Document:

exhibit.htm

    Exhibit
      10.1

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    CREDIT
      AGREEMENT

    

    DATED
      AS OF DECEMBER 7, 2007

    

    BETWEEN

    

    HURCO
      COMPANIES, INC.

    

    AND

    

    JPMORGAN
      CHASE BANK, N.A.

    

    

    

    

    
      
                   

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    TABLE
      OF CONTENTS

    

    

      
        	
                ARTICLE
                  I.

              	
                DEFINITIONS

              	
                1

              
	
                1.1.

              	
                Certain
                  Definitions

              	
                1

              
	
                1.2.

              	
                Other
                  Definitions; Rules of Construction

              	
                13

              
	 	 	 
	
                ARTICLE
                  II.

              	
                THE
                  CREDITS

              	
                13

              
	
                2.1.

              	
                Commitment

              	
                13

              
	
                2.2.

              	
                Determination
                  of Dollar Amounts; Required Payments; Termination

              	
                13

              
	
                2.3.

              	
                [Reserved]

              	
                13

              
	
                2.4.

              	
                Types
                  of Advances

              	
                13

              
	
                2.5.

              	
                Fees;
                  Reductions in Commitment

              	
                13

              
	
                2.6.

              	
                Minimum
                  Amount of Each Advance

              	
                14

              
	
                2.7.

              	
                Optional
                  Principal Payments

              	
                14

              
	
                2.8.

              	
                Method
                  of Selecting Types and Interest Periods for New Advances

              	
                14

              
	
                2.9.

              	
                Conversion
                  and Continuation of Outstanding Advances

              	
                15

              
	
                2.10.

              	
                Changes
                  in Interest Rate, etc.

              	
                15

              
	
                2.11.

              	
                Rates
                  Applicable After Default

              	
                15

              
	
                2.12.

              	
                Method
                  of Payment

              	
                16

              
	
                2.13.

              	
                Noteless
                  Agreement; Evidence of Indebtedness

              	
                16

              
	
                2.14.

              	
                Telephonic
                  Notices

              	
                16

              
	
                2.15.

              	
                Interest
                  Payment Dates; Interest and Fee Basis

              	
                17

              
	
                2.16.

              	
                Lending
                  Installations

              	
                17

              
	
                2.17.

              	
                [Reserved]

              	
                17

              
	
                2.18.

              	
                Facility
                  LCs.

              	
                17

              
	 	
                2.18.1.  Issuance

              	
                17

              
	 	
                2.18.2.  Notice

              	
                17

              
	 	
                2.18.3.  Administration;
                  Reimbursement by the Bank

              	
                18

              
	 	
                2.18.4.  Reimbursement
                  by the Borrower

              	
                18

              
	 	
                2.18.5.  Obligations
                  Absolute

              	
                18

              
	 	
                2.18.6.  Actions
                  of the Bank

              	
                19

              
	 	
                2.18.7.  Indemnification

              	
                19

              
	 	
                2.18.8.  Facility
                  LC Collateral Account

              	
                19

              
	
                2.19.

              	
                [Reserved]

              	
                19

              
	
                2.20.

              	
                Guarantees

              	
                19

              
	 	 	 
	
                ARTICLE
                  III.

              	
                YIELD
                  PROTECTION; TAXES

              	
                20

              
	
                3.1.

              	
                Yield
                  Protection

              	
                20

              
	
                3.2.

              	
                Changes
                  in Capital Adequacy Regulations

              	
                20

              
	
                3.3.

              	
                Availability
                  of Types of Advances

              	
                21

              
	
                3.4.

              	
                Funding
                  Indemnification

              	
                21

              
	
                3.5.

              	
                Taxes

              	
                21

              
	
                3.6.

              	
                Bank
                  Statements; Survival of Indemnity

              	
                22

              
	 	 	 
	
                ARTICLE
                  IV.

              	
                CONDITIONS
                  PRECEDENT

              	
                22

              
	
                4.1.

              	
                Initial
                  Credit Extension

              	
                22

              
	
                4.2.

              	
                Each
                  Credit Extension

              	
                23

              
	 	 	 
	
                ARTICLE
                  V.

              	
                REPRESENTATIONS
                  AND WARRANTIES

              	
                24

              
	
                5.1.

              	
                Existence
                  and Standing

              	
                24

              
	
                5.2.

              	
                Authorization
                  and Validity

              	
                24

              
	
                5.3.

              	
                No
                  Conflict; Government Consent

              	
                24

              
	
                5.4.

              	
                Financial
                  Statements

              	
                24

              
	
                5.5.

              	
                Material
                  Adverse Change

              	
                24

              
	
                5.6.

              	
                Taxes

              	
                25

              
	
                5.7.

              	
                Litigation
                  and Contingent Obligations

              	
                25

              
	
                5.8.

              	
                Subsidiaries

              	
                25

              
	
                5.9.

              	
                ERISA

              	
                25

              
	
                5.10.

              	
                Accuracy
                  of Information

              	
                25

              
	
                5.11.

              	
                Regulation
                  U

              	
                25

              
	
                5.12.

              	
                Material
                  Agreements

              	
                25

              
	
                5.13.

              	
                Compliance
                  With Laws

              	
                25

              
	
                5.14.

              	
                Ownership
                  of Properties

              	
                26

              
	
                5.15.

              	
                Plan
                  Assets; Prohibited Transactions

              	
                26

              
	
                5.16.

              	
                Environmental
                  Matters

              	
                26

              
	
                5.17.

              	
                Investment
                  Company Act

              	
                26

              
	
                5.18.

              	
                Public
                  Utility Holding Company Act

              	
                26

              
	
                5.19.

              	
                Insurance

              	
                26

              
	
                5.20.

              	
                [Reserved]

              	
                26

              
	
                5.21.

              	
                Disclosure

              	
                26

              
	
                5.22.

              	
                Intellectual
                  Property

              	
                27

              
	 	 	 
	
                ARTICLE
                  VI.

              	
                COVENANTS

              	
                27

              
	
                6.1.

              	
                Financial
                  Reporting

              	
                27

              
	
                6.2.

              	
                Use
                  of Proceeds

              	
                28

              
	
                6.3.

              	
                Notice
                  of Default

              	
                28

              
	
                6.4.

              	
                Conduct
                  of Business

              	
                28

              
	
                6.5.

              	
                Taxes

              	
                28

              
	
                6.6.

              	
                Insurance

              	
                29

              
	
                6.7.

              	
                Compliance
                  with Laws

              	
                29

              
	
                6.8.

              	
                Maintenance
                  of Properties

              	
                29

              
	
                6.9.

              	
                Inspection

              	
                29

              
	
                6.10.

              	
                Dividends

              	
                29

              
	
                6.11.

              	
                Indebtedness

              	
                29

              
	
                6.12.

              	
                Merger

              	
                30

              
	
                6.13.

              	
                Sale
                  of Assets

              	
                30

              
	
                6.14.

              	
                Investments
                  and Acquisitions

              	
                30

              
	
                6.15.

              	
                Liens

              	
                31

              
	
                6.16.

              	
                Affiliates

              	
                32

              
	
                6.17.

              	
                Sale
                  and Leaseback Transactions

              	
                32

              
	
                6.18.

              	
                Contingent
                  Obligations

              	
                32

              
	
                6.19.

              	
                [Reserved]

              	
                32

              
	
                6.20.

              	
                Financial
                  Covenants

              	
                32

              
	
              	
                6.20.1. 
                  [Reserved]

              	
                32

              
	
              	
                6.20.2. 
                  Maximum Consolidated Total Indebtedness to Consolidated Total
                  Capitalization

              	
                33

              
	
              	
                6.20.3. 
                  [Reserved]

              	
                33

              
	
              	
                6.20.4. 
                  Net Income

              	
                33

              
	
                6.21.

              	
                Banking
                  Relationship

              	
                33

              
	
                6.22.

              	
                Guaranty

              	
                33

              
	
                6.23.

              	
                Further
                  Assurances

              	
                33

              
	
                6.24.

              	
                Accounting
                  Changes

              	
                33

              
	
                6.25.

              	
                Inconsistent
                  Agreements

              	
                33

              
	
                6.26.

              	
                Negative
                  Pledge Limitation

              	
                33

              
	
                6.26.

              	
                Government
                  Regulation

              	
                33

              
	 	 	 
	
                ARTICLE
                  VII.

              	
                DEFAULTS

              	
                34

              
	 	 	 
	
                ARTICLE
                  VIII.

              	
                ACCELERATION,
                  WAIVERS, AMENDMENTS AND REMEDIES

              	
                36

              
	
                8.1.

              	
                Acceleration;
                  Facility LC Collateral Account

              	
                36

              
	
                8.2.

              	
                Amendments

              	
                36

              
	
                8.3.

              	
                Preservation
                  of Rights

              	
                37

              
	 	 	 
	
                ARTICLE
                  IX.

              	
                GENERAL
                  PROVISIONS

              	
                37

              
	
                9.1.

              	
                Survival
                  of Representations

              	
                37

              
	
                9.2.

              	
                Governmental
                  Regulation

              	
                37

              
	
                9.3.

              	
                Headings

              	
                37

              
	
                9.4.

              	
                Entire
                  Agreement

              	
                37

              
	
                9.5.

              	
                Benefits
                  of this Agreement

              	
                37

              
	
                9.6.

              	
                Expenses;
                  Indemnification

              	
                37

              
	
                9.7.

              	
                Accounting

              	
                38

              
	
                9.8.

              	
                Severability
                  of Provisions

              	
                38

              
	
                9.9.

              	
                Nonliability
                  of the Bank

              	
                38

              
	
                9.10.

              	
                Confidentiality

              	
                38

              
	
                9.11.

              	
                Disclosure

              	
                38

              
	
                9.12.

              	
                Construction
                  of Certain Provisions

              	
                38

              
	
                9.13.

              	
                Independence
                  of Covenants

              	
                38

              
	
                9.14.

              	
                Interest
                  Rate Limitation

              	
                39

              
	
                9.15.

              	
                USA
                  Patriot Act Notification

              	
                39

              
	
                9.16.

              	
                Termination
                  of Existing Credit Agreement; Existing Facility LC

              	
                39

              
	 	 	 
	
                ARTICLE
                  X.

              	
                SETOFF

              	
                39

              
	 	 	 
	
                ARTICLE
                  XI.

              	
                BENEFIT
                  OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

              	
                40

              
	
                11.1.

              	
                Successors
                  and Assigns

              	
                40

              
	
                11.2.

              	
                Participations

              	
                40

              
	 	
                11.2.1  Permitted
                  Participants; Effect

              	
                40

              
	 	
                11.2.2  Voting
                  Rights

              	
                40

              
	 	
                11.2.3  Benefit
                  of Setoff

              	
                40

              
	
                11.3.

              	
                Dissemination
                  of Information

              	
                40

              
	 	 	 
	
                ARTICLE
                  XII.

              	
                NOTICES

              	
                41

              
	
                12.1.

              	
                Notices

              	
                41

              
	
                12.2.

