kreditversicherung für PSFU

  	
   

  	
  customer guaranty

  	
   

  	
   

  	
   

  	
  11,555.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse or UBS

  	
   

  	
  FORTIS-Leasing/Werner Boller

  	
   

  	
  customer guaranty

  	
   

  	
   

  	
   

  	
  188,837.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Oberzolldirektion
  (Einfuhrumsatzsteuer)

  	
   

  	
  Government Duty Bond

  	
   

  	
  Open-ended

  	
   

  	
  40,000.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Eidg. Steuerverwaltung (MWSt Hardinge Inc.)

  	
   

  	
  Vat Bond

  	
   

  	
  Open-ended

  	
   

  	
  50,000.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Handelskammer SG (Carnet
  ATA)

  	
   

  	
  Government Duty Bond

  	
   

  	
  Open-ended

  	
   

  	
  450,000.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  COFMOW (State Bank of India)

  	
   

  	
  Warranty Guarantee

  	
   

  	
  1/31/2008

  	
   

  	
  27,506.25

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  Neway Precision Machine

  	
   

  	
  Downpayment

  	
   

  	
  5/30/2008

  	
   

  	
  54,000.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Leistritz Aktiengesellschaft

  	
   

  	
  Downpayment

  	
   

  	
  5/30/2008

  	
   

  	
  132,120.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Wilhelm König Maschinenbau GmbH.

  	
   

  	
  Downpayment

  	
   

  	
  6/30/2008

  	
   

  	
  90,667.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  Schaeffler KG.

  	
   

  	
  Downpayment

  	
   

  	
  6/30/2008

  	
   

  	
  192,000.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  IKB LEASING/Ganter

  	
   

  	
  Downpayment

  	
   

  	
  6/30/2007

  	
   

  	
  120,000.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Leistritz Aktiengesellschaft

  	
   

  	
  Downpayment

  	
   

  	
  6/30/2008

  	
   

  	
  173,250.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  China National Aero-Technology Intl.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  7/11/2008

  	
   

  	
  22,810.00

  	
   

  	
  CHF

  	
   

  

 

 

	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  COFMOW (State Bank of India)

  	
   

  	
  Warranty Guarantee

  	
   

  	
  7/31/2008

  	
   

  	
  27,506.25

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  Neway Precision Machine

  	
   

  	
  Downpayment

  	
   

  	
  8/30/2008

  	
   

  	
  47,000.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Hindustan Aeronautics Ltd.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  8/31/2008

  	
   

  	
  25,000.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Hindustan Aeronautics Ltd.

  	
   

  	
  Downpayment

  	
   

  	
  8/31/2008

  	
   

  	
  43,500.50

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  MAN Roland Druckmaschinen AG

  	
   

  	
  Warranty Guarantee

  	
   

  	
  8/31/2008

  	
   

  	
  93,348.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  MAN Roland Druckmaschinen AG

  	
   

  	
  Warranty Guarantee

  	
   

  	
  8/31/2008

  	
   

  	
  24,390.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Heidelberger Druckmaschinen AG.

  	
   

  	
  Downpayment

  	
   

  	
  8/31/2008

  	
   

  	
  99,200.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  International Cap Dubai

  	
   

  	
  Warranty Guarantee

  	
   

  	
  3/9/2008

  	
   

  	
  27,050.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  Koepfer Verzahungsmaschinen

  	
   

  	
  Downpayment

  	
   

  	
  9/30/2008

  	
   

  	
  88,600.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Heidelberger Druckmaschinen AG.

  	
   

  	
  Downpayment

  	
   

  	
  9/30/2008

  	
   

  	
  99,200.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  Shanxii Hanjiang Machine Tool Co. Ltd.

  	
   

  	
  Downpayment

  	
   

  	
  9/30/2008

  	
   

  	
  123,800.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  ECTEK Automotive Electronics Co. Ltd.

  	
   

  	
  Downpayment

  	
   

  	
  9/30/2008

  	
   

  	
  75,006.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Fässler AG.

  	
   

  	
  Downpayment

  	
   

  	
  10/30/2008

  	
   

  	
  29,970.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  Reich GmbH.

  	
   

  	
  Downpayment

  	
   

  	
  10/31/2008

  	
   

  	
  78,829.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Maasara Co.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  11/15/2008

  	
   

  	
  25,199.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  China National Aero-Technology Intl.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  11/15/2008

  	
   

  	
  20,585.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  INA-Lanskroun

  	
   

  	
  Downpayment

  	
   

  	
  11/30/2008

  	
   

  	
  98,800.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  Blickle Räder & Rollen GmbH.

  	
   

  	
  Downpayment

  	
   

  	
  12/31/2008

  	
   

  	
  166,665.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  ABPLANALP Polen/Fabryka Luzysk Tocnyach

  	
   

  	
  Downpayment

  	
   

  	
  12/31/2008

  	
   

  	
  123,541.50

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Jakob Müller AG.

  	
   

  	
  Downpayment

  	
   

  	
  12/1/2008

  	
   

  	
  217,890.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  ESK Ceramics GmbH.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  1/12/2009

  	
   

  	
  48,450.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  Michael Weinig AG.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  2/5/2009

  	
   

  	
  58,520.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Bharat Fritz Werner Ltd.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  5/4/2009

  	
   

  	
  59,900.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Turbomeca

  	
   

  	
  Warranty Guarantee

  	
   

  	
  10/31/2009

  	
   

  	
  120,000.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  MAN Diesel A/S

  	
   

  	
  Warranty Guarantee

  	
   

  	
  12/13/2009

  	
   

  	
  66,097.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  UBS Ag

  	
   

  	
  Liebherr-Verzahntechnik AG.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  1/10/2010

  	
   

  	
  59,925.00

  	
   

  	
  CHF

  	
   

  

 

 

	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  ESK Ceramics GmbH.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  3/7/2010

  	
   

  	
  47,600.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Weiler Werkzeugmaschinen

  	
   

  	
  Warranty Guarantee

  	
   

  	
  3/18/2010

  	
   

  	
  31,500.00

  	
   

  	
  CHF

  	
   

  
	
  Kellenberger

  	
   

  	
  Credit Suisse

  	
   

  	
  Chiron-Werke GmbH.

  	
   

  	
  Warranty Guarantee

  	
   

  	
  3/18/2008

  	
   

  	
  11,000.00

  	
   

  	
  CHF

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  3,598,544.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GmbH

  	
   

  	
  Deutschland

  	
   

  	
  Bönner

  	
   

  	
  Other

  	
   

  	
  Open-ended

  	
   

  	
  21,402.00

  	
   

  	
  Euro

  	
   

  
	
  GmbH

  	
   

  	
  Deutschland

  	
   

  	
  HAL, India

  	
   

  	
  Performance Guarantee

  	
   

  	
  10/7/2008

  	
   

  	
  18,731.71

  	
   

  	
  Euro

  	
   

  
	
  GmbH

  	
   

  	
  Deutschland

  	
   

  	
  HAL, India

  	
   

  	
  Performance Guarantee

  	
   

  	
  4/15/2008

  	
   

  	
  8,262.00

  	
   

  	
  Euro

  	
   

  
	
  GmbH

  	
   

  	
  Deutschland

  	
   

  	
  HAL, India

  	
   

  	
  Performance Guarantee

  	
   

  	
  8/13/2008

  	
   

  	
  9,045.00

  	
   

  	
  Euro

  	
   

  
	
  GmbH

  	
   

  	
  Deutschland

  	
   

  	
  HAL, India

  	
   

  	
  Performance Guarantee

  	
   

  	
  5/31/2008

  	
   

  	
  9,998.00

  	
   

  	
  Euro

  	
   

  
	
  GmbH

  	
   

  	
  Deutschland

  	
   

  	
  ISRO

  	
   

  	
  Performance Guarantee

  	
   

  	
  2/11/2009

  	
   

  	
  6,695.00

  	
   

  	
  Euro

  	
   

  
	
  GmbH

  	
   

  	
  Deutschland

  	
   

  	
  Government Tool Room and Training

  	
   

  	
  Open-ended

  	
   

  	
  16,420.00

  	
   

  	
  Euro

  	
   

  	
   

  	
   

  
	
  GmbH

  	
   

  	
  Deutschland

  	
   

  	
  Spindel Lagerungstechnik

  	
   

  	
  Performance Guarantee

  	
   

  	
  7/15/2008

  	
   

  	
  100,000.00

  	
   

  	
  Euro

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  190,553.71

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Guizhou Space Appliance Co. Ltd.

  	
   

  	
  warranty guarantee

  	
   

  	
  14/Nov/08

  	
   

  	
  ¥160,000.00

  	
   

  	
  RMB

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Chongqin Boshen Electrical Equipment Co. Ltd.

  	
   

  	
  warranty guarantee

  	
   

  	
  31/Jul/08

  	
   

  	
  ¥80,000.00

  	
   

  	
  RMB

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Yibin Wuliangye Group I And E Co., Ltd Sichuan, China

  	
   

  	
  warranty guarantee

  	
   

  	
  4/Aug/08

  	
   

  	
  ¥145,000.00

  	
   

  	
  RMB

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Jianglin Motors Import & Export Co., Ltd

  	
   

  	
  downpayment

  	
   

  	
  19/Jun/08

  	
   

  	
  US$32,000.00

  	
   

  	
  USD

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  NORSTAR AUTO SUSPENSION SYSTEMS BEIJING INC

  	
   

  	
  warranty guarantee

  	
   

  	
  15/Jun/08

  	
   

  	
  US$11,330.00

  	
   

  	
  USD

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Wuhan International Trade Co., Ltd.

  	
   

  	
  warranty guarantee

  	
   

  	
  8/Nov/08

  	
   

  	
  ¥98,496.00

  	
   

  	
  RMB

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Anhui ANMEC Export Import Corporation

  	
   

  	
  warranty guarantee

  	
   

  	
  31/May/08

  	
   

  	
  ¥72,420.00

  	
   

  	
  RMB

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Anhui ANMEC Export Import Corporation

  	
   

  	
  downpayment

  	
   

  	
  1/Jun/08

  	
   

  	
  ¥122,670.00

  	
   

  	
  RMB

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Norstar Automotive Industries Inc.

  	
   

  	
  warranty guarantee

  	
   

  	
  8/Aug/08

  	
   

  	
  ¥165,400.00

  	
   

  	
  RMB

  	
   

  

 

 

	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Chongqin North Jianshe Imp. & Exp. Trae Co.,
  Ltd

  	
   

  	
  warranty guarantee

  	
   

  	
  15/Dec/08

  	
   

  	
  ¥264,300.00

  	
   

  	
  RMB

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Chongqin North Jianshe Imp. & Exp. Trae Co.,
  Ltd

  	
   

  	
  warranty guarantee

  	
   

  	
  15/Dec/08

  	
   

  	
  ¥268,300.00

  	
   

  	
  RMB

  	
   

  
	
  HSL

  	
   

  	
  Bank of China

  	
   

  	
  Henan Pingyuan Optics Electronics Co., Ltd.

  	
   

  	
  warranty guarantee

  	
   

  	
  28/Jan/09

  	
   

  	
  ¥64,000.00

  	
   

  	
  RMB

  	
   

  

 

 

SCHEDULE 6.02

 

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

  	
   

  	
  UK 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 Pension Scheme

  	
   

  	
  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 Pension 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, Swtizerland

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardinge Taiwan
  Precision Machinery Limited

  	
   

  	
  Mega International
  Commercial Bank

  	
   

  	
  Taiwan

  	
   

  	
  06/2006

  	
   

  	
  Mortgage on real property
  in Taiwan

  

 

 

Exhibit B-1

 

June 13, 2008

 

To the Lenders and the Administrative Agent
Referred to Below

c/o JPMorgan Chase Bank, N.A.

270 Park Avenue

New York, New York 10017

 

Re:  Hardinge Inc. Credit Agreement

 

Ladies and Gentlemen:

 

We have acted
as special counsel to Hardinge Inc., a New York corporation (the “Company”),
and Hardinge Technology Systems, Inc., a New York corporation (“Technology”),
in connection with the Credit Agreement, dated as of June 13, 2008 (the “Credit
Agreement”), among the Company, Hardinge Holdings GmbH, a Swiss limited
liability company, as the Swiss Borrower, various financial institutions as
lenders (the “Lenders”) and JPMorgan Chase Bank, N.A., as administrative
agent for the Lenders (in such capacity, the “Administrative Agent).  The Company and Technology are sometimes
referred to herein individually as a “Transaction Party” and
collectively as the “Transaction Parties.”  The Swiss Borrower, Hardinge Machine Tools
Limited, an English company (“Machine Tools”), and L. Kellenberger &
Co. AG, a Swiss company (“Kellenberger”) are sometimes referred to
herein individually as a “Foreign Transaction Party” and collectively as
the “Foreign Transaction Parties.”

 

This opinion
letter is delivered to you pursuant to Section 4.01(b) of the Credit
Agreement.  Capitalized terms used herein
and not otherwise defined herein have the meanings assigned to such terms in
the Credit Agreement.  The Uniform
Commercial Code, as amended and in effect in the State of New York on the date
hereof, is referred to herein as the “NY UCC.”  With your permission, all assumptions and
statements of reliance herein have been made without any independent
investigation or verification on our part except to the extent, if any,
otherwise expressly stated, and we express no opinion with respect to the
subject matter or accuracy of the assumptions or items upon which we have
relied.