              	
                Change
                  of Address

              	
                41

              
	 	 	 
	
                ARTICLE
                  XIII.

              	
                COUNTERPARTS

              	
                41

              
	 	 	 
	
                ARTICLE
                  XIV.

              	
                CHOICE
                  OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
                  TRIAL

              	
                41

              
	
                14.1.

              	
                CHOICE
                  OF LAW

              	
                41

              
	
                14.2.

              	
                CONSENT
                  TO JURISDICTION

              	
                41

              
	
                14.3.

              	
                WAIVER
                  OF JURY TRIAL

              	
                42

                 

              
	
                SCHEDULE
                  5.8.

              	
                SUBSIDIARIES
                  AND AFFILIATES OF THE BORROWER

              	
                44

                 

              
	
                SCHEDULE
                  6.14.

              	
                OTHER
                  INVESTMENTS

              	
                45

              

      

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBITS

    

    Exhibit
      A
– Form of Note

    

    Exhibit
      B
– Compliance Certificate

    

    Exhibit
      C
– Form of Subsidiary Guaranty

    

    Exhibit
      D
– Wire Transfer Instructions

    

    Exhibit
      E
– Form of Opinion

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

    CREDIT
      AGREEMENT

     

    This
      Credit Agreement, dated as of December 7, 2007, is between
Hurco Companies, Inc., an Indiana corporation, and
JPMorgan Chase Bank, N.A., successor by merger
      to Bank One, NA
      (Main Office Chicago).  The parties hereto agree as
      follows:

    

    

    INTRODUCTION

     

    A.           The
      Borrower desires to obtain (i) a revolving credit facility, including letters
      of
      credit, in an aggregate principal amount not exceeding $30,000,000 to be used
      for working capital and general corporate purposes and (ii) a separate letter
      of
      credit facility in an aggregate principal amount of New Taiwan Dollars
      100,000,000 to be used as provided in Section 2.18.1(a), and the Bank is willing
      to provide such credit facilities on the terms herein set forth.

     

    B.           On
      or about the Effective Date, Hurco Europe Limited, a corporation organized
      under
      the laws of England and Wales and a Subsidiary of the Borrower ("Hurco Europe")
      will enter into a Revolving Facility Agreement with the Bank, whereby the Bank
      will agree, subject to the terms and conditions thereof, to make revolving
      credit loans to Hurco Europe in an aggregate principal amount not to exceed
      British Pounds Sterling 1,000,000 for Hurco Europe's general working capital
      purposes (the "UK Facility").

     

    C.           On
      or about the Effective Date, Hurco Manufacturing Ltd., Taiwan, a corporation
      organized under the laws of Taiwan and a Subsidiary of the Borrower ("Hurco
      Taiwan") will enter into a General Agreement for Banking Transactions and a
      Banking Facilities Confirmation Letter with the Bank (together with any
      promissory note(s) and security documents entered into in connection therewith
      from time to time, all as amended or  modified from time to time,
      including any agreement(s) or instrument(s) entered into with the Bank in
      replacement thereof, the "Taiwan Facility Documents"), whereby the Bank will
      agree, subject to the terms and conditions thereof, to provide a revolving
      credit facility to Hurco Taiwan in an aggregate principal amount not to exceed
      New Taiwan Dollars 100,000,000 for Hurco Taiwan's general working capital
      purposes (the "Taiwan Facility").

     

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

    

    

    ARTICLE
      I

    

    DEFINITIONS

     

    1.1           Certain
      Definitions.  As used herein, the following terms have the
      following respective meanings:

     

    "Active
      Subsidiary" means a Subsidiary of the Borrower which is not an Inactive
      Subsidiary.

     

    "Acquisition"
      means any transaction, or any series of related transactions, consummated on
      or
      after the date of this Agreement, by which the Borrower or any of its
      Subsidiaries (i) acquires any going business or all or substantially all of
      the
      assets of any firm, corporation or limited liability company, or division
      thereof, whether through purchase of assets, merger or otherwise or (ii)
      directly or indirectly acquires (in one transaction or as the most recent
      transaction in a series of transactions) at least a majority (in number of
      votes) of the securities of a corporation which have ordinary voting power
      for
      the election of directors (other than securities having such power only by
      reason of the happening of a contingency) or a majority (by percentage or voting
      power) of the outstanding ownership interests of a partnership or limited
      liability company.

     

    
      
        
        

      

      
        
        

        
          
1

      

      
        
        

      

    

     

    "Affiliate"
      of any Person means any other Person directly or indirectly controlling,
      controlled by or under common control with such Person.  A Person
      shall be deemed to control another Person if the controlling Person owns 10%
      or
      more of any class of voting securities (or other ownership interests) of the
      controlled Person or possesses, directly or indirectly, the power to direct
      or
      cause the direction of the management or policies of the controlled Person,
      whether through ownership of stock, by contract or otherwise.

     

    "Agreement"
      means this Credit Agreement, as it may be amended or modified and in effect
      from
      time to time.

     

    "Agreement
      Accounting Principles" means generally accepted accounting principles as in
      effect from time to time, applied in a manner consistent with that used in
      preparing the financial statements referred to in Section 5.4.

     

    "Alternate
      Base Rate" means, for any day, a rate of interest per annum equal to the higher
      of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds
      Effective Rate for such day plus 1% per annum.

     

    "Applicable
      Margin" means, with respect to the Eurodollar Rate, Floating Rate and Commitment
      Fees, the applicable percentage rates per annum set forth in the table below
      based upon the Total Funded Debt/EBITDA Ratio as of the date of the applicable
      Loan or Commitment Fee:

    

    
      	
              Total
                Funded Debt/EBITDA Ratio

            	
              Eurodollar
                Loans

              (%
                per annum)

            	
              Floating
                Rate

              Loans

              (%
                per annum)

            	
              Commitment

              Fee

              (%
                per annum)

            
	
              Greater
                than 4.0

            	
              1.75%

            	
              0%

            	
              .25%

            
	
              Greater
                than 3.25 and less than or equal to 4.0

            	
              1.5%

            	
              0%

            	
              .20%

            
	
              Greater
                than 2.5 and less than or equal to 3.25

            	
              1.25%

            	
              -.25%

            	
              .15%

            
	
              Greater
                than 1.75 and less than or equal to 2.50

            	
              1.0%

            	
              -.50%

            	
              .125%

            
	
              Greater
                than 1.0 and less than or equal to 1.75

            	
              .75%

            	
              -.75%

            	
              .125%

            
	
              Less
                than or equal to 1.0

            	
              .50%

            	
              -1.0%

            	
              .05%

            

    

     

    Notwithstanding
      the above, the Applicable Margin with respect to the Eurodollar Rate and the
      Floating Rate shall be adjusted quarterly as necessary as of the first day
      of
      the month following the Bank receiving the financial statements required
      pursuant to Section 6.1(ii) allowing the Total Funded Debt/EBITDA Ratio to
      be
      calculated for the quarterly periods ending on each January 31, April 30, July
      31, and October 31.  Prior to January 1, 2008, the Applicable Margin
      shall be determined based on the Total Funded Debt/EBITDA Ratio being less
      than
      1.0.

     

    "Article"
      means an article of this Agreement unless another document is specifically
      referenced.

     

    
      
        
        

      

      
        
        

        
          
2

      

      
        
        

      

    

     

    "Authorized
      Officer" means any of the President, Chief Executive Officer, Chief Financial
      Officer, or Corporate Controller of the Borrower, acting singly.

     

    "Bank"
      means JPMorgan Chase Bank, N.A., any of its Lending Installations, and any
      of
      their respective successors and assigns.

     

    "Borrower"
      means Hurco Companies, Inc., an Indiana corporation, and its successors and
      assigns.

     

    "Borrowing
      Date" means a date on which a Loan is made hereunder.

     

    "Borrowing
      Notice" is defined in Section 2.8.

     

    "Business
      Day" means (i) with respect to any borrowing, payment or rate selection of
      Eurodollar Loans, a day (other than a Saturday or Sunday) on which banks
      generally are open in Chicago and New York for the conduct of substantially
      all
      of their commercial lending activities, interbank wire transfers can be made
      on
      the Fedwire system and dealings in Dollars are carried on in the London
      interbank market and (ii) for all other purposes, a day (other than a Saturday
      or Sunday) on which banks generally are open in Chicago for the conduct of
      substantially all of their commercial lending activities and interbank wire
      transfers can be made on the Fedwire system.

     

    "Capital
      Stock" of any person means any equity securities, any securities exchangeable
      for or convertible into equity securities, and any warrants, rights, or other
      options to purchase or otherwise acquire such securities.

     

    "Capitalized
      Lease" of a Person means any lease of Property by such Person as lessee which
      would be capitalized on a balance sheet of such Person prepared in accordance
      with Agreement Accounting Principles.

     

    "Capitalized
      Lease Obligations" of a Person means the amount of the obligations of such
      Person under Capitalized Leases which would be shown as a liability on a balance
      sheet of such Person prepared in accordance with Agreement Accounting
      Principles.

     

    "Cash
      Equivalent Investments" means (i) short-term obligations of, or fully guaranteed
      by, the United States of America, (ii) commercial paper rated A-1 or better
      by
      S&P or P-1 or better by Moody's, (iii) investment grade quality auction rate
      notes, (iv) demand deposit accounts maintained in the ordinary course of
      business, and (v) certificates of deposit issued by and time deposits with
      commercial banks (whether domestic or foreign) having capital and surplus in
      excess of $100,000,000; provided in each case that the same provides
      for payment of both principal and interest (and not principal alone or interest
      alone) and is not subject to any contingency (other than the passage of time
      or
      notice) regarding the payment of principal or interest.

     

    "Code"
      means the Internal Revenue Code of 1986, as amended, reformed or otherwise
      modified from time to time.

     

    "Collateral
      Shortfall Amount" is defined in Section 8.1.

     

    "Commitment"
      means, the obligation of the Bank pursuant to Section 2.1(a) to make Loans
      to,
      and issue US Facility LCs upon the application of, the Borrower in an aggregate
      amount not exceeding $30,000,000, reduced by the amount as permitted pursuant
      to
      Section 2.5(c).

     

    "Consolidated
      Assets" as of any date means the aggregate book value of the total assets of
      the
      Borrower and its Subsidiaries determined on a consolidated basis in accordance
      with Agreement Accounting Principles.

     

    
      
        
        

      

      
        
        

        
          
3

      

      
        
        

      

    

     

    "Consolidated
      EBITDA" means, with reference to any period, Consolidated Net Income for such
      period determined in accordance with Agreement Accounting Principles
plus, to the extent deducted in determining Consolidated Net Income,
      (i) Consolidated Interest Expense, (ii) expense for income taxes, (iii)
      depreciation, (iv) amortization, (v) extraordinary losses incurred other than
      in
      the ordinary course of business, (vi) non-current asset write downs, and (vii)
      non-cash losses on equity interests of Affiliates, minus, to the extent
      included in Consolidated Net Income, extraordinary gains realized other than
      in
      the ordinary course of business (including without limitation non-cash gains
      on
      equity interests of Affiliates), all calculated for the Borrower and its
      Subsidiaries on a consolidated basis.

     

    "Consolidated
      Interest Expense" means, with reference to any period, the interest expense
      of
      the Borrower and its Subsidiaries (including the interest component of Rentals
      under Capitalized Leases and capitalized interest) calculated on a consolidated
      basis for such period.

     

    "Consolidated
      Net Income" means, with reference to any period, the net income (or loss) of
      the
      Borrower and its Subsidiaries calculated on a consolidated basis for such
      period.

     

    "Consolidated
      Net Worth" means, as of any date, (a) the amount of any Capital Stock,
      paid-in-capital, and similar equity accounts of the Borrower and its
      Subsidiaries calculated on a consolidated basis as of such time, plus
      (or minus in the case of a deficit) the capital surplus and retained
      earnings of the Borrower and its Subsidiaries calculated on a consolidated
      basis
      as of such time and excluding the amount of Other Comprehensive Income of the
      Borrower and its Subsidiaries calculated on a consolidated basis as of such
      time, less (b) any treasury stock of the Borrower and its Subsidiaries
      calculated on a consolidated basis as of such time.

     

    "Consolidated
      Total Capitalization" means at any time the sum of Consolidated Total
      Indebtedness and Consolidated Net Worth, each calculated at such
      time.

     

    "Consolidated
      Total Indebtedness" means, as of any date, the Indebtedness of the Borrower
      and
      its Subsidiaries, determined on a consolidated basis in accordance with
      Agreement Accounting Principles, which, without duplication, either (a) is
      interest-bearing and, in accordance with Agreement Accounting Principles, should
      be reflected on a consolidated balance sheet of the Borrower and its
      Subsidiaries as of such date or (b) consists of Letters of Credit, valued at
      the
      undrawn face amount thereof.

     

    "Contingent
      Obligation" of a Person means any agreement, undertaking or arrangement by
      which
      such Person assumes, guarantees, endorses, contingently agrees to purchase
      or
      provide funds for the payment of, or otherwise becomes or is contingently liable
      upon, the obligation or liability of any other Person, or agrees to maintain
      the
      net worth or working capital or other financial condition of any other Person,
      or otherwise assures any creditor of such other Person against loss, including,
      without limitation, any comfort letter, operating agreement, take-or-pay
      contract or the obligations of any such Person as general partner of a
      partnership with respect to the liabilities of the partnership.

     

    "Controlled
      Group" means all members of a controlled group of corporations or other business
      entities and all trades or businesses (whether or not incorporated) under common
      control which, together with the Borrower or any of its Subsidiaries, are
      treated as a single employer under Section 414 of the Code.

     

    "Conversion/Continuation
      Notice" is defined in Section 2.9.

     

    "Credit
      Extension" means the making of a Loan or the issuance of a Facility LC
      hereunder.

     

    "Credit
      Extension Date" means the Borrowing Date for a Loan or the issuance date for
      a
      Facility LC.

     

    
      
        
        

      

      
        
        

        
          
4

      

      
        
        

      

    

     

    "Credit
      Obligations" means all present and future obligations and other liabilities
      of
      the Borrower and its Subsidiaries (without duplication) arising under or
      included within the Outstanding Facilities, as amended from time to time,
      including without limitation any interest, premium, fees, expenses, and charges
      relating thereto and any renewals, extensions, and refundings of the
      foregoing.  The principal amount of the Credit Obligations shall be
      the aggregate of the outstanding principal amount of all Loans outstanding
      under
      the Outstanding Facilities plus the undrawn face amount of the Facility
      LCs.

     

    "Default"
      means an event described in Article VII.

     

    "Dollars"
      and "$" shall mean the lawful currency of the United States of
      America.

     

    "Domestic
      Subsidiaries" means all Subsidiaries of the Borrower which are organized under
      the laws of one of the states of the United States.

     

    "Effective
      Date" means the date on which the Borrower satisfies the conditions set forth
      in
      Section 4.1.

     

    "Environmental
      Laws" means any and all federal, state, local and foreign statutes, laws,
      judicial decisions, regulations, ordinances, rules, judgments, orders, decrees,
      plans, injunctions, permits, concessions, grants, franchises, licenses,
      agreements and other governmental restrictions relating to (i) the protection
      of
      the environment, (ii) the effect of the environment on human health, (iii)
      emissions, discharges or releases of pollutants, contaminants, hazardous
      substances or wastes into surface water, ground water or land, or (iv) the
      manufacture, processing, distribution, use, treatment, storage, disposal,
      transport or handling of pollutants, contaminants, hazardous substances or
      wastes or the clean-up or other remediation thereof.

     

    "ERISA"
      means the Employee Retirement Income Security Act of 1974, as amended from
      time
      to time, and any rule or regulation issued thereunder.

     

    "Eurodollar
      Loan" means a Loan which, except as otherwise provided in Section 2.11, bears
      interest at the applicable Eurodollar Rate.

     

    "Eurodollar
      Rate" means, with respect to a Eurodollar Loan for the relevant Interest Period,
      the sum of (i) the quotient of (a) the Eurodollar Reference Rate applicable
      to
      such Interest Period, divided by (b) one minus the Reserve Requirement
      (expressed as a decimal) applicable to such Interest Period, if any,
plus (ii) the Applicable Margin, changing when and as the Applicable
      Margin changes.

     

    "Eurodollar
      Reference Rate" means, with respect to any Eurodollar Loan for the relevant
      Interest Period, rate appearing on page 3750 of the Moneyline Telerate Service
      (or 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 determined by the Bank
      from
      time to time for purpose of providing quotations of interest rate, applicable
      to
      dollar deposits in the London interbank market) at approximately 11:00 a.m.
      (London time) two Business Days prior to the first day of such Interest Period,
      as the rate for dollar deposits with a maturity comparable to such Interest
      Period, provided that, if no such British rate is available, the
      applicable Eurodollar Reference Rate for the relevant Interest Period shall
      instead be the rate determined by the Bank to be the rate at which the Bank
      offers to place dollar deposits in the London interbank market at approximately
      11:00 a.m. (London time) two Business Days prior to the first day of such
      Interest Period, in the approximate amount of the relevant Eurodollar Loan
      and
      having a maturity comparable to such Interest Period.

     

    "Excluded
      Taxes" means, in the case of the Bank or applicable Lending Installation, taxes
      imposed on its overall net income, and franchise taxes imposed on it, by (i)
      the
      jurisdiction under the laws of which the Bank is incorporated or organized
      or
      (ii) the jurisdiction in which the Bank's principal executive office or the
      Bank's applicable Lending Installation is located.

     

    
      
        
        

      

      
        
        

        
          
5

      

      
        
        

      

    

     

    "Exhibit"
      refers to an exhibit to this Agreement, unless another document is specifically
      referenced.

     

    "Existing
      US Facility LC" means that certain standby letter of credit number CBCI-299975
      in the face amount of $1,354,488.00 issued by the Bank for the account of the
      Borrower.

     

    "Facility
      LC" is defined in Section 2.18.1.

     

    "Facility
      LC Application" is defined in Section 2.18.2.

     

    "Facility
      LC Collateral Account" is defined in Section 2.18.8.

     

    "Facility
      Termination Date" means December 7, 2012.

     

    "Federal
      Funds Effective Rate" means, for any day, an interest rate per annum equal
      to
      the weighted average of the rates on overnight Federal funds transactions with
      members of the Federal Reserve System arranged by Federal funds brokers on
      such
      day, as published for such day (or, if such day is not a Business Day, for
      the
      immediately preceding Business Day) by the Federal Reserve Bank of New York,
      or,
      if such rate is not so published for any day which is a Business Day, the
      average of the quotations at approximately 10:00 a.m. (Chicago time) on such
      day
      on such transactions received by the Bank from three Federal funds brokers
      of
      recognized standing selected by the Bank in its sole discretion.

     

    "Floating
      Rate" means, for any day, a rate per annum equal to (i) the Alternate Base
      Rate
      for such day plus (ii) the Applicable Margin, in each case changing
      when and as the Alternate Base Rate and Applicable Margin change; provided,
      however, that at no time may the Floating Rate be less than the then applicable
      Eurodollar Rate for a Eurodollar Loan in Dollars for an Interest Period of
      one
      month.

     

    "Floating
      Rate Loan" means a Loan which, except as otherwise provided in Section 2.11,
      bears interest at the Floating Rate.

     

    "Guarantors"
      means Hurco International Inc. and Hurco International Holdings, Inc. as
      signatories to the Guaranty and any other Person who guaranties to the Bank
      the
      Borrower's payment and performance of its obligations under this Agreement
      and
      the other Loan Documents, including without limitation each other Subsidiary
      which becomes a party to the Guaranty after the date of this Agreement, and
      their respective successors and assigns.

     

    "Guaranty"
      means, collectively, that certain Subsidiary Guaranty, dated of even date
      herewith, executed by the Guarantors in favor of the Bank substantially in
      the
      form of Exhibit C, and any other such Subsidiary Guaranty executed by any
      Guarantors from time to time.

     

    "Hurco
      BV" means Hurco B.V., a limited liability company organized under the laws
      of
      the Netherlands, and an indirect wholly-owned subsidiary of the
      Borrower.

     

    "Hurco
      Deferred Compensation Plan" means the unfunded plan adopted by the Borrower
      for
      the purpose of providing deferred compensation for a select group of management
      personnel or other employees of the Borrower, as evidenced by the CORPORATE
      plan
      for Retirement Select Plan and Basic Plan Document effective as of July 1,
      1996,
      as amended, and the related Hurco Deferred Compensation Plan Trust
      Agreement.

     

    
      
        
        

      

      
        
        

        
          
6

      

      
        
        

      

    

     

    "Hurco
      Deferred Compensation Plan Trust Agreement" means the Trust Agreement dated
      as
      of April 11, 1996, between the Borrower and Fidelity Management Trust Company,
      as amended.

     

    "Hurco
      Europe" is defined in the Introduction to this Agreement.

     

    "Hurco
      GmbH" means Hurco GmbH Werkzeugmaschinen CIM-Bausteine Vertreib und Service,
      a
      corporation organized under the laws of the Federal Republic of Germany, and
      an
      indirect wholly-owned subsidiary of the Borrower.

     

    "Hurco
      GmbH Facility" means a credit facility of Hurco GmbH and Hurco BV in a maximum
      principal amount of Three Million Euros obtained from Dresdner Bank or any
      affiliate or successor thereof which may be secured by assets of Hurco GmbH
      and
      Hurco BV and an unsecured guaranty of payment of the Borrower.

     

    "Hurco
      Taiwan" is defined in the Introduction to this Agreement.

     

    "Hurco
      UK
      Guaranty" means the guaranty dated on or about the Effective Date, executed
      by
      the Borrower in favor of the Bank, by which the Borrower has guaranteed to
      the
      Bank the obligations of Hurco Europe under the UK Facility, as it may be
      amended, modified or confirmed and in effect from time to time.