 

In connection
with the opinions expressed herein, we have examined such documents, records
and matters of law as we have deemed necessary for the purposes of such
opinions.  We have examined, among other
documents, the following:

 

1.             an executed copy of
the Credit Agreement;

 

 

2.             an executed copy of
the Pledge and Security Agreement, dated as of June 13, 2008 (the “Security
Agreement”), executed by each of the Transaction Parties in favor of the
Administrative Agent;

 

3.             an executed copy of
the Confirmatory Grant of Security
Interest in United States Patents made by each of the Transaction Parties in
favor of the Administrative Agent, dated as of June 13, 2008 (the “Patent
Agreement”);

 

4.             an executed copy of
the Confirmatory Grant of Security
Interest in United States Trademarks made by each of the Transaction Parties in
favor of the Administrative Agent, dated as of June 13, 2008 (the “Trademark
Agreement”);

 

5.             an executed copy of
the Confirmatory Grant of Security
Interest in United States Copyrights made by each of the Transaction Parties in
favor of the Administrative Agent, dated as of June 13, 2008 (the “Copyright
Agreement”);

 

6.             an executed copy of
the Guaranty, dated as of June 13, 2008 (the “Guaranty”), made by
each of Technology, Machine Tools and Kellenberger in favor of the
Administrative Agent (the “Guaranty”);

 

7.             the Officer’s
Certificate of each Transaction Party delivered to us in connection with this
opinion letter, in the form of each of which is attached hereto as Exhibits A-1
and A-2 (as to each such Transaction Party, the “Officer’s
Certificate”);

 

8.             an unfiled copy of a
financing statement naming the Company as debtor and the Administrative Agent
as secured party (the “Company Financing Statement”), a copy of which is
attached hereto as Exhibit B, which Company Financing Statement we
understand will be filed in the office of the Secretary of State of the State
of New York (such office, the “New York Filing Office”);

 

9.             an unfiled copy of a
financing statement naming Technology as debtor and the Administrative Agent as
secured party (the “Technology Financing Statement”, and together with
the Company Financing Statement, the “Financing Statements”), a copy of
which is attached hereto as Exhibit C, which Technology Financing
Statement we understand will be filed in the New York Filing Office;

 

10.           a copy of the Restated
Certificate of Incorporation of the Company, certified by the Secretary of
State of the State of New York on April 25, 2008 (the “Company
Organizational Document”);

 

11.           a copy of the
Certificate of Incorporation of Technology, certified by the Secretary of State
of the State of New York on May 16, 2008 (the “Technology
Organizational Document”, and together with the Company Organizational
Document, the “Organizational Documents”);

 

2

 

12.           a copy of the By-Laws
of the Company (the “Company Governing Document”), certified to us by
the Secretary of the Company as being complete and correct and in full force
and effect as of the date hereof;

 

13.           a copy of the By-Laws
of Technology (the “Technology Governing Document”; and together with
the Company Governing Document, the “Governing Documents”), certified to
us by the Secretary of Technology as being complete and correct and in full
force and effect as of the date hereof;

 

14.           a copy of Certificate
of Existence, dated April 23, 2008, of the Secretary of State of the State
of New York, as to the existence of the Company in the State of New York as of
such Date (the “Company Good Standing Certificate”); and

 

15.           a copy of Certificate
of Existence, dated May 14, 2008, of the Secretary of State of the State
of New York, as to the existence of Technology in the State of New York as of
such Date (the “Technology Good Standing Certificate”; and together with
the Company Good Standing Certificate, the “Good Standing Certificates”).

 

The documents
referred to in items (1) through (6) above, inclusive, are
referred to herein collectively as the “Documents,” and the documents
referred to in items (2) through (5) are referred to herein
collectively the “Security Documents.” As used herein, “security
interest” means “security interest” as defined in Section 1-201(37) of
the NY UCC.

 

In all such
examinations, we have assumed the legal capacity of all natural persons
executing documents, the genuineness of all signatures, the authenticity of
original and certified documents and the conformity to original or certified
copies of all copies submitted to us as conformed or reproduction copies.  As to various questions of fact relevant to
the opinions expressed herein, we have relied upon, and assume the accuracy of,
representations and warranties contained in the Documents, the respective
Officer’s Certificates and other certificates and oral or written statements
and other information of or from representatives of the Transaction Parties or
the Foreign Transaction Parties and others and assume compliance on the part of
the Transaction Parties and the Foreign Transaction Parties with their
covenants and agreements contained therein.

 

In connection
with the opinions expressed in paragraph (a) below, we have relied
solely upon certificates of public officials as to the factual matters and
legal conclusions set forth therein. 
With respect to the opinions expressed in clause (i) of
paragraph (b) below, clause (ii) of paragraph (c) below
and clause (ii)(A) of paragraph (d) below, our opinions are limited (x) to
Our Actual Knowledge, if any, of the specially regulated business activities
and properties of the Transaction Parties based solely upon each Transaction
Party’s respective Officer’s Certificate in respect of such matters and without
any independent investigation or verification on our part and (y) to only
those laws and regulations that, in our experience, are normally applicable to
transactions of the type contemplated by the Documents.

 

3

 

Based upon the foregoing, and subject to the limitations,
qualifications and assumptions set forth herein, we are of the opinion that:

 

a.             Each
Transaction Party is a corporation incorporated and existing under the laws of
the State of New York.

 

b.             Each
Transaction Party has the corporate power and authority (i) to conduct its
business substantially as described in the Officer’s Certificate of such
Transaction Party and (ii) to enter into and to incur and perform its
obligations under the Documents to which it is a party.

 

c.             The
execution and delivery to the Administrative Agent and the Lenders by each of
the Transaction Parties of the Documents, in each case to which it is a party,
and the performance by each such Transaction Party of its obligations
thereunder, and the granting by each such Transaction Party of the security
interests provided for in the Security Documents, (i) have been authorized
by all necessary corporate action by such Transaction Party and (ii) do
not require under present law, or present regulation of any governmental agency
or authority of the State of New York or the United States of America, as
applicable, any filing or registration by such Transaction Party with, or
approval or consent to such Transaction Party of, any governmental agency or
authority of the State of New York or the United States of America that has not
been made or obtained except (w) those required in the ordinary course of
business in connection with the performance by such Transaction Party of its
obligations under certain covenants contained in the Documents to which it is a
party, (x) those required to perfect security interests, if any, granted
by such Transaction Party thereunder (other than the security interests in
collateral as to which current perfection opinions are expressed below), (y) those
required pursuant to securities and other laws that may be applicable to the
disposition of any collateral subject thereto and (z) filings,
registrations, consents or approvals in each case not required to be made or
obtained by the date hereof.

 

d.             The
execution and delivery to the Administrative Agent and the Lenders by each of
the Transaction Parties of the Documents, in each case to which it is a party,
and the performance by each such Transaction Party of its obligations
thereunder, and the granting by each such Transaction Party of the security
interests provided for in the Security Documents, (i) do not contravene
any provision of any Organizational Document or Governing Document of such
Transaction Party, (ii) do not violate (A) any present law, or
present regulation of any governmental agency or authority, of the State of New
York or the United States of America, applicable to such Transaction Party or
its property, or (B) any agreement binding upon such Transaction Party or
its property that is listed on Annex I to the Officer’s Certificate or any
court decree or order binding upon such Transaction Party or its property that
is listed on Annex II to the Officer’s Certificate (this opinion being
limited in that we express no opinion with respect to any violation not readily
ascertainable from the face of any such agreement, decree or order, or arising
under or based upon any cross default provision insofar as it relates to a
default 

 

4

 

under an agreement not so identified to us, or arising under or based
upon any covenant of a financial or numerical nature or requiring computation)
and (iii) will not result in or require the creation or imposition of any
security interest or lien upon any of its properties pursuant to the provisions
of any agreement binding upon such Transaction Party or its properties that is
listed on Annex I to the Officer’s Certificate other than any security
interests or liens created by the Documents and any other security interests or
liens in favor of the Administrative Agent or the Lenders arising under any of
the Documents or applicable law.

 

e.             Each
Document to which each Transaction Party is a party has been duly executed and
delivered on behalf of such Transaction Party.

 

f.              Each
Document constitutes a valid and binding obligation of each Transaction Party
signatory thereto enforceable against such Transaction Party in accordance with
its terms.  The Guaranty is a valid and
binding obligation of each of Machine Tools and Kellenberger, respectively,
enforceable against each such party in accordance with its terms.  The Credit Agreement is a valid and binding
obligation of the Swiss Borrower, enforceable against the Swiss Borrower in
accordance with its terms.

 

g.             The
borrowings by the Company under the Credit Agreement and the application of the
proceeds thereof as provided in the Credit Agreement will not violate
Regulation T, U or X of the Board of Governors of the Federal Reserve System
(the “Margin Regulations”).

 

h.             No
Transaction Party is required to register as an “investment company” (under,
and as defined in, the Investment Company Act of 1940, as amended (the “1940
Act”)) and is not is a company controlled by a company required to register
as such under the 1940 Act.

 

i.              The
Security Agreement creates in favor of the Administrative Agent, for the
benefit of the Holders of Secured Obligations, as security for the Secured
Obligations, a security interest in the right, title and interest of each
Transaction Party thereto in the Collateral (as defined in the Security
Agreement) to which Article 9 of the NY UCC is applicable (the “Article 9
Collateral”).

 

j.              Upon
the effective filing of the Financing Statements with the New York Filing
Office, the Administrative Agent will have, for the benefit of the Holders of
Secured Obligations, a perfected security interest against the Transaction
Parties in that portion of the Article 9 Collateral in which a security
interest may be perfected by filing an initial financing statement with the New
York Filing Office under the NY UCC (the “New York Filing Collateral”).  We express no opinion as to the priority of
any security interest of any person identified above in the New York Filing
Collateral and we note, without expressing any opinion as to the issue, that
the priority of a security interest in the New York Filing Collateral may be
governed by laws other than the NY UCC 

 

5

 

(including, without limitation, the laws of jurisdictions other than
the State of New York) even if perfection of a security interest in the
Security Agreement New York Filing Collateral is governed by the NY UCC.

 

k.             The
Security Agreement, together with physical delivery to the Administrative Agent
in the State of New York of the certificates representing the shares of stock
issued by Technology and the Swiss Borrower and owned by the Company and
identified on Exhibit D to the Security Agreement (the “Pledged Equity
Interests”), accompanied by undated stock powers with respect to such Pledged
Equity Interests duly indorsed in blank by an effective indorsement, creates in
favor of the Administrative Agent, for the benefit of the Holders of Secured
Obligations, as security for the Secured Obligations, a perfected security
interest under the NY UCC in the Company’s rights in the Pledged Equity
Interests issued by Technology and the Swiss Borrower while the Pledged Equity
Interests are located in the State of New York and in the possession of the
Administrative Agent.  Assuming that
neither the Administrative Agent nor any other Holder of Secured Obligations
has notice of any adverse claim to such Pledged Equity Interest and that the
security interest of the Administrative Agent for the benefit of the Holders of
Secured Obligations is perfected as described above, the Administrative Agent
for the benefit of the Holders of Secured Obligations will acquire its security
interest in such Pledged Equity Interests free of any adverse claim

 

To Our Actual
Knowledge there are no legal proceedings (i) pending before any court or
arbitration tribunal or (ii) overtly threatened in writing, in each case,
against any Transaction Party that seek to enjoin or otherwise interfere
directly with the transactions contemplated by the Documents other than the
legal proceedings, if any, disclosed in the Documents, including, without
limitation, any schedules or exhibits thereto. 
For purposes of this opinion letter, “Actual Knowledge” means, with
respect to any person, the conscious awareness of facts by such person; “Our
Actual Knowledge” means the Actual Knowledge of any lawyer included in the
Covered Lawyer Group; and the “Covered Lawyer Group” means lawyers currently at
Squire, Sanders & Dempsey L.L.P. who have been actively involved in
negotiating the Documents and the transactions contemplated thereby or
preparing this opinion letter.  For
purposes of this paragraph, we have inquired as to the Actual Knowledge of the
lawyers included in the Covered Lawyer Group with respect to the existence of
the legal proceedings described above and we have relied on, and assumed the
accuracy of, representations and warranties contained in the Documents and
certificates and oral or written statements and other information of or from
officers or other representatives of the Transaction Parties.  We have not, however, made any review, search
or investigation of any public or private records or files, including, without
limitation, litigation dockets or other records or files of the Transaction
Parties or of Squire, Sanders & Dempsey L.L.P.

 

The opinions set forth above are subject to the following
qualifications and limitations:

 

A.            Our
opinions in paragraph (f) above are subject to (i) applicable
bankruptcy, insolvency, reorganization, fraudulent transfer and conveyance, 

 

6

 

voidable preference, moratorium, receivership, conservatorship,
arrangement or similar laws, and related regulations and judicial doctrines,
from time to time in effect affecting creditors’ rights and remedies generally,
(ii) general principles of equity (including, without limitation,
standards of materiality, good faith, fair dealing and reasonableness,
equitable defenses, the exercise of judicial discretion and limits on the
availability of equitable remedies, including without limitation specific
performance), whether such principles are considered in a proceeding at law or
in equity, (iii) defenses arising from actions by a party seeking
enforcement which may be unconscionable, inequitable or unreasonable or from
the passage of time, and (iv) the qualification that certain provisions of
the Documents may be unenforceable in whole or in part under the laws
(including judicial decisions) of the State of New York or the United States of
America, but the inclusion of such provisions does not make the remedies
afforded by the Documents inadequate for the practical realization of the
principal benefits provided by the Documents, in each case subject to the other
qualifications contained in this letter.