     

    "Hurco
      Taiwan Guaranty" means the guaranty dated on or about the Effective Date,
      executed by the Borrower in favor of the Bank, by which the Borrower has
      guaranteed to the Bank the obligations of Hurco Taiwan under the Taiwan
      Facility, as it may be amended, modified or confirmed and in effect from time
      to
      time.

     

    "Inactive
      Subsidiary" means a Subsidiary of the Borrower not actively engaged in business,
      and which has assets with a book value less than or equal to
      $10,000.   Schedule 5.8 lists all Inactive Subsidiaries
      existing on the Effective Date.  Notwithstanding anything to the
      contrary, so long as Hurco Technology, Inc., an Indiana corporation, holds
      only
      patents and other intellectual property and has total annual revenues of not
      greater than $500,000, all of which is derived from licensing of that
      intellectual property, it shall be deemed an Inactive Subsidiary.

     

    "Indebtedness"
      of a Person means, without duplication, such Person's (i) obligations for
      borrowed money (including without limitation, with respect to the Borrower,
      all
      Reimbursement Obligations, all Credit Obligations and all Rate Management
      Transactions), (ii) obligations representing the deferred purchase price of
      Property or services (other than accounts payable arising in the ordinary course
      of such Person's business payable on terms customary in the trade), (iii)
      obligations, whether or not assumed, secured by Liens or payable out of the
      proceeds or production from Property now or hereafter owned or acquired by
      such
      Person, (iv) obligations which are evidenced by notes, acceptances, or other
      instruments, (v) obligations of such Person to purchase securities or other
      Property arising out of or in connection with the sale of the same or
      substantially similar securities or Property, (vi) Capitalized Lease
      Obligations, (vii) all obligations of such Person to purchase goods, property,
      or services where payment therefor is required, regardless of whether delivery
      of such goods or property or the performance of such services is ever made
      or
      tendered (generally referred to as "take or pay contracts"), (viii) all
      liabilities of such person in respect of Unfunded Liabilities under any Plan
      of
      such Person or of any ERISA Affiliate and (ix) any other obligation for borrowed
      money or other financial accommodation which in accordance with Agreement
      Accounting Principles would be shown as a liability on the consolidated balance
      sheet of such Person, including without limitation all obligations of others
      similar in character to those described in clauses (i) through (viii) of this
      definition for which such Person is contingently liable, as guarantor, surety,
      accommodation party, partner or in any other capacity, or in respect of which
      obligations such person assures a creditor against loss or agrees to take any
      action to prevent any such loss (other than endorsements of negotiable
      instruments for collection in the ordinary course of business), including
      without limitation all reimbursement obligations of such Person in respect
      of
      letters of credit, surety bonds, or similar obligations, and all obligations
      of
      such Person to advance funds to, or to purchase assets, property or services
      from, any other Person in order to maintain the financial condition of such
      other Person.

     

    
      
        
        

      

      
        
        

        
          
7

      

      
        
        

      

    

     

    "Intellectual
      Property" is defined in Section 5.22.

     

    "Interest
      Period" means, with respect to a Eurodollar Loan, a period of one, two, three
      or
      six months commencing on a Business Day selected by the Borrower pursuant to
      this Agreement.  Such Interest Period shall end on the day which
      corresponds numerically to such date one, two, three or six months thereafter,
      provided, however, that if there is no such numerically corresponding
      day in such next, second, third or sixth succeeding month, such Interest Period
      shall end on the last Business Day of such next, second, third or sixth
      succeeding month.  If an Interest Period would otherwise end on a day
      which is not a Business Day, such Interest Period shall end on the next
      succeeding Business Day, provided, however, that if said next
      succeeding Business Day falls in a new calendar month, such Interest Period
      shall end on the immediately preceding Business Day.

     

    "Investment"
      of a Person means any loan, advance (other than commission, travel and similar
      advances to officers and employees made in the ordinary course of business),
      extension of credit (other than accounts receivable arising in the ordinary
      course of business on terms customary in the trade) or contribution of capital
      by such Person; stocks, bonds, mutual funds, partnership interests, notes,
      debentures or other securities owned by such Person; any deposit accounts and
      certificate of deposit owned by such Person; and structured notes, derivative
      financial instruments and other similar instruments or contracts owned
      by  such Person.

     

    "LC
      Fee"
      is defined in Section 2.5(b).

     

    "LC
      Obligations" means, at any time, the sum, without duplication, of (i) the
      aggregate undrawn stated amount under all Facility LCs outstanding at such
      time
plus (ii) the aggregate unpaid amount at such time of all Reimbursement
      Obligations.

     

    "LC
      Payment Date" is defined in Section 2.18.3.

     

    "Lending
      Installation" means any office of the Bank in Chicago, Illinois or any office,
      branch, subsidiary or affiliate of the Bank selected by the Bank pursuant to
      Section 2.16 or providing the UK Facility or the Taiwan Facility.

     

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

     

    "Lien"
      means any lien (statutory or other), mortgage, pledge, hypothecation,
      assignment, deposit arrangement, encumbrance or preference, priority or other
      security agreement or preferential arrangement of any kind or nature whatsoever
      (including, without limitation, the interest of a vendor or lessor under any
      conditional sale, Capitalized Lease or other title retention
      agreement).

     

    "Loan"
      means any loan by the Bank made pursuant to Article II (or any conversion or
      continuation thereof).

     

    "Loan
      Documents" means this Agreement, the Facility LC Applications, any Notes issued
      pursuant to Section 2.15, the Guaranty, the Hurco UK Guaranty, the Hurco Taiwan
      Guaranty, and all other agreements and documents executed or delivered in
      connection with any of the foregoing at any time, as each may be amended or
      modified from time to time.

     

    
      
        
        

      

      
        
        

        
          
8

      

      
        
        

      

    

     

    "Material
      Adverse Effect" means a material adverse effect on (i) the business, Property,
      condition (financial or otherwise), results of operations, or prospects of
      the
      Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower
      or any Subsidiary to perform its obligations under the Loan Documents to which
      it is a party, or (iii) the validity or enforceability of any of the Loan
      Documents or the rights or remedies of the Bank thereunder.

     

    "Modify"
      and "Modification" are defined in Section 2.18.1.

     

    "Moody's"
      means Moody's Investors Service, Inc., and any successor thereto.

     

    "Multiemployer
      Plan" means a Plan maintained pursuant to a collective bargaining agreement
      or
      any other arrangement to which the Borrower or any member of the Controlled
      Group is a party to which more than one employer is obligated to make
      contributions.

     

    "New
      Taiwan Dollars" shall mean the lawful currency of Taiwan.

     

    "Note"
      is
      defined in Section 2.13 and includes any and all notes executed pursuant to
      this
      Agreement, each in the form of Exhibit A.

     

    "Obligations"
      means all Reimbursement Obligations, Credit Obligations, and all accrued and
      unpaid fees and all expenses, reimbursements, indemnities and other obligations
      of the Borrower to the Bank or any indemnified party arising under the Loan
      Documents.

     

    "Operating
      Lease" of a Person means any lease of Property (other than a Capitalized Lease)
      by such Person as lessee which has an original term (including any required
      renewals and any renewals effective at the option of the lessor) of one year
      or
      more.

     

    "Other
      Comprehensive Income" means that amount reported in the Borrower's consolidated
      balance sheet as "Accumulated Other Comprehensive Income (Loss)" and which
      is
      included in total shareholders' equity in accordance with Agreement Accounting
      Principles.

     

    "Other
      Taxes" is defined in Section 3.5(ii).

     

    "Outstanding
      Credit Exposure" means, at any time, the sum of (i) the aggregate principal
      amount of the Loans outstanding at such time, plus (ii) an amount equal
      to the LC Obligations at such time.

     

    "Outstanding
      Facilities" means, collectively and without duplication, the Loans and the
      Facility LCs, each as existing following the Effective Date.

     

    "Participants"
      is defined in Section 11.2.1.

     

    "Payment
      Date" means the last day of each quarter.

     

    "PBGC"
      means the Pension Benefit Guaranty Corporation, or any successor
      thereto.

     

    "Permitted
      Liens" means Liens permitted by Section 6.15.

     

    "Person"
      means any natural person, corporation, firm, joint venture, partnership, limited
      liability company, association, enterprise, trust or other entity or
      organization, or any government or political subdivision or any agency,
      department or instrumentality thereof.

    
 

    
      
        
        

      

      
        
        

        
          
9

      

      
        
        

      

    

     

    "Plan"
      means an employee pension benefit plan which is covered by Title IV of ERISA
      or
      subject to the minimum funding standards under Section 412 of the Code as to
      which the Borrower or any member of the Controlled Group may have any
      liability.

     

    "Prime
      Rate" means the rate of interest per annum announced from time to time by the
      Bank as its prime rate.  The Prime Rate is a variable rate and each
      change in the Prime Rate is effective from and including the date the change
      is
      announced as being effective.  THE PRIME RATE IS A REFERENCE RATE AND
      MAY NOT BE THE BANK'S LOWEST RATE.

     

    "Property"
      of a Person means any and all property, whether real, personal, tangible,
      intangible, or mixed, of such Person, or other assets owned, leased or operated
      by such Person.

     

    "Rate
      Management Transaction" means any transaction (including an agreement with
      respect thereto) now existing or hereafter entered into between the Borrower
      and
      any Person which is a rate swap, basis swap, forward rate transaction, commodity
      swap, commodity option, equity or equity index swap, equity or equity index
      option, bond option, interest rate option, foreign exchange transaction, cap
      transaction, floor transaction, collar transaction, forward transaction,
      currency swap transaction, cross-currency rate swap transaction, currency option
      or any other similar transaction (including any option with respect to any
      of
      these transactions) or any combination thereof, whether linked to one or more
      interest rates, foreign currencies, commodity prices, equity prices or other
      financial measures.

     

    "Rate
      Management Obligations" of a Person means any and all obligations of such
      Person, whether absolute or contingent and howsoever and whensoever created,
      arising, evidenced or acquired (including all renewals, extensions and
      modifications thereof and substitutions therefor), under (i) any and all Rate
      Management Transactions, and (ii) any and all cancellations, buy backs,
      reversals, terminations or assignments of any Rate Management
      Transactions.

     

    "Regulation
      D" means Regulation D of the Board of Governors of the Federal Reserve System
      as
      from time to time in effect and any successor thereto or other regulation or
      official interpretation of said Board of Governors relating to reserve
      requirements applicable to member banks of the Federal Reserve
      System.

     

    "Regulation
      U" means Regulation U of the Board of Governors of the Federal Reserve System
      as
      from time to time in effect and any successor or other regulation or official
      interpretation of said Board of Governors relating to the extension of credit
      by
      banks for the purpose of purchasing or carrying margin stocks applicable to
      member banks of the Federal Reserve System.

     

    "Reimbursement
      Obligations" means, at any time, the aggregate of all obligations of the
      Borrower then outstanding under Section 2.18 to reimburse the Bank for amounts
      paid by the Bank in respect of any one or more drawings under Facility
      LCs.

     

    "Rentals"
      of a Person means the aggregate fixed amounts payable by such Person under
      any
      Operating Lease.