 

B.            We express no opinion
as to the enforceability of any provision in the Documents:

 

(i)            providing
that any person or entity may sell or otherwise dispose of, or purchase, any
collateral subject thereto, or enforce any other right or remedy thereunder
(including without limitation any self-help or taking-possession remedy),
except in compliance with the NY UCC and other applicable laws;

 

(ii)           establishing
standards for the performance of the obligations of good faith, diligence,
reasonableness and care prescribed by the NY UCC or establishing standards
measuring fulfillment of rights and duties other than as permitted by Section 9-603
of the NY UCC;

 

(iii)          relating to indemnification, contribution or
exculpation in connection with violations of any securities laws or statutory
duties or public policy, or in connection with willful, reckless or unlawful
acts or gross negligence of the indemnified or exculpated party or the party
receiving contribution;

 

(iv)          providing
that any person or entity may exercise set-off rights other than in accordance
with and pursuant to applicable law;

 

(v)           relating
to choice of governing law in any Document;

 

(vi)          relating
to the law of usury;

 

(vii)         waiving any rights to trial by jury;

 

7

 

(viii)        waiving any rights to consequential damages;

 

(ix)           purporting
to confer, or constituting an agreement with respect to, subject matter
jurisdiction of United States federal courts to adjudicate any matter;

 

(x)            purporting
to create a trust or other fiduciary relationship;

 

(xi)           specifying
that provisions thereof may he waived only in writing, to the extent that an
oral agreement or an implied agreement by trade practice or course of conduct
has been created that modifies any provision of such Documents;

 

(xii)          giving any person or entity the power to
accelerate obligations or to foreclose upon collateral without any notice to
the obligor;

 

(xiii)         providing for the performance by any guarantor
of any of the nonmonetary obligations of any person or entity not controlled by
such guarantor;

 

(xiv)        providing for restraints on alienation of
property and purporting to render transfers of such property void and of no
effect or prohibiting or restricting the assignment or transfer of property or
rights to the extent that any such prohibition or restriction is ineffective
pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the NY UCC;

 

(xv)         providing
for the payment of attorneys’ fees; and

 

(xvi)        granting any party a power of attorney to act
on behalf of the Transaction Parties or the Foreign Transaction Parties.

 

C.            Our
opinions as to enforceability are subject to the effect of generally applicable
rules of law that:

 

(i)            provide
that forum selection clauses in contracts are not necessarily binding on the
court(s) in the forum selected; and

 

(ii)           may,
where less than all of a contract may be unenforceable, limit the
enforceability of the balance of the contract to circumstances in which the
unenforceable portion is not an essential part of the agreed exchange, or that
permit a court to reserve to itself a decision as to whether any provision of
any agreement is severable.

 

8

 

D.            We
express no opinion as to the enforceability of any purported waiver, release,
variation, disclaimer, consent or other agreement to similar effect (all of the
foregoing, collectively, a “Waiver”) by any Transaction Party or any
Foreign Transaction Party under any of the Documents to the extent limited by
the NY UCC, including Sections 1-102(3), 9-602 or 9-624 thereof, or other
provisions of applicable law (including judicial decisions), or to the extent
that such a Waiver applies to a right, claim, duty or defense or a ground for,
or a circumstance that would operate as, a discharge or release otherwise
existing or occurring as a matter of law (including judicial decisions), except
to the extent that such a Waiver is effective under and is not prohibited by or
void or invalid under the NY UCC, including Sections 9-602 or 9-624
thereof or other provisions of applicable law (including judicial decisions).

 

E.             Our
opinions are subject to the following assumptions, qualifications and
limitations:

 

(i)            Any
security interest in the proceeds of collateral is subject in all respects to
the limitations set forth in Section 9-315 of the NY UCC.

 

(ii)           We
express no opinion as to the nature or extent of the rights, or the power to
transfer rights, of any Transaction Party or Foreign Transaction Party in, or
title of any Transaction Party or Foreign Transaction Party into, any
collateral under any of the Documents, or property purporting to constitute
such collateral, or the value, validity or effectiveness for any purpose of any
such collateral or purported collateral, and we have assumed that each
Transaction Party or Foreign Transaction Party has sufficient rights in, or
power to transfer rights in, all such collateral or purported collateral for
the liens and security interests provided for under the Documents to attach.

 

(iii)          We express no opinion as to the priority of
any pledge, security interest, assignment for security, lien or other
encumbrance, as the case may be, that may be created or purported to be created
under the Documents.  Other than as
expressly noted in paragraphs (j) and (k) above, we express no
opinion as to the perfection of, and other than as expressly noted in
paragraphs (i) and (j) above, we express no opinion as to the
creation, validity or enforceability of, any pledge, security interest, assignment
for security, lien or other encumbrance, as the case may be, that may be
created or purported to be created under the Documents.  We express no opinion as to the creation,
validity or enforceability of any pledge, security interest, assignment for
security, lien or other encumbrance, as the case may be, that may be created or
purported to be created under the Documents in any commercial tort claims.

 

9

 

(iv)          In
the case of property that becomes collateral under the Documents after the date
hereof, Section 552 of the United States Bankruptcy Code limits the extent
to which property acquired by a debtor after the commencement of a case under
the United States Bankruptcy Code may be subject to a lien arising from a
security agreement entered into by the debtor before the commencement of such
case.

 

(v)           We
express no opinion as to the enforceability of the liens and security interests
under the Documents in any item of collateral subject to any restriction on or
prohibition against transfer contained in or otherwise applicable to such item
of collateral or any contract, agreement, license, permit, security, instrument
or document constituting, evidencing or relating to such item, except to the
extent that any such restriction is rendered ineffective pursuant to any of
Sections 9-406, 9-407, 9-408 and 9-409 of the NY UCC.

 

(vi)          We
call to your attention that Chapter 9 of the NY UCC requires the filing of
continuation statements within the period of six months prior to the expiration
of five years from the date of original filing of financing statements under
the NY UCC in order to maintain the effectiveness of such financing statements
and that additional financing statements may be required to be filed to maintain
the perfection of security interests if the debtor granting such security
interests makes certain changes to its name, or changes its location (including
through a change in its jurisdiction of organization) or the location of
certain types of collateral, all as provided in the NY UCC.  We specifically disclaim any obligation to
render further advice to you as to the need to file any such continuation
statements or additional financing statements.

 

(vii)         We call to your attention that an obligor (as
defined in the NY UCC) other than a debtor may have rights under Part 6 of
Article 9 of the NY UCC.

 

(viii)        With respect to our opinions above as to the
perfection of a security interest in the Article 9 Collateral through the
filing of a financing statement, we express no opinion with respect to the
perfection of any such security interest in any Article 9 Collateral
constituting timber to be cut, as extracted collateral, cooperative interests,
or property described in Section 9-311(a) of the NY UCC (including,
without limitation, property subject to a certificate-of-title statute), and we
express no opinion with respect to the effectiveness of any financing statement
filed or purported to be filed as a fixture filing.

 

10

 

(ix)           We
have assumed that each Transaction Party is organized solely under the laws of
the state identified as such Transaction Party’s jurisdiction of organization
in such Transaction Party’s applicable Organizational Document and Good Standing
Certificate.

 

(x)            We
have assumed that the information pertaining to the Administrative Agent in the
Financing Statements is correct in all respects.

 

F.             To
the extent it may be relevant to the opinions expressed herein, we have assumed
that the parties to the Documents (other than the Transaction Parties):  (i) are in good standing under their
respective jurisdictions of organization, (ii) have the power to enter
into and perform such agreements and to consummate the transactions
contemplated thereby, and (iii) do not require the consent or approval of
any third party or governmental authority (which has not been obtained) to
execute and deliver such Documents.  We
have further assumed that with respect to each party to the Documents (other
than the Transaction Parties):  (i) such
Documents have been duly authorized, executed and delivered by, and, other than
with respect to the Foreign Transaction Parties, constitute legal, valid and
binding obligation of, such party, enforceable against such party in accordance
with their respective terms and (ii) such execution, delivery and
performance do not violate any material agreements of such party, any
applicable laws or such party’s constituent documents or any governmental laws,
rules or regulations of any jurisdiction.

 

G.            For
purposes of the opinions set forth in paragraph (k) above, we have
assumed that the Pledged Equity Interests issued by the Swiss Borrower
constitute “securities” as defined in Section 8-102(a)(15) of the NY UCC.

 

H.            We
note that Section 27 of the Judiciary Law of the State of New York
provides that a court in New York ordinarily enters and enforces a judgment
only in U.S. Dollars, but that in any case in which the cause of action is
based upon an obligation denominated in a currency other than U.S. Dollars the
court shall render or enter a judgment or decree in the foreign currency of the
underlying obligation, and that such judgment or decree shall be converted into
U.S. Dollars at the rate of exchange pending on the date of entry of such
judgment or decree.  Therefore, we
express no opinion on any provision of the Documents that purports to treat the
currency of a judgment or decree in a manner inconsistent with Section 27
of the Judiciary Law.

 

I.              The
opinions expressed herein are limited to (i) the federal laws of the
United States of America and the laws of the State of New York as currently in
effect.  Our opinions in paragraph (i) and
(j) above are limited to Article 9 of the NY UCC, and our opinions in
paragraph (k) above are limited to Articles 8 

 

11

 

and 9 of the NY UCC.  As such,
the foregoing opinion paragraphs do not address: (i) laws of jurisdictions
other than New York and the United States of America, and laws of New York and
the United States of America, (ii) collateral of a type not subject to
Articles 8 or 9 of the NY UCC and (iii) the choice of law rules of
the NY UCC with respect to the laws of other jurisdictions that may govern
perfection and priority of security interests granted in the Collateral.

 

Our opinions
are limited to those expressly set forth herein, and we express no opinions by
implication.

 

We express no
opinion as to the compliance or noncompliance, or the effect of the compliance
or noncompliance, of each of the addressees or any other person or entity with
any state or federal laws or regulations applicable by reason of their status
as or affiliation with a federally insured depository institution, except as
expressly set forth in paragraph (g) above.  We express no opinion as to the effect of any
foreign laws on our opinions with respect to the Foreign Transaction Parties or
the pledge of the Pledged Equity Interests issued by the Swiss Borrower.

 

The opinions
expressed herein are solely for the benefit of the addressees hereof and of any
other person or entity becoming a Lender or Administrative Agent under the
Credit Agreement, in each case above, in connection with the transaction
referred to herein and may not be relied on by such addressees or such other
persons or entities for any other purpose or in any manner or for any purpose
by any other person or entity.

 

The opinions
expressed herein are valid as of the date hereof.  We do not undertake to advise you or anyone
else of any changes in the views expressed herein resulting from matters that
hereafter might occur or be brought to our attention.

 

Respectfully
submitted,

 

 

SQUIRE,
SANDERS & DEMPSEY L.L.P.

 

12

 

Exhibit A-1

 

HARDINGE
INC.

 

OFFICER’S
CERTIFICATE

 

The
undersigned officer of Hardinge Inc., a New York corporation (the “Company”),
hereby certifies, as of the date hereof in connection with the execution,
delivery and performance by the Company of the Credit Agreement, dated as of June 13,
2008 (the “Financing Agreement”), among the Company, Hardinge Holdings
GmbH, a Swiss limited liability company, as the Swiss Borrower, various
financial institutions (the “Lenders”) and JPMorgan Chase Bank, N.A., as
administrative agent for the Lenders (in such capacity, the “Administrative
Agent), and with the consummation of the transactions contemplated thereby
and the opinion of Squire, Sanders & Dempsey L.L.P. (the “Opinion”)
delivered in connection therewith, as follows:

 

1.             Attached as (a) Annex I
hereto is a list of all indentures, mortgages, deeds of trust, security and/or
pledge agreements, guarantees, loan and/or credit agreements and other
agreements or instruments (other than the Documents) and (b) Annex II
hereto is a list of all decrees and orders, in each case in clause (a) and
(b) above, to which the Company is a party or that are otherwise binding
upon the Company or any of its assets or property and that contain financial or
other covenants or provisions for defaults or events of default or similar
events or occurrences or other provisions that otherwise would or could have
the effect of (i) restricting the types of provisions that any other
agreement to which the Company becomes a party may contain, (ii) restricting
the conduct of the Company’s business, the incurrence by the Company of
indebtedness, guarantees, or other liabilities or obligations, or the creation
of liens upon any of the Company’s property or assets, or otherwise restricting
the execution, delivery, and performance of, or the consummation of the
transactions contemplated by, the Financing Agreement or any of the other
Documents to which the Company is a party, or (iii) resulting in, or
requiring the creation or imposition of, any lien upon any of the Company’s
assets or property as a result of the execution, delivery or performance of, or
the consummation of the transactions contemplated by, any of the Documents to
which the Company is a party.

 

A true and
complete copy of each of the above agreements, instruments, decrees and orders
has heretofore been furnished to Squire, Sanders & Dempsey L.L.P.

 

No default or
event of default under, or violation of, any such agreement, instrument, decree
or order exists or, immediately after giving effect to entry into the Documents
or consummation of any of the transactions contemplated thereby, will exist.

 

2.             The nature of the Company’s
business and properties, and the purpose of the Company, is to engage in the
following businesses and activities: the design, manufacture and distribution
of turning, milling, grinding, cutting and workholding machines and related
products.  The Company is not engaged in
any activity or business, and does not own any properties, not permitted
pursuant to those provisions of its Restated Certificate of Incorporation or
By-Laws, as amended, specifying the nature of the Company’s business and the
purposes of the Company.  The Company
does not engage or propose to engage in any industry or business or activity,
or own any property or asset, that causes or would cause it to be subject to
special 

 

 

local, state or federal
regulation not applicable to business organizations generally (including,
without limitation, those regulations applicable only to banks, savings and
loan institutions, insurance companies, public utilities or investment
companies).

 

3.             No (i) proceeding is pending
in any jurisdiction for the dissolution or liquidation of the Company, and the
Company has not filed any certificate or order of dissolution, (ii) event
has occurred that has adversely affected the good standing of the Company under
the laws of its jurisdiction of organization, and the Company has paid all
taxes currently due, if any, and taken all other action required by state law
to maintain such good standing and (iii) grounds exist for the revocation
or forfeiture of the Company’s Restated Certificate of Incorporation and
By-Laws.

 

4.             Squire, Sanders & Dempsey
L.L.P. may rely upon the accuracy of all factual representations and warranties
of the Company contained in the Documents, in this Officer’s Certificate and in
all documents and certificates referred to therein or delivered in connection
therewith.

 

5.             The Company does not own or operate
equipment or facilities, or engage in any other activity in the nature of a
public utility, including, without limitation, any such equipment, facilities
or activity relating to garbage or sewage disposal or water production or
transmission, that would subject the Company to regulation as a public utility of
any nature.

 

6.             The Company does not accept
deposits or engage in any other business activity reserved exclusively to banks
or other lenders or financial institutions, or engage in any trust or insurance
business.

 

7.             The Company is not a licensee under
the Federal Power Act, as amended, or engaged in the production, transmission
or sale of electric energy or the production, transmission or sale of any other
form of energy in a manner that makes it subject to state or federal
regulation.

 

8.             Where the Company is engaged in the
treatment, storage, production, processing, transportation or disposal of any
toxic or hazardous waste or other regulated substance, it is in compliance in
all material respects with all applicable local, state, and federal regulations,
and such activity is not conducted by it as a business, but is an activity
incidental to its normal business activities.

 

9.             The Company (a) is not
engaged, and does not hold itself out as being engaged, and does not propose to
engage, primarily in the business of investing, reinvesting or trading in
securities, (b) is not engaged and does not propose to engage in the
business of issuing any certificate, investment contract, or other security
which represents an obligation to pay a stated or determinable sum or sums at a
fixed or determinable date or dates more than twenty-four months after the date
of issuance in consideration of the payment of periodic installments of a
stated or determinable amount (i.e., face-amount certificates of the
installment type), and (c) is not engaged, and does not propose to engage,
in the business of investing, reinvesting, owning, holding or trading in
securities, or if the Company is so engaged or so proposes to engage, it does
not own or propose to acquire investment securities having a value exceeding
40% of the value 

 

 

of the Company’s total
assets (exclusive of Government securities and cash items) on an unconsolidated
basis.  For purposes of this paragraph 9,
(x) “investment securities” includes all securities except (A) government
securities, (B) securities issued by employees’ securities companies, and (C) securities
issued by majority-owned subsidiaries of the Company that are not investment
companies, and (y) “government securities” includes any security issued or
guaranteed as to principal or interest by the United States, or by a person or
entity controlled or supervised by and acting as an instrumentality of the
Government of the United States pursuant to authority granted by the Congress
of the United States; or any certificate of deposit for any of the foregoing.

 

10.           The Company does not own, and no part
of the proceeds of the loans contemplated by the Loan Documents will be used to
purchase or carry (i) any equity security registered or having unlisted
trading privileges on a national securities exchange; (ii) any
over-the-counter security designated as qualified for trading in the national
market system under a designation plan approved by the Securities and Exchange
Commission; (iii) any debt security convertible into or carrying a warrant
or right to subscribe to or purchase a security described in clauses (i), (ii) and
(v) of this paragraph, (iv) any warrant or right to subscribe to a
security described in clauses (i), (ii) and (v) of this paragraph, or
(v) any security issued by an investment company registered under Section 8
of the Investment Company Act of 1940.

 

11.           There is no pending legal proceeding
before, or pending investigation by, any court or administrative agency or
authority of the United States of America or the State of New York or any
arbitration tribunal against or directly affecting the Company or any of its
properties (a) with respect to the transactions contemplated by the
Documents or (b) which could reasonably be expected to have a material
adverse effect on the Company or its assets or properties.

 

Capitalized
terms used but not defined in this Officer’s Certificate have the meanings
ascribed to them in the Opinion.

 

[Signature
Follows on Next Page]

 

 

IN WITNESS
WHEREOF, I have hereunto set my hand as of the
         day of June, 2008.

 

 

	
   

  	
   

  
	
   

  	
  Name: Edward J. Gaio

  
	
   

  	
  Title:   Vice President and Chief Financial

  Officer

  

 

 

ANNEX I

 

1.  Lease, dated as of March 26, 2004,
between Hilliard Real Properties, LLC, a New York limited liability company,
and Hardinge Inc., a New York corporation.

 

2.  Industrial Lease, dated as of February 20,
2008, between MTM Realty, LLC, a New York limited liability company, and
Hardinge Inc., a New York corporation.

 

3.  Lease, dated as of July 1, 2002, between
Hardinge Technology [Systems], Inc., a New York corporation, and Hardinge
Inc., a New York corporation.

 

I-1

 

ANNEX II

 

None

 

II-1

 

Exhibit A-2

 

HARDINGE
TECHNOLOGY SYSTEMS, INC.

 

OFFICER’S
CERTIFICATE

 

The
undersigned officer of Hardinge Technology Systems, Inc., a New York
corporation (the “Company”), hereby certifies, as of the date hereof in
connection with the execution, delivery and performance by the Company of the
Guaranty, dated as of June 13, 2008, executed in connection with that
certain Credit Agreement, dated as of June 13, 2007 (the “Financing
Agreement”), among Hardinge Inc., a New York corporation, Hardinge Holdings
GmbH, a Swiss limited liability company, as the Swiss Borrower, various
financial institutions (the “Lenders”) and JPMorgan Chase Bank, N.A., as
administrative agent for the Lenders (in such capacity, the “Administrative
Agent), and with the consummation of the transactions contemplated thereby
and the opinion of Squire, Sanders & Dempsey L.L.P. (the “Opinion”)
delivered in connection therewith, as follows:

 

1.             Attached as (a) Annex I
hereto is a list of all indentures, mortgages, deeds of trust, security and/or
pledge agreements, guarantees, loan and/or credit agreements and other
agreements or instruments (other than the Documents) and (b) Annex II
hereto is a list of all decrees and orders, in each case in clause (a) and
(b) above, to which the Company is a party or that are otherwise binding
upon the Company or any of its assets or property and that contain financial or
other covenants or provisions for defaults or events of default or similar
events or occurrences or other provisions that otherwise would or could have
the effect of (i) restricting the types of provisions that any other
agreement to which the Company becomes a party may contain, (ii) restricting
the conduct of the Company’s business, the incurrence by the Company of
indebtedness, guarantees, or other liabilities or obligations, or the creation
of liens upon any of the Company’s property or assets, or otherwise restricting
the execution, delivery, and performance of, or the consummation of the
transactions contemplated by, the Financing Agreement or any of the other
Documents to which the Company is a party, or (iii) resulting in, or
requiring the creation or imposition of, any lien upon any of the Company’s
assets or property as a result of the execution, delivery or performance of, or
the consummation of the transactions contemplated by, any of the Documents to
which the Company is a party.

 

A true and
complete copy of each of the above agreements, instruments, decrees and orders
has heretofore been furnished to Squire, Sanders & Dempsey L.L.P.

 

No default or
event of default under, or violation of, any such agreement, instrument, decree
or order exists or, immediately after giving effect to entry into the Documents
or consummation of any of the transactions contemplated thereby, will exist.

 

2.             The nature of the Company’s
business and properties, and the purpose of the Company, is to engage in the
following businesses and activities: the design, manufacture and distribution
of turning, milling, grinding, cutting and workholding machines and related
products.  The Company is not engaged in
any activity or business, and does not own any properties, not permitted
pursuant to those provisions of its Certificate of Incorporation or By-Laws, as
amended, specifying the nature of the Company’s business and the purposes of
the 

 

A-2-1

 

Company.  The Company does not engage or propose to
engage in any industry or business or activity, or own any property or asset,
that causes or would cause it to be subject to special local, state or federal
regulation not applicable to business organizations generally (including,
without limitation, those regulations applicable only to banks, savings and
loan institutions, insurance companies, public utilities or investment
companies).

 

3.             No (i) proceeding is pending
in any jurisdiction for the dissolution or liquidation of the Company, and the
Company has not filed any certificate or order of dissolution, (ii) event
has occurred that has adversely affected the good standing of the Company under
the laws of its jurisdiction of organization, and the Company has paid all
taxes currently due, if any, and taken all other action required by state law
to maintain such good standing and (iii) grounds exist for the revocation
or forfeiture of the Company’s Certificate of Incorporation or By-Laws, as
amended.

 

4.             Squire, Sanders & Dempsey
L.L.P. may rely upon the accuracy of all factual representations and warranties
of the Company contained in the Documents, in this Officer’s Certificate and in
all documents and certificates referred to therein or delivered in connection
therewith.

 

5.             The Company does not own or operate
equipment or facilities, or engage in any other activity in the nature of a
public utility, including, without limitation, any such equipment, facilities
or activity relating to garbage or sewage disposal or water production or
transmission, that would subject the Company to regulation as a public utility
of any nature.

 

6.             The Company does not accept
deposits or engage in any other business activity reserved exclusively to banks
or other lenders or financial institutions, or engage in any trust or insurance
business.

 

7.             The Company is not a licensee under
the Federal Power Act, as amended, or engaged in the production, transmission
or sale of electric energy or the production, transmission or sale of any other
form of energy in a manner that makes it subject to state or federal
regulation.

 

8.             Where the Company is engaged in the
treatment, storage, production, processing, transportation or disposal of any
toxic or hazardous waste or other regulated substance, it is in compliance in
all material respects with all applicable local, state, and federal
regulations, and such activity is not conducted by it as a business, but is an
activity incidental to its normal business activities.

 

9.             The Company (a) is not
engaged, and does not hold itself out as being engaged, and does not propose to
engage, primarily in the business of investing, reinvesting or trading in
securities, (b) is not engaged and does not propose to engage in the
business of issuing any certificate, investment contract, or other security
which represents an obligation to pay a stated or determinable sum or sums at a
fixed or determinable date or dates more than twenty-four months after the date
of issuance in consideration of the payment of periodic installments of a
stated or determinable amount (i.e., face-amount certificates of the
installment type), and (c) is not engaged, and does not propose to engage,
in the business of investing, reinvesting, owning, 

 

A-2-2

 

holding or trading in
securities, or if the Company is so engaged or so proposes to engage, it does
not own or propose to acquire investment securities having a value exceeding
40% of the value of the Company’s total assets (exclusive of Government
securities and cash items) on an unconsolidated basis.  For purposes of this paragraph 9, (x) “investment
securities” includes all securities except (A) government securities, (B) securities
issued by employees’ securities companies, and (C) securities issued by
majority-owned subsidiaries of the Company that are not investment companies,
and (y) “government securities” includes any security issued or guaranteed
as to principal or interest by the United States, or by a person or entity
controlled or supervised by and acting as an instrumentality of the Government
of the United States pursuant to authority granted by the Congress of the
United States; or any certificate of deposit for any of the foregoing.

 

10.           The Company does not own, and no part
of the proceeds of the loans contemplated by the Loan Documents will be used to
purchase or carry (i) any equity security registered or having unlisted
trading privileges on a national securities exchange; (ii) any
over-the-counter security designated as qualified for trading in the national
market system under a designation plan approved by the Securities and Exchange
Commission; (iii) any debt security convertible into or carrying a warrant
or right to subscribe to or purchase a security described in clauses (i), (ii) and
(v) of this paragraph, (iv) any warrant or right to subscribe to a
security described in clauses (i), (ii) and (v) of this paragraph, or
(v) any security issued by an investment company registered under Section 8
of the Investment Company Act of 1940.

 

11.           There is no pending legal proceeding
before, or pending investigation by, any court or administrative agency or
authority of the United States of America or the State of New York or any
arbitration tribunal against or directly affecting the Company or any of its
properties (a) with respect to the transactions contemplated by the
Documents or (b) which could reasonably be expected to have a material
adverse effect on the Company or its assets or properties.

 

Capitalized
terms used but not defined in this Officer’s Certificate have the meanings
ascribed to them in the Opinion.

 

[Signature
Follows on Next Page]

 

A-2-3

 

IN WITNESS
WHEREOF, I have hereunto set my hand as of the
         day of June, 2008.

 

 

	
   

  	
   

  
	
   

  	
  Name: Edward J. Gaio

  
	
   

  	
  Title:  Treasurer

  

 

A-2-4

 

ANNEX I

 

1.  Lease, dated as of July 1, 2002, between
Hardinge Technology [Systems], Inc., a New York corporation, and Hardinge
Inc., a New York corporation.

 

I-1

 

ANNEX II

 

None

 

II-1

 

Exhibit B

 

Hardinge Inc. Financing Statements

 

 

Exhibit C

 

Hardinge Technology Systems, Inc.
Financing Statements

 

Exhibit B-2

 

STAIGER, SCHWALD & PARTNER

ATTORNEYS-AT-LAW

 

 

	
   

  	
   

  	
  To:

  
	
   

  	
   

  	
  JPMorgan Chase Bank, N.A.

  
	
   

  	
   

  	
  as Administrative Agent

  
	
   

  	
   

  	
  and the Lenders to Hardinge Inc.

  
	
   

  	
   

  	
  under the Credit Agreement (as defined below)

  
	
   

  	
   

  	
   

  
	
  Mark-Oliver Baumgarten

  	
   

  	
  Zurich, June 13, 2008

  
	
  Attorney-at-Law, Dr. iur., LL.M.

  	
   

  	
   

  
	
  mark-oliver.baumgarten@ssplaw.ch

  	
   

  	
   

  

 

Hardinge Inc. / Credit Agreement

 

Dear Sir or Madam:

 

We have acted as special Swiss counsel to the Swiss Companies (as
defined below) in connection with a Credit Agreement (the “Credit
Agreement”) dated as of June 12, 2008 among, inter alia, Hardinge Inc. as borrower (the “Company”), Hardinge Holdings GmbH as Swiss borrower (the “Swiss Borrower”) and JPMorgan Chase Bank, N.A. as
administrative agent (the “Administrative Agent”)
and the Lenders (as defined in the Agreement) and agents party to the Credit
Agreement. We have been requested to render an opinion in connection with
certain issues of Swiss law.