     

    "Replacement
      Taiwan Facility" means a senior revolving credit facility issued by a
      Replacement Taiwan Lender to be used by Hurco Taiwan for its general working
      capital purposes at any time the Taiwan Facility no longer is available to
      Hurco
      Taiwan and all amounts owing under the Taiwan Facility have been paid in
      full.  Without limitation, the Taiwan Facility shall be deemed no
      longer available if: (i) the Bank demands payment of all or any portion of
      the
      principal amount outstanding under the Taiwan Facility and at the time of such
      demand no 

     

    
      
        
        

      

      
        
        

        
          
10

      

      
        
        

      

    

     

    "Event
      of
      Default" (as that term is defined in the Taiwan Facility Documents) has occurred
      and is continuing; or (ii) the Bank fails to honor any proper request for an
      advance or loan under the Taiwan Facility at a time when all conditions to
      availability under the Taiwan Facility have been satisfied, no "Event of
      Default" (as that term is defined in the Taiwan Facility Documents) has occurred
      and is continuing and, if such advance or loan were made, the aggregate
      principal amount of all loans and advances outstanding under the Taiwan Facility
      would not exceed the "Ceiling" (as that term is defined in the Taiwan Facility
      Documents).

     

    "Replacement
      Taiwan Lender" means any depository bank customarily providing senior revolving
      credit facilities denominated in New Taiwan Dollars to borrowers in Taiwan
      for
      working capital purposes.

     

    "Reportable
      Event" means a reportable event as defined in Section 4043 of ERISA and the
      regulations issued under such section, with respect to a Plan, excluding,
      however, such events as to which the PBGC has by regulation waived the
      requirement of Section 4043(a) of ERISA that it be notified within 30 days
      of
      the occurrence of such event, provided, however, that a failure to meet
      the minimum funding standard of Section 412 of the Code and of Section 302
      of
      ERISA shall be a Reportable Event regardless of the issuance of any such waiver
      of the notice requirement in accordance with either Section 4043(a) of ERISA
      or
      Section 412(d) of the Code.

     

    "Reports"
      is defined in Section 9.6.

     

    "Reserve
      Requirement" means, with respect to an Interest Period, the maximum aggregate
      reserve requirement (including all basic, supplemental, marginal and other
      reserves) which is imposed under Regulation D  or any comparable
      regulation from time to time on Eurocurrency funding.  Eurodollar
      Loans shall be deemed to constitute Eurocurrency funding and to be subject
      to
      such reserve requirements without the benefit of or credit for pro-ration,
      exemption or offset, that may be available under such Regulation D or any
      comparable regulation.  The Reserve Requirement shall be adjusted
      automatically on and as of the effective date of any change of such reserve
      requirement.

     

    "S&P"
      means Standard and Poor's Ratings Services, a division of The McGraw Hill
      Companies, Inc., and any successor thereto.

     

    "Sale
      and
      Leaseback Transaction" means any sale or other transfer of Property by any
      Person with the intent to lease such Property as lessee.

     

    "Schedule"
      refers to a specific schedule to this Agreement, unless another document is
      specifically referenced.

     

    "Section"
      means a numbered section of this Agreement, unless another document is
      specifically referenced.

     

    "Single
      Employer Plan" means a Plan maintained by the Borrower or any member of the
      Controlled Group for employees of the Borrower or any member of the Controlled
      Group.

     

    "Subordinated
      Indebtedness" of a Person means any Indebtedness of such Person for borrowed
      money the payment of which is subordinated to payment of the Obligations and
      any
      Rate Management Obligations to the written satisfaction of the
      Bank.

     

    "Subsidiary"
      of a Person means (i) any corporation more than 50% of the outstanding
      securities having ordinary voting power of which shall at the time be owned
      or
      controlled, directly or indirectly, by such Person or by one or more of its
      Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii)
      any
      partnership, limited liability company, association, joint venture or similar
      business organization more than 50% of the ownership interests having ordinary
      voting power of which shall at the time be so owned or
      controlled.  Unless otherwise expressly provided, all references
      herein to a "Subsidiary" shall mean a Subsidiary of the Borrower.

     

    
      
        
        

      

      
        
        

        
          
11

      

      
        
        

      

    

     

    "Substantial
      Portion" means, with respect to the Property of the Borrower and its
      Subsidiaries, Property which (i) represents more than 10% of the consolidated
      assets of the Borrower and its Subsidiaries as would be shown in the
      consolidated financial statements of the Borrower and its Subsidiaries as at
      the
      beginning of the twelve-month period ending with the month in which such
      determination is made, or (ii) is responsible for more than 7.5% of the
      consolidated net sales of the Borrower and its Subsidiaries as reflected in
      the
      financial statements referred to in clause (i) above.

     

    "Taiwan
      Facility"  is defined in the Introduction to this
      Agreement.

     

    "Taiwan
      Facility Documents"  is defined in the Introduction to this
      Agreement.

     

    "Taiwan
      Facility LC" is defined in Section 2.18.1.

     

    "Taiwan
      Facility LC Commitment" means, the obligation of the Bank pursuant to Section
      2.1(b) to issue Taiwan Facility LCs upon the application of the Borrower in
      an
      aggregate amount not exceeding New Taiwan Dollars 100,000,000.

     

    "Taxes"
      means any and all present or future taxes, duties, levies, imposts, deductions,
      charges or withholdings, and any and all liabilities with respect to the
      foregoing, but excluding Excluded Taxes and Other Taxes.

     

    "Total
      Funded Debt/EBITDA Ratio" means the ratio of Consolidated Total Indebtedness
      as
      of the end of each fiscal quarter of the Borrower to Consolidated EBITDA for
      the
      four consecutive fiscal quarters then ending.

     

    "Transferee"
      is defined in Section 11.3.

     

    "Type"
      means, with respect to any Loan, its nature as a Floating Rate Loan or a
      Eurodollar Loan.

     

    "UK
      Facility" is defined in the Introduction to this Agreement.

     

    "Unfunded
      Liabilities" means the amount (if any) by which the present value of all vested
      and unvested accrued benefits under all Single Employer Plans exceeds the fair
      market value of all such Plan assets allocable to such benefits, all determined
      as of the then most recent valuation date for such Plans using PBGC actuarial
      assumptions for single employer plan terminations.

    "Unmatured
      Default" means an event which but for the lapse of time or the giving of notice,
      or both, would constitute a Default.

     

    "US
      Facility LC" is defined in Section 2.18.1.

     

    "Wholly-Owned
      Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting
      securities of which shall at the time be owned or controlled, directly or
      indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such
      Person, or by such Person and one or more Wholly-Owned Subsidiaries of such
      Person, or (ii) any partnership, limited liability company, association, joint
      venture or similar business organization 100% of the ownership interests having
      ordinary voting power of which shall at the time be so owned or
      controlled.

     

    
      
        
        

      

      
        
        

        
          
12

      

      
        
        

      

    

     

    1.2           Other
      Definitions; Rules of Construction.  The foregoing definitions
      include both the singular and the plural forms thereof and shall be construed
      accordingly.  All computations required hereunder and all financial
      terms used herein shall be made or construed in accordance with Agreement
      Accounting Principles unless such principles are inconsistent with the express
      requirements of this Agreement; provided that, if the Borrower notifies
      the Bank that the Borrower wishes to amend any covenant in Article VI to
      eliminate the effect of any change in Agreement Accounting Principles in the
      operation of such covenant (or if the Bank notifies the Borrower that the Bank
      wishes to amend Article VI for such purpose), then the Borrower's compliance
      with such covenant shall be determined on the basis of Agreement Accounting
      Principles in effect immediately before the relevant change in Agreement
      Accounting Principles became effective, until either such notice is withdrawn
      or
      such covenant is amended in a manner satisfactory to the Borrower and the
      Bank.  Use of the terms "herein", "hereof", and
      "hereunder" shall be deemed references to this entire Agreement and not
      to the Section or clause in which the term appears.  References to
      "Sections" and "subsections" shall be to Sections and subsections,
      respectively, of this Agreement unless otherwise specifically
      provided.

    

    

    ARTICLE
      II

    

    THE
      CREDITS

     

    2.1.           Commitments.

     

    (a)           Loans
      and US Facility LCs.  From and including the Effective Date and
      prior to the Facility Termination Date, the Bank agrees, on the terms set forth
      in this Agreement, to (i) make Loans to the Borrower from time to time, and
      (ii)
      issue US Facility LCs upon the request of the Borrower, in amounts not to exceed
      in aggregate principal amount at any time outstanding the amount of the
      Commitment as of the date any such Loan is made or US Facility LC is issued
      or a
      Modification thereof is to be made.  All Loans shall be made and US
      Facility LCs shall be issued in Dollars.  Subject to the terms of this
      Agreement, the Borrower may borrow, repay and reborrow Loans at any time prior
      to the Facility Termination Date.  The Commitment to extend credit
      under this Section 2.1(a) shall expire on the Facility Termination
      Date.  The Bank will issue US Facility LCs hereunder on the terms set
      forth in Section 2.18.

     

    (b)           Taiwan
      Facility LCs.  From and including the Effective Date and prior to
      the Facility Termination Date, the Bank agrees, on the terms set forth in this
      Agreement, to issue Taiwan Facility LCs upon the request of the Borrower, in
      amounts not to exceed in aggregate principal amount at any time outstanding
      the
      amount of the Taiwan Facility LC Commitment as of the date any such Taiwan
      Facility LC is issued or a Modification thereof is to be made.  All
      Taiwan Facility LCs shall be issued in New Taiwan Dollars and shall be used
      in
      connection with one or more Replacement Taiwan Facilities.  The Taiwan
      Facility LC Commitment to extend credit hereunder shall expire on the Facility
      Termination Date.  The Bank will issue Taiwan Facility LCs hereunder
      on the terms set forth in Section 2.18.

     

    2.2.           Required
      Payment.  In addition to any other payments required
      under this Agreement, the Outstanding Credit Exposure and all other unpaid
      Obligations shall be paid in full by the Borrower on the Facility Termination
      Date.

     

    2.3.          [Reserved]

     

    2.4.           Types
      of Loans.  The Loans may be Floating Rate Loans or Eurodollar
      Loans, or a combination thereof, selected by the Borrower in accordance with
      Sections 2.8 and 2.9.

     

    2.5.           Fees;
      Reductions in Commitment.

     

    
      
        
        

      

      
        
        

        
          
13

      

      
        
        

      

    

     

    (a)           Commitment
      Fee.  The Borrower agrees to pay to the Bank a commitment fee at a
      per annum rate equal to the Applicable Margin on the daily unused amount of
      the
      Commitment from the Effective Date to and including the Facility Termination
      Date, payable quarterly in arrears and on the Facility Termination
      Date.  The commitment fee for each fiscal quarter of the Borrower
      shall be due and payable within ten (10) days after the Bank submits a statement
      to the Borrower of the amount due for such fiscal quarter, based on the Bank's
      determination of the Applicable Margin for such fiscal quarter.