 

Capitalized terms and expressions shall have the same meaning as in the
Credit Agreement unless otherwise defined herein.

 

DOCUMENTS REVIEWED

 

For the purposes of this opinion letter, we have examined the following
documents:

 

A.1          An
execution copy of the Credit Agreement;

 

A.2          an execution copy of a Guaranty (“Subsidiary Guaranty”) dated as of June 12, 2008 to be
granted by L. Kellenberger & Co. AG (“Kellenberger”,
together with the Swiss Borrower, the “Swiss Companies”);

 

Staiger, Schwald & Partner Ltd.

Genferstrasse 24, P.O. Box 2012, CH-8027
Zurich, Phone +41 44 283 86 86, Fax +41 44 283 87 87

ssplaw@ssplaw.ch, www.ssplaw.ch

 

 

A.3          an execution copy of the Pledge and Security
Agreement (the “Pledge Agreement”) dated as of June 12,
2008 between, inter alia, the Company as pledgor and the Administrative Agent,
acting for itself and the Secured Parties, relating to the pledge of 66 2/3
percent of its participation in the Swiss Borrower (the Pledge Agreement
together with the Credit Agreement and the Subsidiary Guaranty, the “Agreements” and each of them an “Agreement”);

 

A.4          a copy of the corporate documents of the
Swiss Borrower (the “Swiss Borrower Corporate
Documents”):

 

A.4.1       a certified copy of an excerpt of the commercial
register (Handelsregisterauszug) of the Canton of St. Gall dated June 6,
2008, in respect to the Swiss Borrower (the “Swiss
Borrower Excerpt”);

 

A.4.2       a certified copy dated June 6, 2008 of the
articles of association (Statuten) of the Swiss Borrower (the “Swiss Borrower Articles”);

 

A.4.3       a copy of the resolution of the extraordinary
shareholders meeting of the Swiss Borrower dated June 3, 2008 (the “Swiss Borrower Shareholders Resolution”);

 

A.4.4       a copy of the resolution of the managing board
of the Swiss Borrower dated June 3, 2008 (the “Swiss
Borrower Board Resolution”);

 

A.4.5       a copy of the Swiss Borrower’s company share
register dated June 12, 2008 (the “Swiss Borrowers Share
Register”);

 

A.4.6       certificate (Namenpapier) no. 1 for 63’747
company shares (Stammanteile) in the Swiss Borrower with a par value of
CHF 100 dated June 9, 2008 (the “Swiss Borrower Share
Certificate”);

 

A.5          a copy of the corporate documents of
Kellenberger (the “Kellenberger Corporate
Documents”, together with the Swiss Borrower Corporate Documents,
the “Corporate Documents”):

 

A.5.1       a certified copy of an excerpt from the
commercial register (Handelsregisterauszug) of the Canton of St. Gall dated June 9,
2008, in respect to Kellenberger (the “Kellenberger Excerpt”,
together with the Swiss Borrower Excerpt, the “Excerpts”);

 

A.5.2       a certified copy dated June 4, 2008 of the
articles of association (Statuten) of Kellenberger (the “Kellenberger
Articles”, together with the Swiss Borrower Articles, the “Articles”);

 

A.5.3       a copy of the resolution of the extraordinary
shareholders meeting of Kellenberger dated May 28, 2008 (the “Kellenberger Shareholders Resolution”, together with the
Swiss Borrower Shareholders Resolution, the “Shareholders
Resolutions”);

 

A.5.4       a copy of the resolution of the board of
directors of Kellenberger dated June 5, 2008 (the “Kellenberger
Board Resolution”, together with the Swiss Borrower Board
Resolution, the “Board Resolutions”).

 

2

 

For the purposes of this opinion letter, we have reviewed no documents
other than those mentioned in this section A. Therefore, we express no opinion
on, or in connection with, any such other agreements or documents.

 

B.       ASSUMPTIONS

 

In giving our opinion, we have assumed the following:

 

B.1          All signatures on the documents submitted to
us (and on any and all agreements and documents referred to therein) or on the
originals thereof are genuine.

 

B.2          Copies submitted to us are true and complete
and conform to the originals thereof.

 

B.3          None of the documents submitted to us (and
none of the agreements and documents referred to therein) has been amended,
rescinded or revoked.

 

B.4          Each of the parties (other than the Swiss
Companies) to the Agreements (and to any and all agreements and documents
referred to therein) is a company, other legal entity, partnership or other
organization duly organized, validly existing and in good standing (where such
concept is legally relevant) under the laws of the jurisdiction of its
incorporation and/or establishment and has the requisite capacity, power and
authority to enter into the transactions contemplated by any Agreement (and to
any and all agreements and documents referred to therein) and to perform its
respective rights and obligations thereunder.

 

B.5          The execution, delivery and performance of
the Agreements (and of any and all agreements and documents referred to
therein) by all parties thereto (other than the Swiss Companies) have been or,
where appropriate, will be duly authorized by all action necessary under
applicable law, the articles of incorporation (if applicable) and the internal
regulations (if applicable) of each such party.

 

B.6          The Agreements (and any and all agreements
and documents referred to therein) have been or, where appropriate, will be
duly signed, executed and delivered by representatives of all the parties
thereto (other than the Swiss Companies) with the requisite signing authority
conferred on them in accordance with applicable law, the articles of
incorporation (if applicable) and the internal regulations (if applicable) of
each such party.

 

B.7          The Agreements (and any and all agreements
and documents referred to therein), upon signature and execution, will be
legal, valid, binding and enforceable in accordance with its terms under the
laws of the State of New York, by which they are expressed to be governed, and
the choice of such laws was freely made by the parties thereto and for bona
fide purposes. The Agreements have been, or will be, entered into, and the
execution and completion thereof (and of any and all agreements and documents
referred to therein) have been, or will be, carried out for bona fide commercial reasons by each of

 

3

 

the parties thereto. None of the directors or officers of the
respective party has or had a conflict of interest with such party in respect
of any Agreement (and any and all agreements and documents referred to therein)
that would preclude him from validly representing (or granting a power of
attorney in respect of the documents for) the respective party.

 

B.8          All conditions and prerequisites provided for
in each Agreement (and in any and all agreements and documents referred to
therein) have been met or waived. The shares to be pledged under the Pledge
Agreement have been, or will be, transferred into, and remain in, the
possession of the Administrative Agent, acting for itself and the Secured
Parties.

 

B.9          All representations and warranties made by
any one of the parties in any Agreement (and in any and all agreements and
documents referred to therein) are, when made or repeated or deemed to be made
or repeated, true and accurate.

 

B.10        The Holders of Secured Obligations (the “Secured Parties”) actually have claims to be secured under
the Pledge Agreement. The Swiss Borrower Share Certificate is legally and
validly existing.

 

B.11        As of the date hereof and as of the date of the
perfection of the Pledge Agreement, all shares so pledged will be free of any
encumbrance or other third party rights.

 

B.12        Each of the parties to the Agreements has duly
performed, or will duly perform, all obligations thereunder (and under any and
all agreements and documents referred to therein) by which it is bound in
accordance with the respective terms thereof.

 

B.13        To the extent any document has to be executed
or any obligation under any Agreement (or under any and all agreements and
documents referred to therein) has to be performed under any law other than
Swiss law or in any jurisdiction outside Switzerland, such execution or
performance will not be illegal or unenforceable by virtue of the laws of such
jurisdiction, and all parties to such Agreement (and any and all agreements and
documents referred to therein) will comply with all matters of validity and
enforceability under any law.

 

B.14        None of the parties to any Agreement (or to any
and all agreements and documents, referred to therein) has passed a voluntary
winding-up resolution, nor has a petition been presented or order been made by
a court for the winding up, dissolution, bankruptcy, receivership, moratorium
or administration of any such party, and no receiver, trustee in bankruptcy,
administrator or similar officer has been appointed in relation to any such
parties or any of their assets or revenues.

 

B.15        At the time of entering into any Agreement (and
any and all agreements and documents referred to therein), each of the Swiss
Companies is not, and there are no reasonable grounds to believe that in the
future any of the Swiss Companies will be, impendingly

 

4

 

illiquid (drohend zahlungsunfähig),
illiquid (zahlungsunfähig) or overindebted (überschuldet).

 

B.16        The Corporate Documents are unchanged and
correct as of the date hereof, and no changes have been made which should have
been, or should be, reflected in such documents as of the date hereof.

 

B.17        The Board Resolutions and the Shareholders
Resolutions (i) have each been duly resolved in respective meetings duly
convened or otherwise in the manner set forth therein, (ii) accurately
reflect the resolutions and other matters stated therein, and (iii) are each
in full force and effect.

 

C.            OPINION

 

Based on the assumptions and subject to the
qualifications set forth herein, we are of the opinion that:

 

C.1          Kellenberger has been duly incorporated and
is validly existing as a corporation (Aktiengesellschaft) pursuant to articles
620 et seq. of the Swiss Code of Obligations (“CO”).
The Swiss Borrower has been duly incorporated and is validly existing as a
limited liability company (Gesellschaft mit beschränkter Haftung) pursuant to
articles 772 et seq. CO.

 

C.2          Each of the Swiss Companies has the corporate
power and authority to enter into each Agreement to which it is a party, and
the execution, delivery and performance by each of the Swiss Companies of such
Agreement have been duly authorized by the respective Swiss Company.

 

C.3          The execution, delivery and performance by
the Swiss Companies of each Agreement to which it is a party do not violate (i) any
provision of the respective Articles or (ii) any laws or ordinances of
Switzerland applicable to the Swiss Companies.

 

C.4          The choice of the law of the State of New
York governing each Agreement as set forth in such Agreement is a valid choice
of law under the laws of Switzerland, and will be recognized and applied by the
courts of Switzerland. The pledge of the company shares (Stammanteile) under
the Pledge Agreement creates and perfects the security interests expressed to
be created therein, enforceable in accordance with, and subject to, its terms.

 

C.5          Each of the Swiss Companies has the corporate
power to submit to the jurisdiction of the Supreme Court of the State of New
York sitting in New York and of the United States District Court of the
Southern District of New York, and the submission to the jurisdiction of the
such courts is valid and legally binding on each of the Swiss Companies.

 

5

 

C.6          It is not necessary under the laws of
Switzerland that any Lender or the Sole Lead Arranger be licensed, authorized
or otherwise entitled to carry on business in Switzerland in order to enable it
to enforce its rights under any Agreement.

 

C.7          To ensure the legality, validity
enforceability or admissibility in evidence of each Agreement in Switzerland or
any political subdivision thereof, it is not necessary that any Agreement be
filed, recorded or enrolled with any governmental or public body or court
authority in Switzerland.

 

C.8          Each of the Swiss Companies has no right of
immunity on the grounds of sovereignty or otherwise from any legal action, suit
or proceeding, from set-off or counterclaim, from attachment or from execution
or any other legal process in respect of any of its obligations under any
Agreement.

 

C.9          A final judgment against any of the Swiss
Companies in respect of any Agreement duly obtained in the court of the Supreme
Court of the State of New York sitting in New York or of the United States
District Court of the Southern District of New York would be recognized and
enforced in Switzerland without re-trial or re-examination of the merits in the
case.

 

D.            QUALIFICATIONS

 

The opinions set forth herein are subject to
the following qualifications:

 

D.1          We have not been retained as tax or
regulatory counsel and, therefore, express no opinion on any tax matters nor on
regulatory issues relating to any of the Swiss Companies or any of its
subsidiaries or such transactions.

 

D.2          The opinions expressed herein are limited to
the laws of Switzerland as in force on the date hereof and as currently applied
and construed by the courts of Switzerland. In the absence of statutory or
established case law, we base our opinion on our independent professional
judgement. We have not investigated and do not express or imply any opinion
herein concerning any other laws.

 

D.3          Where we refer to enforceability, we only
express an opinion as to enforceability under the rules of procedure
applicable in Switzerland. The terms “enforceable”, “enforceability”, “valid”, “legal”,
“binding” and “effective” (or any combination thereof) where used above mean
that the obligations assumed by the relevant party under the relevant document
are of a type which Swiss law generally recognizes and enforces; they do not
mean that these obligations will necessarily be enforced in all circumstances
in accordance with their terms. Enforceability of the Agreements may be limited
by applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors and secured parties in general (including, without limitation,
provisions relating to voidable preferences), general equitable principles (including,
but not limited to, the abuse of rights (Rechtsmissbrauch)),
the principle of good faith (Grundsatz von Treu und Glauben)
and Swiss public policy

 

6

 

(ordre public) as defined in articles 17–19
of the Swiss Private International Law Act, as amended (the “PILA”).

 

Enforcement before the courts of Switzerland will in any event be
subject to:

 

(i)    the nature of the remedies available in the Swiss
courts (and nothing in this opinion letter must be taken as indicating that
specific performance (other than for the payment of a sum of money) or
injunctive relief would be available as remedies for the enforcement of such
obligations ); and

 

(ii)   the acceptance of such courts of jurisdiction and
the power of such courts to stay proceedings if concurrent proceedings are
being brought elsewhere.

 

D.4          Based on mandatory Swiss law, the appointment
of the Administrative Agent and its authorization as well as the appointment of
any process agent are revocable at any time; furthermore, the Administrative
Agent and any process agent may resign at any time. Under Swiss law, a power of
attorney may be revoked and terminated any time even though stated to be
irrevocable or to be subject to other limitations.