     

    (b)           LC
      Fees.  The Borrower shall pay to the Bank (i) with respect to each
      standby Facility LC, a letter of credit fee at a per annum rate equal to the
      Applicable Margin for Eurodollar Loans in effect from time to time on the
      average daily undrawn stated amount under such standby Facility LC, subject
      to
      the Bank's standard minimum fee existing at the time of issuance, such fee
      to be
      payable in advance on each Payment Date, and (ii) with respect to each
      commercial Facility LC, a one-time letter of credit fee at times and in amounts
      as the Borrower and the Bank may agree from time to time (each such fee
      described in this sentence, an "LC Fee").  The Borrower shall also pay
      to the Bank at the time each Facility LC is issued documentary and processing
      charges in connection with the issuance or Modification of and draws under
      Facility LCs in accordance with the Bank's standard schedule for such charges
      as
      in effect from time to time.

     

    (c)           Optional
      Reductions in Commitment.  From time to time, the Borrower may
      permanently reduce the Commitment in a minimum amount of $1,000,000 and in
      integral multiples of $500,000, upon written notice to the Bank, which notice
      shall specify the amount of any such reduction, provided, however, that
      the amount of the Commitment may not be reduced below the aggregate principal
      amount of the Outstanding Credit Exposure for Loans and US Facility
      LCs.

     

    (d)           Mandatory
      Prepayments.  Notwithstanding anything in this Agreement to the
      contrary, if at any time the aggregate amount of the Outstanding Credit Exposure
      for Loans and US Facility LCs exceeds the Commitment, and upon written notice
      from the Bank of such occurrence, the Borrower shall immediately repay Loans,
      and otherwise provide funds to the Bank, in an aggregate principal amount
      sufficient to eliminate any such excess, to be applied first to amounts
      outstanding under the Loan, and then to the Facility LC Collateral Account
      in
      respect to US Facility LCs.

     

    2.6.           Minimum
      Amount of Each Loan; Limitation on Eurodollar Interest
      Periods.  Each Eurodollar Loan shall be in the minimum amount of
      $1,000,000 and in multiples of $100,000 if in excess thereof, and each Floating
      Rate Loan shall be in the minimum amount of $100,000 and in multiples of $10,000
      if in excess thereof, provided, any Floating Rate Loan may be in the
      amount of the unused Commitment.  There shall be no more than five (5)
      different Interest Periods in effect at any time.

     

    2.7.           Optional
      Principal Payments.  The Borrower may from time to time pay,
      without penalty or premium, all outstanding Floating Rate Loans, or, in a
      minimum aggregate amount of $100,000 or any integral multiple of $10,000 in
      excess thereof, any portion of the outstanding Floating Rate
      Loans.  The Borrower may from time to time pay, subject to the payment
      of any funding indemnification amounts required by Section 3.4 but without
      penalty or premium, all outstanding Eurodollar Loans, or, in a minimum aggregate
      amount of $1,000,000 or any integral multiple of $100,000 in excess thereof,
      any
      portion of the outstanding Eurodollar Loan upon three Business Days' prior
      notice to the Bank.

     

    2.8.           Method
      of Selecting Types and Interest Periods for New Loans.  The
      Borrower shall select the Type of Loan and, in the case of each Eurodollar
      Loan,
      the Interest Period applicable thereto from time to time.  The
      Borrower shall give the Bank irrevocable notice (a "Borrowing Notice") not
      later
      than Noon (Chicago time) on the Borrowing Date of each Floating Rate Loan and
      three Business Days before the Borrowing Date for each Eurodollar Loan,
      specifying:

    

    
      	
               

            	
              (i)

            	
              the
                Borrowing Date, which shall be a Business Day, of such
                Loan,

            

    

     

    
      
        
        

      

      
        
        

        
          
14

      

      
        
        

      

    

    
 

    
      	
               

            	
              (ii)

            	
              the
                aggregate amount of such Loan,

            

    

    

    
      	
               

            	
              (iii)

            	
              the
                Type of Loan selected, and

            

    

    

    
      	
               

            	
              (iv)

            	
              in
                the case of each Eurodollar Loan, the Interest Period applicable
                thereto.

            

    

     

    2.9.           Conversion
      and Continuation of Outstanding Loans.  Floating Rate Loans shall
      continue as Floating Rate Loans unless and until such Floating Rate Loans are
      converted into Eurodollar Loans pursuant to this Section 2.9 or are repaid
      in
      accordance with Section 2.7.  Each Eurodollar Loan shall continue as a
      Eurodollar Loan until the end of the then applicable Interest Period therefor,
      at which time each such Eurodollar Loan shall be automatically converted into
      a
      Floating Rate Loan unless (x) such Eurodollar Loan is or was repaid in
      accordance with Section 2.7 or (y) the Borrower shall have given the Bank a
      Conversion/Continuation Notice requesting that, at the end of such Interest
      Period, such Eurodollar Loan either continue as a Eurodollar Loan for the same
      or another Interest Period or be converted into a Floating Rate
      Loan.  Any conversion of any Eurodollar Loan shall be made only on the
      last day of the Interest Period applicable thereto

     

    Subject
      to the terms of Section 2.6, the Borrower may elect from time to time to convert
      all or any part of a Floating Rate Loan into a Eurodollar Loan.  The
      Borrower shall give the Bank irrevocable notice (a "Conversion/Continuation
      Notice") of each conversion of a Floating Rate Loan into a Eurodollar Loan
      or
      continuation of a Eurodollar Loan not later than 10:00 a.m. (Chicago time)
      at
      least three Business Days prior to the date of the requested conversion or
      continuation, specifying:

    

    
      	
               

            	
              (i)

            	
              the
                requested date, which shall be a Business Day, of such conversion
                or
                continuation,

            

    

    

    
      	
               

            	
              (ii)

            	
              the
                aggregate amount and Type of the Loan which is to be converted or
                continued, and,

            

    

    

    
      	
               

            	
              (iii)

            	
              the
                amount of such Loan which is to be converted into or continued as
                a
                Eurodollar Loan and the duration of the Interest Period applicable
                thereto.

            

    

     

    2.10.           Changes
      in Interest Rate, etc.  Each Floating Rate Loan shall bear
      interest on the outstanding principal amount thereof, for each day from and
      including the date such Loan is made or is converted from a Eurodollar Loan
      into
      a Floating Rate Loan pursuant to Section 2.9, to but excluding the date it
      is
      paid or is converted into a Eurodollar Loan pursuant to Section 2.9 hereof,
      at a
      rate per annum equal to the Floating Rate for such day.  Changes in
      the rate of interest on that portion of any Loan maintained as a Floating Rate
      Loan will take effect simultaneously with each change in the Alternate Base
      Rate.  Each Eurodollar Loan shall bear interest on the outstanding
      principal amount thereof from and including the first day of the Interest Period
      applicable thereto to (but not including) the last day of such Interest Period
      at the interest rate determined by the Bank as applicable to such Eurodollar
      Loan based upon the Borrower's selections under Sections 2.8 and 2.9 and
      otherwise in accordance with the terms hereof.  No Interest Period may
      end after the Facility Termination Date.

     

    2.11.           Rates
      Applicable After Default.  Notwithstanding anything to the
      contrary contained in Section 2.8 or 2.9, during the continuance of a Default
      or
      Unmatured Default the Bank may, at its option, by notice to the Borrower,
      declare that no Loan may be made as, converted into or continued as a Eurodollar
      Loan.  During the continuance of a Default the Bank may, at its
      option, by notice to the Borrower, declare that (i) each Eurodollar Loan shall
      bear interest for the remainder of the applicable Interest Period at the rate
      otherwise applicable to such Interest Period plus 2% per annum, (ii)
      each Floating Rate Loan shall bear interest at a rate per annum equal to the
      Floating Rate in effect from time to time plus 2% per annum and (iii)
      the LC Fee shall be increased by 2% per annum, provided that, during
      the continuance of a Default under Section 7.6 or 7.7, the interest rates set
      forth in clauses (i) and (ii) above and the increase in the LC Fee set forth
      in
      clause (iii) above shall be applicable to all Credit Extensions without any
      election or action on the part of the Bank.

     

    
      
        
        

      

      
        
        

        
          
15

      

      
        
        

      

    

     

    2.12.           Method
      of Payment.  

     

    (a)   Each
      Loan shall be repaid and each payment of interest thereon shall be paid in
      Dollars.  All Reimbursement Obligations shall be paid in the currency
      in which the related draw on the relevant Facility LC was paid.  All
      payments of the Obligations hereunder shall be made, without setoff, deduction,
      or counterclaim, in immediately available funds to the Bank at the Bank's
      address specified pursuant to Article XII, or at any other Lending Installation
      of the Bank specified in writing by the Bank to the Borrower, by noon (Chicago
      time) on the date when due and shall (except in the case of Reimbursement
      Obligations for which the Bank has not been fully indemnified, or as otherwise
      specifically required hereunder) be applied by the Bank as it may determine
      in
      its sole discretion.  The Bank is authorized to charge any account of
      the Borrower maintained with the Bank or any of its Affiliates for each payment
      of principal, interest, Reimbursement Obligations and fees as it becomes due
      hereunder.

     

    (b)   Notwithstanding
      the foregoing provisions of this Section, if, after the Bank pays any draw
      on
      any Taiwan Facility LC in New Taiwan Dollars, currency control or exchange
      regulations are imposed in Taiwan with the result that such currency no longer
      exists or the Borrower is not able to make payment to the Bank in New Taiwan
      Dollars, then all payments to be made by the Borrower hereunder and under the
      other Loan Documents in New Taiwan Dollars shall instead be made when due in
      Dollars in an amount equal to the Dollar equivalent of such payment due, it
      being the intention of the parties hereto that the Borrower take all risks
      of
      the imposition of any such currency control or exchange
      regulations.  The Dollar equivalent of New Taiwan Dollars will be
      determined at the exchange rate as quoted by a source selected by the Bank
      in
      its sole discretion for the purchase of Dollars on the date such payment is
      due.

     

    2.13.           Noteless
      Agreement; Evidence of Indebtedness.  (i)  The Bank
      shall maintain in accordance with its usual practice an account or accounts
      evidencing the indebtedness of the Borrower to the Bank resulting from each
      Loan
      made by the Bank from time to time, including the amounts of principal and
      interest payable and paid to the Bank from time to time hereunder.

     

                     
      (ii)           The Bank
      shall also maintain accounts in which it will record (a) the amount of each
      Loan
      made hereunder, the Type thereof and the Interest Period with respect thereto,
      (b) the amount of any principal or interest due and payable or to become due
      and
      payable from the Borrower to the Bank hereunder, (c) the original stated amount
      of each Facility LC and the amount of LC Obligations outstanding at any time,
      and (d) the amount of any sum received by the Bank hereunder from the
      Borrower.

     

                      (iii)           The
      entries maintained in the accounts maintained pursuant to paragraphs (i) and
      (ii) above shall be prima facie evidence of the existence and amounts
      of the Obligations therein recorded; provided, however, that the
      failure of the Bank to maintain such accounts or any error therein shall not
      in
      any manner affect the obligation of the Borrower to repay the Obligations in
      accordance with their terms.