 

D.5          Based on mandatory Swiss law, the liability
of the parties to any Agreement may not be excluded for willful misconduct or
gross negligence; furthermore, if the Administrative Agent is a bank or another
person that conducts a business that is carried on under an official license,
even the exclusion for liability for simple negligence (leichte
Fahrlässigkeit) may be considered to be null and void at the
discretion of the court seized.

 

D.6          The validity of the choice of the laws of the
State of New York as the governing law of the Agreements is subject to the
qualifications referred to in any applicable treaty and in Articles 17 et seq.
PILA with regard to the applicability of a foreign law in cases of conflicts
with Swiss public policy (ordre public)
or the application of mandatory provisions of Swiss or a foreign law.

 

D.7          The enforceability of a commitment by a party
to provide another party with data relating to third parties or with inspection
rights relating to such data may be limited by applicable laws relating to data
protection and/or business secrecy protection.

 

D.8          A certificate, determination or opinion of a
party to any Agreement or a third party might be held by a Swiss court not to
be conclusive without further proof of the relevant facts.

 

D.9          The exercise of discretion or the giving of
an opinion by a party to any Agreement or by a third party or the reliance by
any such party on certain circumstances may not be valid unless such discretion
is exercised reasonably or such opinion or reliance is based on reasonable
grounds.

 

D.10        A notice given to, but not actually received
by, a party to any Agreement may be considered not to have been properly given,
and a notice received after the date of its effectiveness as provided for in
such Agreement may be considered to have been given on the date of actual
receipt only.

 

7

 

D.11        The question whether a provision of any
Agreement that is invalid or unenforceable may be severed from other provisions
is determined at the discretion of the court seized.

 

D.12        In making references to the terms of any
Agreement, other agreements or documents, no opinion is expressed as to whether
these are sufficiently specified or leave room for interpretation or whether
they may otherwise be subject to interpretation in accordance with Swiss law
principles on the interpretation of agreements (Vertrauensprinzip),
including, without limitation, the interpretation of agreements or other
documents which have to be filed with the court in a form translated into any
language other than the language of their origin, which may become a matter of
the discretion of the court seized.

 

D.13        No opinion is expressed as to the accuracy of
the representations and warranties on facts set out in the documents reviewed
or the factual background assumed therein.

 

D.14        Claims may become barred under statutes of
limitation or prescription, or may be or become subject to available defenses
such as lapse of time, the failure to take action, set-off, retention, counterclaim,
misrepresentation, material error, duress or fraud. Further, limitations may
apply with respect to any indemnification and contribution undertakings by a
party to any Agreement if a court considers any act of the indemnified person
as willful or negligent, and an obligation to pay an amount may be
unenforceable to the extent the amount is held to constitute an excessive
penalty such as punitive damages. A Swiss court may limit or decline to give
effect to an indemnity for legal fees or costs incurred.

 

D.15        The transmission of judicial documents,
including service of process, in a manner other than provided by the applicable
treaties (mainly the Hague Convention of November 15, 1965 on the Service
Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters)
or, in case no treaty applies, other than through the appropriate diplomatic
channels, could be held invalid by a Swiss court despite a Swiss party having
consented to such service and notification.

 

D.16        Concurrent proceedings might be disregarded by
a court other than the court first seized with such proceedings.

 

D.17        We express no opinion as to the validity or
enforceability of any security interest created under any agreement other than
the Pledge Agreement. We express no opinion as to the enforceability of the
relevant security as security for any parallel debt or any reinstatement
clauses set forth in any Agreement nor on any data protection issues.

 

D.18        We express no opinion as to bank or insurance
regulatory matters or as to any commercial, accounting, calculating, auditing
or other non-legal matter such as the economic value of the securities created
under any Agreement.

 

D.19        The security interest created under the Pledge
Agreement is granted to the Administrative Agent. The other Secured Parties may
not benefit from such security directly from the respective Agreement. Their
security position will depend on the security position of the Administrative
Agent and on the contractual agreements between the Secured Parties in relation
to such security held by the Administrative Agent.

 

8

 

D.20        We express no opinion on the relationship
between the Lenders or Secured Parties among themselves or under the
Agreements, nor on the relationship between the Lenders or Secured Parties of
different security agreements. In particular, we do not opine on any ranks of
any Lender or Secured Party with respect to their security entitlement to the
security created under the Pledge Agreement, nor on the use of enforcement
proceeds or distribution of any proceeds among the Lenders or Secured Parties.
While the choice of New York law of the Pledge Agreement is a valid choice of
law among the parties thereto, article 105 PILA provides that such
choice of law may not be invoked against third parties. Any choice of law under
any Agreement, to the extent it creates security interests over claims or
securities, is subject to article 105 PILA, according to which such
choice may not be invoked against third parties, and only the law to which the
pledged claim or right is subject may be asserted against the respective
debtor. Furthermore, the enforceability of the Obligations against any of the
Swiss Companies is at all times subject to the limitations pursuant to the laws
applicable to them, on the scope of which we do not opine. The application of
such provisions may therefore limit or even exclude the enforcement of the
security interest created under the Pledge Agreement.

 

D.21        In spite of provisions on continuing and
independent security in the Agreements, in the event of a transfer of all or
any part of the Obligations by way of novation or assignment or in the event of
a restoration of any payment received by the Administrative Agent in relation
to the Obligations, it cannot be excluded that a Swiss court, on the basis of
article 889 of the Swiss Federal Civil Code (“CC”)
or general principles of Swiss law, would hold the security interest created
under the Pledge Agreement to have expired.

 

D.22        The recognition and enforcement in Switzerland
of a judgment rendered by a foreign court is subject to the limitations set
forth in (i) the Lugano Convention on Jurisdiction and Enforcement of
Judgments in Civil and Commercial Matters of September 16, 1988, or (ii) such
other international treaties by which Switzerland is bound, or (iii) the
PILA. Pursuant to the PILA, a judgment rendered by a foreign court may only be
enforced in Switzerland if:

 

(1)   The foreign court had jurisdiction in accordance
with the PILA;

 

(2)   the judgment of such foreign court has become final
and is no longer subject to any ordinary appeal; and

 

(3)   none of the following grounds for denial exists:

 

·      the judgment of such foreign
court is manifestly incompatible with Swiss public policy; or

 

·      a party can establish (a) that
it did not receive proper notice under the law of its registered place, unless
such party proceeded on the merits without reservation; (b) that the
decision was rendered in violation of fundamental principles of the Swiss conception
of procedural law, in particular the fact that a party did not have the
opportunity to present its defense; or (c) that the dispute between the 

 

9

 

same parties and with respect to the same subject matter is the subject
of a pending proceeding in Switzerland, or such dispute has previously been
decided in a third state, provided that the decision of such third state
fulfils the prerequisites for its recognition.

 

D.23        A foreign judgment will be enforced in
Switzerland in accordance with the relevant procedural requirements of Swiss
Cantonal and Federal law.

 

D.24        For enforcement proceedings in Switzerland, a
judgment or award expressed in a currency other than Swiss Francs will have to
be converted into Swiss Francs.

 

D.25        The enforcement of any security granted by any
of the Swiss Companies for, or with respect to, any obligation of any other
obligor to any Agreement that is not a direct or indirect fully-owned
subsidiary of the respective Swiss Company may be limited to the freely
disposable shareholders’ equity of such Swiss Company. Such freely disposable
shareholders’ equity shall be determined in accordance with Swiss law and Swiss
accounting principles and shall correspond to the amount of such Swiss
Company’s total shareholder equity less the total of (i) its aggregate
share capital and (ii) its statutory reserves (including reserves for own
shares and revaluations as well as paid-in capital surplus) to the extent such
reserves are not available for distribution at the time of the start of the
proceedings for enforcement. In addition, any Swiss Company may be required to
deduct Swiss withholding tax of 35 percent on payments under a security
granted by it for, or with respect to, any obligation of any other obligor that
is not a direct or indirect fully owned subsidiary if the Swiss Federal Tax
Administration deems such payment to constitute or qualify as a dividend or
similar distribution.

 

D.26        Any provision of any Agreement which
constitutes, or purports to constitute, a restriction on the exercise of any
statutory power provided by mandatory law to the relevant bodies of any of the
Swiss Companies may not be enforceable.

 

D.27        Legal terms or concepts expressed in English in
this opinion or in any Agreement (or in any and all agreements and documents
referred to therein) may not be identical to the concepts described by the same
English terms as they exist under the laws of other jurisdictions.

 

We have rendered this opinion letter as of the date hereof.
Consequently, in connection with the issuing of this opinion letter we do not
opine on any facts or circumstances occurring or coming to our attention
subsequent to the date hereof and, for the purpose of this opinion letter, we
assume no obligation to advise you on any changes of factual or legal matters
relevant to this opinion letter that may thereafter be brought to our
attention. This opinion letter is strictly limited to the matters stated in it
and does not apply by implication to any other matters.

 

10

 

This opinion letter is furnished to you in connection with the entering
into the Agreements. Without our prior express written consent, this opinion
letter may not be circulated, quoted or otherwise referred to by you for any
other purpose, nor may any third part use or rely upon this opinion letter,
except (i) that your successors and assigns may rely upon this opinion
letter, (ii) that you may disclose this opinion letter (a) to
prospective successors and assigns of the addressees hereof, (b) to
regulatory authorities having jurisdiction over any of the addressees hereof or
their successors and assigns and (c) pursuant to valid legal process, and (iii) that
reference may be made to it in the Agreement, in any list of closing documents
prepared by, or on behalf of, the addressees hereof and in the transaction
bible relating to the Agreements.

 

This opinion letter is governed by, and construed in accordance with,
Swiss law. All disputes arising out of, or relating to, this opinion letter
shall be subject to the exclusive jurisdiction of the Commercial Court of the
Canton of Zurich (Handelsgericht des Kantons Zürich), Switzerland.

 

 

Sincerely yours,

 

STAIGER, SCHWALD & PARTNER LTD.

 

 

	
  Dr. Mark-Oliver Baumgarten

  	
  Christoph Frey

  

 

11

 

Exhibit B-3

 

13 June 2008

 

JPMorgan Chase Bank, N.A as administrative
agent (the Administrative  Agent) and the parties named as lenders (the Lenders) under the Credit Agreement (as defined below)

 

Dear Sirs

 

Guaranty entered into by Hardinge
Machine Tools Limited pursuant to a credit agreement made or to be made between
Hardinge Inc. and Hardinge Holdings GmbH as Borrowers, certain other
subsidiaries of Hardinge Inc. that may be a party thereto or to other related
documents, the financial institutions party thereto as Lenders, and the
Administrative Agent (the “Credit Agreement”)

 

1.             OUR ROLE

 

1.1           We have acted as English legal
counsel to Hardinge Machine Tools Limited (the “Company”)
for the purposes of, inter alia,
giving this legal opinion (“this  Opinion”) in relation to the Guaranty made as of today’s
date by various subsidiaries of Hardinge, Inc. (including the Company) in
favour of the Administrative Agent (the “Guaranty”),
which is governed by the law of the State of New York (“New York Law”),
a signed copy of which we have received in PDF format by email.

 

1.2           Besides
the Guaranty, we have also examined:-

 

1.2.1                a
copy of the minutes of a meeting of the board of directors of the Company held
on 12 June 2008;

 

1.2.2                a
copy of a written resolution of the shareholders of the Company, passed on 12 June 2008,
approving inter alia the execution, delivery and performance by the Company of
the Guaranty;

 

1.2.3                a
copy of the file of records in respect of the Company maintained at Companies
House and obtained by an on-line search on 3 June 2008 (the “Company Search”); and

 

1.2.4                such
other certificates, documents and records, and have made such examinations of
law, as we have considered necessary or desirable to examine for the purpose of
giving this Opinion.

 

 

1.3           We
have also made an oral enquiry at 10:00am on 13 June 2008 in respect of
the Company at the Central Registry of Winding Up Petitions (the “Central Registry Enquiry”).

 

1.4           We are
qualified to practise law in England and Wales. 
We do not express any opinion concerning any laws of any jurisdiction,
or rules of any tribunal in any jurisdiction other than England and Wales
(the laws of England and Wales being referred to in this Opinion as “English Law”) and we only express any
opinion on European Union law to the extent that it affects England and Wales.

 

2.             ASSUMPTIONS

 

In giving this Opinion we have assumed (but have not independently
verified) that:-

 

2.1           all
signatures are genuine;

 

2.2           all
documents submitted to us as copies conform to all original documents and that
the original documents are authentic and complete;

 

2.3           any
minutes and extracts from minutes are a true record of the proceedings
described in them of duly convened, constituted and quorate meetings and the
resolutions set out in those minutes and any written resolutions were validly
passed and remain in full force and effect without modification;

 

2.4           the
Guaranty has been or will be duly and properly executed by all relevant parties
(other than the Company);

 

2.5           there
are no agreements or arrangements in existence which in any way amend, modify
or vary the terms of the Guaranty or affect any of its provisions in a manner
which would affect the matters set out in this Opinion;

 

2.6           each
of the parties to the Guaranty (other than the Company) is duly incorporated,
validly existing and of good standing in the relevant jurisdictions;

 

2.7           each
of the relevant parties (other than the Company) has the capacity and power to
be a party to the Guaranty, is duly authorised to enter into the Guaranty (as
appropriate) and has taken whatever actions are necessary under:-

 

2.7.1                all
applicable laws, ordinances, regulatory requirements and protocols; and

 

2.7.2                (where
applicable) its internal by-laws, constitutions, regulations and standing
orders,

 

in order to enter into and give effect to the
Guaranty in accordance with its terms;

 

2.8           except
in relation to England and Wales, all authorisations, approvals, licences,
exemptions and consents of, or filings with, all or any governmental or
regulatory authorities required in any relevant jurisdiction with respect to
the execution, delivery or effectiveness of the Guaranty has been obtained;

 

2

 

2.9           For
the purposes of New York Law, the Guaranty is legally binding on the parties to
it and is in a form capable of being legally enforced;

 

2.10         the
parties to the Loan Documents (as defined in the Credit Agreement) have entered
into them in good faith, and not for a purpose not apparent from their
provisions which might render any of the provisions of the Loan Documents
illegal or void;

 

2.11         there
has not been any mistake, fraud, duress or undue influence which may affect any
of the Loan Documents;

 

2.12         there is
no matter under the laws or regulations of any jurisdiction (other than England
and Wales) which would or might affect the opinions given in this Opinion and,
to the extent that the laws of such jurisdiction may be relevant, such laws
will be complied with;

 

2.13         the
choice of New York Law to govern the Guaranty is or will be freely made in good
faith by the respective parties and there is and will be no reason for avoiding
such choice on the grounds of public policy;

 

2.14         the
Central Registry Enquiry was accurate in all respects and the position as described
in the Central Registry Enquiry has not altered since the time of making the
Central Registry Enquiry; and

 

2.15         the
Company Search was accurate in all respects and the position as described in
the Companies House records has not altered since the time of making the
Company Search.

 

3.             OPINION

 

Based on and subject to the foregoing and subject to
the qualifications set out below, we are of the opinion that:-

 

3.1           the
Company is a duly incorporated and validly existing company with limited
liability under the laws of England and Wales;

 

3.2           the
Company has power to enter into, and to execute, deliver and perform its
obligations under the Guaranty;

 

3.3           the
execution of the Guaranty by the Company and the performance of its obligations
thereunder has been duly authorised by the Company;

 

3.4           the
Guaranty has been validly executed and delivered by the Company;

 

3.5           although
the Transaction Documents are governed by New York, for the purposes of English
Law, the Transaction Documents contain obligations of a type and form which
would be enforceable on the parties if the Transaction Documents were governed
by English Law;

 

3.6           the
choice of New York Law to govern the Transaction Documents, is a valid choice
of law and will be recognised by the courts of England and Wales;

 

3

 

3.7           A
final and conclusive judgment for a definitive sum of money entered by the
courts of the State of New York against the Company in any suit, action or
proceeding arising out of or in connection with the Guaranty would be enforced
by the English Courts, if a fresh action were commenced before the English
Courts, without re-examination or re-litigation of the matters adjudicated
upon, provided that:

 

3.7.1                the
judgment was not obtained by fraud;

 

3.7.2                the
judgment was not obtained in proceedings contrary to natural justice;

 

3.7.3                the
judgment was not inconsistent with an English judgment in respect of the same
matter;

 

3.7.4                the
judgment was not for multiple damages;

 

3.7.5                the
enforcement of the judgment would not be contrary to natural justice or public
policy in England; and

 

3.7.6                proceedings
were instituted in the English Courts within six years after the date of the
judgment.

 

3.8           the
Company is subject to the jurisdiction of the English courts and can not claim
immunity from a suit or execution of judgement on grounds of sovereignty or
otherwise;

 

3.9           no
consents, licences, approvals or authorisations of any governmental or other
authority or agency of or in England and no filings, registrations or
recordings of the Guaranty with any governmental or other authority in or of
England are required by law or regulation applicable to English companies
generally in relation to or in connection with the execution and delivery by
the Company of the Guaranty or the performance of the obligations expressed to
be assumed by it in the Guaranty;

 

3.10         no stamp
duty or similar registration duty will be payable in England in respect of the
execution and delivery of the Guaranty; and

 

3.11         the
entry into and performance of the Guaranty by the Company is not in breach of
the Memorandum and Articles of Association of the Company or any existing
provision of the laws of England and Wales.

 

4.             QUALIFICATIONS

 

4.1           For
the purposes of this Opinion, the term “enforceable”,
as used in relation to any document, means that the relevant obligations in
that document are of a type and form which are usually capable of enforcement
in the courts of England and Wales. 
However, for these purposes:-

 

4.1.1                this
does not necessarily mean that each obligation would, for the purposes of
English Law, be enforced in accordance with its terms or in all circumstances
or in foreign jurisdictions or by or against persons who are 

 

4

 

not parties to that document or that any
specific remedy will be granted; and

 

4.1.2                enforcement
is subject to, inter alia, such factors as the nature of the remedies available
in English Courts, the acceptance of such courts of jurisdiction, the power of
courts to stay proceedings and other principles of law and equity of general
application.

 

4.2           This
Opinion is given subject to the exclusions in Paragraph 5 and the following qualifications which would apply to
English Law:-

 

4.2.1                enforcement
may be limited by bankruptcy, insolvency, liquidation, reorganisation,
moratorium and other laws of general application relating to or affecting the
rights of creditors.  The provisions of
Sections 238, 239 and 425 of the UK Insolvency Act 1986 may be relevant;

 

4.2.2                enforcement
may be limited by general principles of equity (regardless of whether such
matter is considered in a proceeding in equity or law); equitable remedies are
discretionary and will not be granted in all cases, for example, but without
limitation, equitable remedies (such as an order of specific performance or an
injunction) may not be available where damages are considered to be an adequate
remedy.  Under English Law, equity may
prevent or restrict a party from exercising what would otherwise be its strict
legal rights where it would be inequitable (i.e.,
unjust) in the circumstances to allow that party to do so.  This principle could (by way of example only)
apply to “estop” claims (i.e., prevent them succeeding) in relation
to matters or documents to which any of the parties have given specific consent
or approval;

 

4.2.3                claims
may become time-barred under laws relating to limitation or may be or become
subject to set-off or counterclaim;

 

4.2.4                where
any person is vested with a discretion or may determine a matter in its
opinion, English Law may require that discretion to be exercised reasonably or
that opinion to be based on reasonable grounds;

 

4.2.5                provisions
providing that terms can only be amended or varied or waived or released by
specific action or in writing may not be effective in all cases;

 

4.2.6                as
a general proposition, English Law will not imply terms into complex commercial
arrangements such as those created by the Loan Documents.  In addition, it may be difficult to enforce
obligations which are unclear or require performance which cannot reasonably be
assessed in cash terms.  General
obligations to act in good faith or similar provisions may, therefore, not be
enforceable or may not be given substantive effect under English Law, as their
meaning is too uncertain;

 

4.2.7                on
the basis of existing case law, an agreement to negotiate or to agree or any
similar provision may be unenforceable under English Law;

 

5

 

4.2.8                any
provision which expressly or impliedly provides that a determination,
calculation, statement or certificate be final, conclusive or binding will not
be effective if such determination, calculation, statement or certificate is
fraudulent or given unreasonably or arbitrarily or without good faith and will
not necessary prevent judicial enquiry into the merits of any claim by any
party.

 

4.2.9                losses,
damages, costs, charges, additional interest and expenses or similar items of
loss expressed to be payable on termination, default, early repayment or
analogous events may be held to be irrecoverable if and to the extent that they
represent a penalty rather than a genuine pre-estimate of loss.  This is because under English Law, penalty
clauses are invalid and, therefore, unenforceable.  Whether a particular provision is to be
construed as a penalty or as liquidated damages is a question of law, which
depends on its construction and on the surrounding circumstances at the time
the relevant agreement is made. 
Accordingly, this legal principle may affect additional interest, costs,
charges and expenses following default including, without limitation, default
interest;

 

4.2.10              any
obligations or purported obligations to pay fees, charges, costs and/or
expenses may not be effective and an English court has power to decide in its
discretion any award by way of costs incurred by any party to a dispute;

 

4.2.11              under
the English Law doctrine of frustration, a contract may be discharged if (after
its formation) events occur making its performance impossible or illegal or
certain other analogous situations occur. 
The application of the doctrine of frustration can be expressly or
impliedly excluded, but terms attempting to do so are narrowly construed and
need to make complete and exhaustive provision for the relevant event to be
wholly effective;

 

4.2.12              provisions
as to severability may not be binding under English Law.  The question of whether or not provisions
relating to invalidity on account of illegality may be severed from other provisions
in order to save such other provisions would be determined by the relevant
court at its discretion;

 

4.2.13              the
effectiveness of terms exculpating a party from a liability or duty otherwise
owed including, without limitation, mitigation of losses, are limited by
English Law as are provisions requiring a party to indemnify another in
relation to any matter;

 

4.2.14              where
any obligations of a person are to be performed in a jurisdiction outside
England and Wales, such obligations may not be enforceable under English Law if
and to the extent that performance of those obligations would be illegal under
the laws of that jurisdiction;

 

4.2.15              where
an obligation governed by English Law is to be performed or observed or is
based upon a matter arising in a jurisdiction other than England and Wales, it
may not be possible to enforce such obligation if the 

 

6

 

same is unlawful, unenforceable or contrary
to public policy in such other jurisdiction;

 

4.2.16              the
exercise of enforcement powers by secured creditors is controlled by law.  For example, the holder of a mortgage may not
generally convey charged assets to itself in satisfaction of indebtedness.  This may affect any power to hold or apply
assets in a particular manner and any purported rights of foreclosure;

 

4.2.17              any
currency indemnity or other provision for currency conversion may not be
enforceable under English Law;

 

4.2.18              any
undertakings or indemnity in relation to United Kingdom stamp duties may be
void; and

 

4.2.19              the
effect of any provision purporting to exclude the effect of agreements or
understandings between the parties which are not included in the relevant
documents is unclear;

 

4.3           the
Company Search is not conclusively capable of revealing whether or not:-

 

4.3.1                a
winding up order has been made in respect of a company or a resolution passed
for the winding up of a company;

 

4.3.2                an
administration order has been made in respect of a company; or

 

4.3.3                a
receiver, administrative receiver, administrator or liquidator has been
appointed in respect of a company,

 

since notice of these matters might not be filed with
the Registrar of Companies immediately and, when filed, might not be entered on
the public records of the relevant company immediately.  In addition, the Company Search is not
capable of revealing prior to the making of the relevant order, whether or not
a winding up petition or a petition for an administration order has been
presented; and

 

4.4           we
have not made enquiries of any County Court as to whether a petition for the
appointment of a liquidator or an administrator has been presented to, or an
administration order or winding up order has been made by such County Court.

 

5.             EXCLUSIONS

 

We give no
opinion as to:-

 

5.1           matters
of fact or matters assumed to be factual including the matters set out in the
recitals to the Guaranty and whether those matters are accurate or
complete.  Any warranties or
representations are similarly outside the scope of this Opinion.  None of these matters has been the subject of
verification by us;

 

7

 

5.2           the
implications of the use of US English language and/or US legal terms and
concepts which may have different meanings or effect when British language is
used or if such terms are applied to England and Wales;

 

5.3           any
liability to any form of taxation;

 

5.4           the
validity, legality or binding effect of any provisions of, or the
enforceability of, the Guaranty or any other documents entered into or to be entered
into in relation to the transactions described in the Credit Agreement, whether
or not such documents are referred to in the Credit Agreement;

 

5.5           the
effect of any provision providing for re-instatement of any security or
obligation after its release (these provisions are of questionable validity
under English law);

 

5.6           the
implications, contents or effects of any foreign legislation, regulatory
requirements or law (“Foreign Law”)
or the effect of Foreign Law on the matters to which this Opinion relates;

 

5.7           the
priority of any security interest or right over or right to take possession of
any asset;

 

5.8           whether
any provision relating to a right of set-off or similar right would be
effective;

 

5.9           the
commercial desirability or reasonableness of any of the terms of the Guaranty;

 

5.10         any
obligation which in any way purports to involve a guarantor guaranteeing its
own obligations; and

 

5.11         any
provision which purports to grant or confer rights, powers, duties or
obligations on any person who is not a party to the Guaranty.

 

6.             EXTENT, PURPOSE AND USE OF OPINION

 

6.1           This
Opinion is limited to its actual contents and is not to be read as extending by
implication to any other matters not specifically referred to in this Opinion.

 

6.2           This
Opinion is given as of the date of this Opinion and shall not extend to any
other time and we assume no obligation to advise you of any changes, whether or
not deemed material and which may arise after the date of this Opinion.

 

7.             GOVERNING LAW AND JURISDICTION

 

7.1           This
Opinion is given on the basis that it is governed by and is to be construed in
accordance with English Law and that the courts of England and Wales shall have
exclusive jurisdiction in respect of any relevant proceedings.

 

7.2           This
Opinion is addressed solely to you for your own use and benefit in connection
with the Guaranty and may not be relied upon by anyone else without our prior
written consent.

 

Yours faithfully

 

 

SQUIRE, SANDERS & DEMPSEY

 

8Exhibit 10.1

 

PROMISSORY NOTE

(Variable Rate, Revolving
Loan)

(Renewal Note)

 

	
  Not to Exceed
  $9,000,000.00

  	
   

  	
  Sioux Falls, South Dakota

  
	
   

  	
   

  	
  July 30, 2008

  

 

FOR VALUE RECEIVED, NORTHERN LIGHTS
ETHANOL, LLC, a South Dakota
Limited Liability Company (“Borrower”), hereby promises to pay to the order of
U.S. BANK NATIONAL ASSOCIATION, a national banking association (“Lender”, which term shall include any
future holder hereof), at 141 N. Main Avenue, Sioux Falls, South Dakota, or at
such other place as Lender may from time-to-time designate in writing, in
lawful money of the United States of America, the principal sum of Nine Million &
00/100 Dollars ($9,000,000.00) or so much thereof as may be advanced hereunder.

 

LOAN RENEWAL. This
Promissory Note renews the loan evidenced in part by that Promissory Note dated
September 21, 2007, in the original principal amount not to exceed
$9,000,000.00 (the “Prior Note”). The terms of the Prior Note apply until July 30,
2008, the date this Renewal Note becomes effective.