     

                     
      (iv)           The Bank
      may request that its Loan be evidenced by a promissory note (a
      "Note").  In such event, the Borrower shall prepare, execute and
      deliver to the Bank a Note payable to the order of the Bank in a form supplied
      by the Bank.  Thereafter, the Loans evidenced by such Note and
      interest thereon shall at all times (including after any assignment pursuant
      to
      Section 11.3) be represented by one or more Notes payable to the order of the
      payee named therein or any assignee pursuant to Section 11.3, except to the
      extent that the Bank or assignee subsequently returns any such Note for
      cancellation and requests that the Loan once again be evidenced as described
      in
      paragraphs (i) and (ii) above.

     

    2.14.           Telephonic
      Notices.  The Borrower authorizes the Bank to extend, convert or
      continue Loans, effect selections of Types of Loans and to transfer funds based
      on telephonic notices made by any person or persons the Bank in good faith
      believes to be acting on behalf of the Borrower, it being understood that the
      foregoing authorization is specifically intended to allow Borrowing Notices
      and
      Conversion/Continuation Notices to be given telephonically.  The
      Borrower agrees to deliver promptly to the Bank a written confirmation, if
      such
      confirmation is requested by the Bank, of each telephonic notice signed by
      an
      Authorized Officer. If the written confirmation differs in any material respect
      from the action taken by the Bank, the records of the Bank shall govern absent
      manifest error.

     

    
      
        
        

      

      
        
        

        
          
16

      

      
        
        

      

    

     

    2.15.           Interest
      Payment Dates; Interest and Fee Basis.  Interest accrued on each
      Floating Rate Loan shall be payable on each Payment Date, commencing with the
      first such date to occur after the date hereof and at
      maturity.  Interest accrued on each Eurodollar Loan shall be payable
      on the last day of its applicable Interest Period, on any date on which the
      Eurodollar Loan is prepaid, whether by acceleration or otherwise, and at
      maturity.  Interest accrued on each Eurodollar Loan having an Interest
      Period longer than three months shall also be payable on the last day of each
      three-month interval during such Interest Period.  Interest and LC
      Fees shall be calculated for actual days elapsed on the basis of a 360-day
      year.  Interest shall be payable for the day a Loan is made but not
      for the day of any payment on the amount paid if payment is received prior
      to
      noon (local time) at the place of payment.  If any payment of
      principal of or interest on a Loan shall become due on a day which is not a
      Business Day, such payment shall be made on the next succeeding Business Day
      and, in the case of a principal payment, such extension of time shall be
      included in computing interest in connection with such payment.

     

    2.16.           Lending
      Installations.  The Bank may make and issue and book the Loans and
      Facility LCs at and through any Lending Installation, including without
      limitation any Lending Installation designated by the Bank by written notice
      to
      the Borrower, and Loan payments and payments with respect to Facility LCs may
      be
      for the account of any such Lending Installation.  All terms of this
      Agreement shall apply to any such Lending Installation and the Loan, Facility
      LCs, and any Note issued hereunder shall be deemed held by the Bank for the
      benefit of any such Lending Installation.  The Bank may, by written
      notice to the Borrower, designate replacement or additional Lending
      Installations through which Facility LCs will be issued by it and for whose
      account payments with respect to Facility LCs are to be made.

     

    2.17.          [Reserved]

     

    2.18.           Facility
      LCs.

     

    2.18.1.       
      Issuance.

     

    (a)
      The
      Bank agrees, on the terms set forth in this Agreement, to issue standby and
      commercial letters of credit (i) for the Borrower's general corporate purposes
      (each, a "US Facility LC") and (ii) for the purpose of providing credit
      enhancement for the benefit of one or more Replacement Taiwan Lenders to induce
      such Replacement Taiwan Lenders to provide one or more Replacement Taiwan
      Facilities in an aggregate principal amount not to exceed the amount of the
      Taiwan Facility LC Commitment (each, a "Taiwan Facility LC", and any and all
      US
      Facility LCs and Taiwan Facility LCs, each a "Facility LC"), and to renew,
      extend, increase, decrease or otherwise modify each Facility LC ("Modify" and
      each such action a "Modification"), from time to time from and including the
      date of this Agreement and prior to the Facility Termination Date upon the
      request of the Borrower; provided that immediately after each such
      Facility LC is issued or Modified, (A) the aggregate amount of the outstanding
      LC Obligations with respect to US Facility LCs shall not exceed the Commitment,
      (B) the Outstanding Credit Exposure for Loans and US Facility LCs shall not
      exceed the Commitment and (C) the aggregate amount of the outstanding LC
      Obligations with respect to Taiwan Facility LCs shall not exceed the Taiwan
      Facility LC Commitment.  No Facility LC shall have an expiry date
      later than the earlier of (x) the fifth Business Day prior to the Facility
      Termination Date and (y) one year after its issuance.

     

    2.18.2.       
      Notice.  Subject to Section 2.18.1, the Borrower shall give the
      Bank notice prior to 10:00 a.m. (Chicago time) at least five Business Days
      prior
      to the proposed date of issuance or Modification of each Facility LC specifying
      whether such Facility LC is a US Facility LC or a Taiwan Facility LC, the
      beneficiary, the proposed date of issuance (or Modification) and the expiry
      date
      of such Facility LC, and describing the proposed terms of such Facility LC
      and
      the nature of the transactions proposed to be supported thereby.  The
      issuance or Modification by the Bank of any Facility LC shall, in addition
      to
      the conditions precedent set forth in Article IV (the satisfaction of which
      the
      Bank shall have no duty to ascertain), be subject to the conditions precedent
      that such Facility LC shall be satisfactory to the Bank and that the Borrower
      shall have executed and delivered such application agreement and/or such other
      instruments and agreements relating to such Facility LC as the Bank shall have
      reasonably requested (each, a "Facility LC Application").  In the
      event of any conflict between the terms of this Agreement and the terms of
      any
      Facility LC Application, the terms of this Agreement shall
      control.  The Borrower understands and agrees that although any Taiwan
      Facility LC may be denominated in New Taiwan Dollars, the Bank shall reserve
      the
      right to effect payment of any draw on any Taiwan Facility  LC in
      Dollars in the amount equal to the Dollar equivalent of such draw if New Taiwan
      Dollars is not a currency available to the Bank at the time of
      drawing.  The Dollar equivalent of New Taiwan Dollars will be
      determined at the exchange rate as quoted by a source selected by the Bank
      in
      its sole discretion for the purchase of Dollars on the day immediately preceding
      the actual date of payment.

     

    
      
        
        

      

      
        
        

        
          
17

      

      
        
        

      

    

    
 

    
      	
              2.18.3.       
                Administration; Reimbursement by the Bank .  Upon receipt
                from the beneficiary of any Facility LC of any demand for payment
                under
                such Facility LC, the Bank shall promptly notify the Borrower as
                to the
                amount to be paid by the Bank as a result of such demand and the
                proposed
                payment date (the "LC Payment Date").  The responsibility of the
                Bank to the Borrower shall be only to determine that the documents
                (including each demand for payment) delivered under each Facility
                LC in
                connection with such presentment shall be in conformity in all material
                respects with such Facility LC.

            

    

    

    
      	
              2.18.4.       
                Reimbursement by the Borrower.  The Borrower shall be
                irrevocably and unconditionally obligated to reimburse the Bank on
                or
                before the applicable LC Payment Date for any amounts to be paid
                by the
                Bank upon any drawing under any Facility LC, without presentment,
                demand,
                protest or other formalities of any kind; provided that the
                Borrower shall not be precluded from asserting any claim for direct
                (but
                not consequential) damages suffered by the Borrower to the extent,
                but
                only to the extent, caused by (i) the willful misconduct or gross
                negligence of the Bank in determining whether a request presented
                under
                any Facility LC issued by it complied with the terms of such Facility
                LC
                or (ii) the Bank's failure to pay under any Facility LC issued by
                it after
                the presentation to it of a request strictly complying with the terms
                and
                conditions of such Facility LC.  All such amounts paid by the
                Bank and remaining unpaid by the Borrower shall bear interest, payable
                on
                demand, for each day until paid at a rate per annum equal to (x)
                the rate
                applicable to Floating Rate Loans for such day if such day falls
                on or
                before the applicable LC Payment Date and (y) the sum of 2% plus
                the rate applicable to Floating Rate Loans for such day if such day
                falls
                after such LC Payment Date.  Subject to the terms of this
                Agreement (including without limitation the submission of a Borrowing
                Notice in compliance with Section 2.8 and the satisfaction of the
                applicable conditions precedent set forth in Article IV), the Borrower
                may
                request a Loan hereunder for the purpose of satisfying any Reimbursement
                Obligation.

            

    

    

    
      	
              2.18.5.       
                Obligations Absolute.  The Borrower's obligations under
                this Section 2.18 shall be absolute and unconditional under any and
                all
                circumstances and irrespective of any setoff, counterclaim or defense
                to
                payment which the Borrower may have or have had against the Bank
                or any
                beneficiary of a Facility LC.  The Borrower further agrees with
                the Bank that the Bank shall not be responsible for, and the Borrower's
                Reimbursement Obligation in respect of any Facility LC shall not
                be
                affected by, among other things, the validity or genuineness of documents
                or of any endorsements thereon, even if such documents should in
                fact
                prove to be in any or all respects invalid, fraudulent or forged,
                or any
                dispute between or among the Borrower, Hurco Taiwan, Hurco Europe,
                any of
                its other Affiliates, the beneficiary of any Facility LC or any financing
                institution or other party to whom any Facility LC may be transferred
                or
                any claims or defenses whatsoever of the Borrower or of any of its
                Affiliates against the beneficiary of any Facility LC or any such
                transferee.  The Bank shall not be liable for any error,
                omission, interruption or delay in transmission, dispatch or delivery
                of
                any message or advice, however transmitted, in connection with any
                Facility LC.  The Borrower agrees that any action taken or
                omitted by the Bank under or in connection with each Facility LC
                and the
                related drafts and documents, if done without gross negligence or
                willful
                misconduct, shall be binding upon the Borrower and shall not put
                the Bank
                under any liability to the Borrower.  Nothing in this Section
                2.18.5 is intended to limit the right of the Borrower to make a claim
                against the Bank for damages as contemplated by the proviso to the
                first
                sentence of Section 2.18.4.

            

    

     

    
      
        
        

      

      
        
        

        
          
18

      

      
        
        

      

    

    
 

    
      	
              2.18.6.       
                Actions of the Bank.  The Bank shall be entitled to rely,
                and shall be fully protected in relying, upon any Facility LC, draft,
                writing, resolution, notice, consent, certificate, affidavit, letter,
                cablegram, telegram, telecopy, telex or teletype message, statement,
                order
                or other document believed by it to be genuine and correct and to
                have
                been signed, sent or made by the proper Person or Persons, and upon
                advice
                and statements of legal counsel, independent accountants and other
                experts
                selected by the Bank.  The Bank shall be fully justified in
                failing or refusing to take any action under this Agreement unless
                it
                shall first have received such advice as it reasonably deems appropriate
                or it shall first be indemnified to its reasonable satisfaction against
                any and all liability and expense which may be incurred by it by
                reason of
                taking or continuing to take any such
                action.