 

CALCULATION OF INTEREST. Interest on each advance hereunder shall
accrue at an annual rate equal to 3.00% plus the one-month LIBOR rate quoted by
Lender (LIBOR + 3.00%), which shall be the one-month LIBOR
rate in effect two New York Banking Days prior to the stated monthly reprice
date, adjusted for any reserve requirement and any subsequent costs
arising from a change in government regulation, such rate to be reset monthly
on the last day of the month. The term “New York Banking Day” means any date
(other than a Saturday or Sunday) on which commercial banks are open for
business in New York, New York. Lender’s internal records of applicable
interest rates shall be determinative in the absence of manifest error. If the
initial advance under this Note occurs other than on the first day of the
month, the initial one-month LIBOR rate shall be that one-month LIBOR rate in
effect two New York Banking Days prior to the date of the initial advance,
which rate shall be in effect on the remaining days of the month of the initial
advance.

 

PAYMENT OF INTEREST. Payments of all interest accrued hereunder shall be made on the last
day of any month in which any amount is outstanding hereunder.

 

REVOLVING FEATURE. Borrower may from time to time prior to the
Maturity Date draw, on a revolving basis, the difference of the outstanding
principal amount hereunder and the lesser of (i) the Borrowing Base and (ii) Nine
Million Dollars ($9,000,000.00) (the greater of the two being the “Loan Maximum”).
Lender’s obligation to make any advance under this Promissory Note is
conditioned upon (i) all representations and warranties made by Borrower
in the Loan Agreement remaining true, accurate and complete, (ii) Borrower’s
continued compliance with all other terms and conditions of this Promissory
Note and the Loan Agreement including any preconditions to any advance
hereunder contained in the Loan Agreement, (iii) no Event of Default
having occurred under this Promissory Note, or any other Promissory Note
between the parties hereto, or under any other Loan Document, and (iv) Borrower
shall demonstrate to Lender’s satisfaction that the funds requested to be
advanced shall be used in the operation of Borrower’s ethanol production
facility. Subject to these conditions, Lender shall advance to Borrower
hereunder, such amounts as Borrower may from time-to-time request, not to
exceed the total principal amount at any one time outstanding hereunder of Nine
Million Dollars ($9,000,000.00). Such requests for advances hereunder shall be
funded the next Business Day if received by Lender not 

 

 

later than 11:00 a.m.
of any Business Day, subject to Lender requiring additional time to confirm
Borrower has satisfied the conditions of this Note (including the Borrowing
Base requirements provided for below) at the time each such advance is
requested and made.

 

PAYMENT IN FULL AT MATURITY. The maturity date of this Note is July 28,
2009 (the “Maturity Date”). The total unpaid principal amount and all interest
thereon and any other amount due hereunder shall be payable on the Maturity
Date. THIS NOTE REQUIRES A BALLOON PAYMENT.

 

PAYMENT DUE ON NON-BUSINESS DAY. In the event any payment due under this Note
is due on a date other than a Business Day (as defined in the Loan Agreement),
such payment shall be due on the Business Day immediately following the day the
payment was otherwise due.

 

PREPAYMENTS. Borrower may prepay this Note in whole or in
part at any time, and if in part from time-to-time, during the entire term of
this Note, without penalty or premium. No prepayment shall reduce the amount of
any scheduled payment.

 

MANDATORY PAYMENTS PRI0R TO MATURITY. In the event the amount outstanding
hereunder at any time, including interest and any other amounts, exceeds the
amount which could be borrowed on such date according to the then applicable
Borrowing Base (the “Eligible Balance”), Borrower shall immediately pay to
Lender an amount not less than the difference between such balance and the
Eligible Balance.

 

BORROWING BASE. Definitions. As used in this Promissory Note: “Borrowing
Base” means, as of the day for which it is calculated, .75
(75%)  of the total of (i) the
fair market value of the outstanding Inventory, (ii) the Eligible Accounts
Receivable, and (iii) hedging accounts at fair market value; “Inventory”
means all Borrower’s corn, and ethanol, and DDGS Inventory, as determined to
Lender’s satisfaction; “Eligible Accounts Receivable” means Accounts (as
defined in the Uniform Commercial Code) owned by Borrower that were generated
by Borrower’s sale of Inventory, minus Ineligible Accounts; “Ineligible
Accounts” means Accounts which either have been outstanding more than 90 days,
or Accounts which otherwise would be Eligible Accounts Receivable that Lender
determines in its discretion should not so qualify. Eligible Accounts
Receivable shall exclude Borrower’s “contra” accounts and any other obligations
or offsets which any of Borrower’s account obligors may claim against Borrower.

 

Borrower Reports. Each
request for an advance hereunder shall be accompanied by Borrower’s report to
Lender evidencing the Borrowing Base as of the close of the previous Business Day, in a form and containing such
content as Lender shall from time-to-time specify to Borrower, including but
not limited to: reports of the Borrower’s Accounts itemized by age; reports of
the Inventory itemized by type, including its quantity, geographical location,
and information identifying any third party in possession or control thereof.
Borrower Report shall also report Eligible Accounts Receivable on a gross
basis, and be itemized as to all offsets that may be claimed by any account
obligor as further set forth in the definition of Eligible Accounts Receivable
above. If at the end of any calendar month any amount is outstanding hereunder,
not later than the 15th day of the following month, Borrower shall provide
Lender a report containing the above information as of the end of such prior
month. Borrower shall also provide Lender such reports at other times specified
by Lender. The request for advances shall be on the form attached hereto as Exhibit A,
unless Lender specifies otherwise.

 

Reasonable Processes and Controls.
Borrower shall
maintain reasonable processes and controls, provide accurate calculation of the
Borrowing Base and otherwise assure compliance with the Lender’s collateral
audit program, including instituting policies requiring its employee marketers
to 

 

2

 

accurately enter each
contract for purchase or sale of Inventory (including other relevant
information as to the status of the contract, including any dispute by the
other party thereto) into Borrower’s accounting system immediately upon entry
into the contract. Among other information which shall be available to Lender
on a daily basis are the amount, identity, location, telephone number and other
relevant information concerning each account obligor, and the location and
quantity of all Inventory.

 

RENEWAL COMMITMENT FEE. In consideration of Lender’s agreement to
renew the loan evidenced by this Note, Borrower shall pay Lender not later than
the date of this Note first shown above a renewal commitment fee of Eighteen
Thousand Dollars ($18,000.00).

 

UNUSED COMMITMENT FEE. Borrower shall pay Lender quarterly, in arrears, an unused commitment fee.
The unused commitment fee shall be paid October 31, January 31, April 30,
and July 31. The unused commitment fee is equal to one-fourth percent (0.25%) per annum, multiplied by the
difference, if any, of the Loan Maximum minus the average daily outstanding
principal balance due hereunder for such prior quarter.

 

PAYMENTS. All payments under this Note shall be made in
immediately available funds. In the event there is no outstanding Event of
Default, all payments made hereunder shall be credited first to accrued
interest, next to unpaid principal, and next, in such order as Lender may
determined in its sole and absolute discretion, to other fees, charges, or
costs and expenses payable by Borrower under this Note or in connection with
any other Loan Document.

 

PREPAYMENTS. Borrower may prepay this Note in whole or in
part at any time, and if in part from time-to-time, during the entire term of
this Note, without penalty or premium. No prepayment shall reduce the amount of
any scheduled payment.

 

COLLATERAL;
COORDINATION WITH LOAN AGREEMENT. This Note is within
the definition of the “Note” in the Amended and Restated Loan Agreement dated
as of August 28, 2006, as amended by that Amendment to Amended and
Restated Loan Agreement effective September 21, 2007 (the “Loan Agreement”),
and is subject to the additional terms and conditions set forth in the Loan
Agreement and the Loan Documents referred to therein. This Note is secured in
part by (and is a Secured Obligation as defined in) a Security Agreement dated
as of August 28, 2006, and a Mortgage - Collateral Real Estate Mortgage;
Security Agreement, Fixture Filing and Assignment of Rents dated as of September 21,
2007, as well as other collateral described in the Loan Agreement and the other
Loan Documents. Capitalized terms not defined herein shall have the meaning
given such terms in the Loan Agreement.

 

LATE PAYMENT; GRACE PERIOD;
DEFAULT; CROSS-DEFAULT. If
a payment due hereunder is not made within ten (10) days after the date
when due, Borrower shall pay to Lender a late payment charge of Five Hundred
Dollars ($500.00) to compensate Lender for a portion of the cost related to
handling the overdue payment. Any default under this Promissory Note, the
Security Agreement dated August 28, 2006, or any Event of Default as
defined in the Loan Agreement, shall constitute an “Event of Default” for
purposes of this Note. After any Event of Default, the entire principal sum
evidenced by this Note, together with all accrued and unpaid interest, shall,
at the option of the holder hereof, bear interest at the rate per annum (the “Default
Rate”) equal to 3% in excess of the rate of interest per annum which would
otherwise be payable hereunder, and become immediately due and payable without
further notice (except as provided in the Loan Agreement), demand or
presentment for payment, and without any relief whatever from any valuation or
appraisement laws.

 

3

 

PAYMENT OF OTHER TTEMS. If Borrower defaults under any of the terms
of this Note, Borrower shall pay all reasonable costs and expenses, including
without limitation attorneys’ fees (including any service tax thereon) and
costs, incurred by Lender in enforcing this Note immediately upon Lender’s
demand, whether or not any action or proceeding is commenced by Lender. Without
limiting the generality of the preceding sentence, such costs and expenses
shall include all attorneys’ fees and costs incurred by Lender in connection
with any federal or state bankruptcy, insolvency, reorganization, or other
similar proceeding by or against Borrower or any surety, guarantor or endorser
of this Note which in any way affects Lender’s exercise of its rights and
remedies under this Note or under the Loan Agreement or any other Loan
Document. Maker hereby stipulates that Lender is a “regulated lender” within
the meaning of SDCL 54-3-13 and other applicable South Dakota statutes.

 

NO OFFSET. No
indebtedness evidenced by this Note shall be offset by all or part of any
claim, cause of action, or cross-claim of any kind, whether liquidated or
unliquidated, which Borrower now has or may hereafter acquire or allege to have
acquired against Lender. To the fullest extent permitted by law, Borrower
waives the benefits of any applicable law, regulation, or procedure which
provides, in substance, that where cross demands for money exist between
parties at any point in time when neither demand is barred by the applicable
statute of limitations, and an action is thereafter commenced by one such
party, the other party may assert the defense of payment in that the two
demands are compensated so far as they equal each other, notwithstanding that
an independent action asserting the claim would at the time of filing the
response be barred by the applicable statute of limitations.

 

CERTAIN BORROWER WAIVERS. Borrower waives presentment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this Note
and any lack of diligence or delays in collection or enforcement of this Note.
Borrower agrees that this Note, or any payment hereunder, may be extended from
time-to-time, and Borrower consents to the release of any party liable for the
obligation evidenced by this Note, the release of any of the security for this
Note, the acceptance of any other security therefore, or any other indulgence
or forbearance whatsoever, all without notice to any party and without
affecting the liability of Borrower.

 

APPLICABLE LAW. This note shall be construed under and
governed by the laws of the State of South Dakota, without giving effect to
conflict of laws or principles thereof, but giving effect to federal laws of
the United States applicable to national banks. Whenever possible, each
provision of this note and any other statement, instrument or transaction
contemplated hereby or relating hereto, shall be interpreted in such manner as
to be effective and valid under such applicable law, but, if any provision of
this note or any other statement, instrument or transaction contemplated hereby
or relating hereto shall be held to be prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this note or any other statement, instrument or
transaction contemplated hereby or relating hereto.

 

NO WAIVER; CERTAIN MISCELLANEOUS PROVISIONS. Failure to exercise any option provided
herein shall not constitute a waiver of the right to exercise the same in the
event of any subsequent default. No modification or waiver by Lender of any of
the terms of this Note shall be valid or binding on Lender unless such
modification or waiver is in writing and signed by Lender. Without limiting the
generality of the preceding sentence, no delay, omission or forbearance by
Lender in exercising or enforcing any of its rights and remedies under this
Note shall constitute a waiver of such rights or remedies. Lender’s rights and
remedies under this Note are cumulative with and in addition to all other legal
and equitable rights and remedies Lender may have in connection with the Loan.
The headings of paragraphs of this Note are for convenience of the parties only
and shall not be used in interpreting this Note. If this Note is lost, stolen,
or destroyed, upon Borrower’s receipt of a reasonably satisfactory
indemnification agreement executed by Lender, or if this Note is mutilated,
upon Lender’s surrender of 

 

4

 

the mutilated Note to
Borrower, Borrower shall execute and deliver to Lender a new promissory note
which is identical in form and content to this Note to replace the lost,
stolen, destroyed or mutilated Note, Time is of the essence in the performance
of each provision of this Note by Borrower. All exhibits hereto are
incorporated herein.

 

AT THE OPTION
OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR SOUTH DAKOTA
STATE COURT SITTING IN SIOUX FALLS, SOUTH DAKOTA; AND BORROWER CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION
OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM
THE RELATIONSI-Ill’ CREATED BY THIS NOTE, LENDER AT ITS OPTION SHALL BE
ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER
CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED
WITHOUT PREJUDICE.

 

BORROWER AND
LENDER EACH IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THE LOAN DOCUMENTS
(AS DEFINED IN THE LOAN AGREEMENT) OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.

 

IN WITNESS WHEREOF, Borrower
has executed this Note as of the date first above written.

 

	
   

  	
  NORTHERN
  LIGHTS ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Delton Strasser

  
	
   

  	
   

  	
    Delton
  Strasser

  
	
   

  	
     Its: President

  

 

5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}]]