            

    

    

    
      	
              2.18.7.       
                Indemnification.  The Borrower indemnifies and holds
                harmless the Bank, and its directors, officers, agents and employees
                from
                and against any and all claims and damages, losses, liabilities,
                costs or
                expenses which the Bank may incur (or which may be claimed against
                the
                Bank by any Person whatsoever) by reason of or in connection with
                the
                issuance, execution and delivery or transfer of or payment or failure
                to
                pay under any Facility LC or any actual or proposed use of any Facility
                LC, including, without limitation, any claims, damages, losses,
                liabilities, costs or expenses which the Bank may incur by reason
                of or in
                connection with, by reason of or on account of the Bank issuing any
                Facility LC which specifies that the term "Beneficiary" included
                therein
                includes any successor by operation of law of the named Beneficiary,
                but
                which Facility LC does not require that any drawing by any such successor
                Beneficiary be accompanied by a copy of a legal document, satisfactory
                to
                the Bank, evidencing the appointment of such successor Beneficiary;
                provided that the Borrower shall not be required to indemnify the
                Bank for any claims, damages, losses, liabilities, costs or expenses
                to
                the extent, but only to the extent, caused by (x) the willful misconduct
                or gross negligence of the Bank in determining whether a request
                presented
                under any Facility LC complied with the terms of such Facility LC
                or (y)
                the Bank's failure to pay under any Facility LC after the presentation
                to
                it of a request strictly complying with the terms and conditions
                of such
                Facility LC.  Nothing in this Section 2.18.7 is intended to
                limit the obligations of the Borrower under any other provision of
                this
                Agreement.

            

    

    

    
      	
              2.18.8.       
                Facility LC Collateral Account.  The Borrower agrees that
                it will, upon the request of the Bank and until the final expiration
                date
                of any Facility LC and thereafter as long as any amount is payable
                to the
                Bank in respect of any Facility LC, maintain a special collateral
                account
                pursuant to arrangements satisfactory to the Bank (the "Facility
                LC
                Collateral Account") at the Bank's office at the address specified
                pursuant to Article XII, in the name of the Borrower but under the
                sole
                dominion and control of the Bank and in which the Borrower shall
                have no
                interest other than as set forth in Section 8.1.  The Borrower
                pledges and assigns to the Bank, and grants to the Bank a security
                interest in, all of the Borrower's right, title and interest in and
                to all
                funds which may from time to time be on deposit in the Facility LC
                Collateral Account to secure the prompt and complete payment and
                performance of the Obligations.  The Bank will invest any funds
                on deposit from time to time in the Facility LC Collateral Account
                in
                certificates of deposit of the Bank having a maturity not exceeding
                30
                days.  Nothing in this Section 2.18.8 shall either obligate the
                Bank to require the Borrower to deposit any funds in the Facility
                LC
                Collateral Account or limit the right of the Bank to release any
                funds
                held in the Facility LC Collateral Account in each case other than
                as
                required by Section 8.1.

            

    

     

    2.19.         
      [Reserved]

     

    2.20.         
      Guarantees.  To secure the payment when due of any Note and the
      other Obligations to the Bank, the Guarantors shall execute and deliver to
      the
      Bank the Guaranty.

     

    
      
        
        

      

      
        
        

        
          
19

      

      
        
        

      

    

     

    2.21.         
      [Reserved]

     

    2.22.         
      Judgment Currency.  If for the purposes of obtaining judgment
      in any court it is necessary to convert a sum due from the Borrower hereunder
      in
      the currency expressed to be payable herein (the "specified currency") into
      another currency, the parties agree that the rate of exchange used shall be
      that
      at which in accordance with normal banking procedures the Bank could purchase
      the specified currency with such other currency at the Bank's main Chicago
      office on the Business Day preceding that on which final, non-appealable
      judgment is given.  The obligations of the Borrower in respect of any
      sum due to the Bank 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 the Bank of any sum adjudged to be so due in such
      other
      currency the Bank 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 originally
      due to the Bank in the specified currency, the Borrower agrees, to the fullest
      extent that it may effectively do so, as a separate obligation and
      notwithstanding any such judgment, to indemnify the Bank against such loss,
      and
      if the amount of the specified currency so purchased exceeds the sum originally
      due to the Bank in the specified currency, the Bank agrees to remit such excess
      to the Borrower.

    

    

    

    ARTICLE
      III

    

    YIELD
      PROTECTION; TAXES

     

    3.1.           Yield
      Protection.  In the event that any applicable law, treaty or other
      international agreement, rule, or regulation (whether domestic or foreign)
      now
      or hereafter in effect and whether or not presently applicable to the Bank
      or
      applicable Lending Installation, or any interpretation or administration thereof
      by any governmental authority charged with the interpretation or administration
      thereof, or compliance by the Bank or applicable Lending Installation with
      any
      guideline, request or directive of any such authority (whether or not having
      the
      force of law), shall (a) affect the basis of taxation of payments to the Bank
      of
      any amounts payable by the Borrower under this Agreement (other than Excluded
      Taxes), or (b) shall 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 the Bank or applicable Lending Installation
      (other than reserves and assessments taken into account in determining the
      interest rate applicable to Eurodollar Loans), or (c) shall impose any other
      condition with respect to this Agreement, the Commitment, any Note, or the
      Loan,
      or any Facility LC, and the result of any of the foregoing is to increase the
      cost to the Bank or applicable Lending Installation of making, funding, or
      maintaining any Eurodollar Loan or any Facility LC or to reduce the amount
      of
      any sum receivable by the Bank or applicable Lending Installation thereon,
      then
      the Borrower shall pay to the Bank, from time to time, upon its request,
      additional amounts sufficient to compensate the Bank for such increased cost
      or
      reduced sum receivable.  A statement as to the amount of such
      increased cost or reduced sum receivable, prepared in good faith and in
      reasonable detail by the Bank and submitted by the Bank to the Borrower, shall
      be conclusive and binding for all purposes absent manifest error in
      computation.

     

    3.2.           Changes
      in Capital Adequacy Regulations.  In the event that any applicable
      law, treaty, or other international agreement, rule, or regulation (whether
      domestic or foreign) now or hereafter in effect and whether or not presently
      applicable to the Bank, or any interpretation or administration thereof by
      any
      governmental authority charged with the interpretation or administration
      thereof, or compliance by the Bank with any guideline, request or directive
      of
      any such authority (whether or not having the force of law), including any
      risk-based capital guidelines, affects or would affect the amount of capital
      required or expected to be maintained by the Bank (or any corporation
      controlling the Bank) and the Bank determines that the amount of such capital
      is
      increased by or based upon the existence of the Bank's obligations hereunder
      and
      such increase has the effect of reducing the rate of return on the Bank's (or
      such controlling corporation's) capital as a consequence of such obligations
      hereunder to a level below that which the Bank (or such controlling corporation)
      could have achieved but for such circumstances (taking into consideration its
      policies with respect to capital adequacy), then the Borrower shall pay to
      the
      Bank from time to time, upon request by the Bank, additional amounts sufficient
      to compensate such Bank (or such controlling corporation) for any increase
      in
      the amount of capital and reduced rate of return which the Bank reasonably
      determines to be allocable to the existence of the Bank's obligations
      hereunder.  A statement as to the amount of such compensation,
      prepared in good faith and in reasonable detail by the Bank and submitted to
      the
      Borrower, shall be conclusive and binding for all purposes absent manifest
      error
      in computation.

     

    
      
        
        

      

      
        
        

        
          
20

      

      
        
        

      

    

     

    3.3.           Availability
      of Types of Loans.  In the event that any applicable law, treaty,
      or other international agreement, rule, or regulation (whether domestic or
      foreign) now or hereafter in effect and whether or not presently applicable
      to
      the Bank, or any interpretation or administration thereof by any governmental
      authority charged with the interpretation or administration thereof, or
      compliance by the Bank with any guideline, request, or directive of such
      authority (whether or not having the force of law), including without limitation
      exchange controls, shall make it unlawful or impossible for the Bank to maintain
      any Eurodollar Loan at a suitable Lending Installation under this Agreement,
      shall make it impracticable, unlawful or impossible for, or shall in any way
      limit or impair ability of, the Borrower to make or the Bank to receive any
      payment under this Agreement at the place specified for payment hereunder,
      the
      Bank shall suspend the availability of Eurodollar Loans and the Borrower shall,
      upon receiving notice thereof from the Bank, repay in full the then-outstanding
      principal amount of each Eurodollar Loan so affected, together with all accrued
      interest thereon to the date of payment and all amounts owing to the Bank under
      Section 3.4, (a) on the last day of the then-current Interest Period applicable
      to the Eurodollar Loan if the Bank may lawfully continue to maintain the
      Eurodollar Loan to that day, or (b) immediately if the Bank may not continue
      to
      maintain the Eurodollar Loan to that day.

     

    3.4.           Funding
      Indemnification.  If the Borrower makes any payment of principal
      with respect to any Eurodollar Loan on any other date than the last day of
      an
      Interest Period applicable thereto (whether pursuant to Section 2.2, Section
      2.5, Section 2.7, Section 8.1, or otherwise), or if the Borrower fails to borrow
      any Eurodollar Loan after notice has been given to the Bank in accordance with
      Section 2.8, or if the Borrower fails to make any payment of principal or
      interest in respect of a Eurodollar Loan when due, the Borrower shall reimburse
      the Bank on demand for any resulting loss or expense incurred by the Bank,
      including without limitation any loss incurred in obtaining, liquidating, or
      employing deposits from third parties, whether or not the Bank shall have funded
      or committed to fund the Eurodollar Loan.  A statement as to the
      amount of such loss or expense, prepared in good faith and in reasonable detail
      by the Bank and submitted by the Bank to the Borrower, shall be conclusive
      and
      binding for all purposes absent manifest error in
      computation.  Calculation of all amounts payable to the Bank under
      this Section 3.4 shall be made as though the Bank shall have actually funded
      or
      committed to fund the relevant Eurodollar Loan through the purchase of an
      underlying deposit in an amount equal to the amount of the Eurodollar Loan
      in
      the relevant market and having a maturity comparable to the related Interest
      Period and through the transfer of such deposit to a domestic office of the
      Bank
      in the United States; provided, however, that the Bank may fund
      any Eurodollar Loans in any manner it sees fit and the foregoing assumption
      shall be utilized only for the purpose of calculating amounts payable under
      this
      Section 3.4.

     

    3.5.           Taxes.  (i)  All
      payments of principal of and interest on the Loan and other amounts payable
      by
      the Borrower hereunder shall be made by the Borrower without setoff or
      counterclaim, and, subject to the next succeeding sentence, free and clear
      of,
      and without deduction or withholding for, or on account of, any
      Taxes.  If any Taxes are imposed, the Borrower will pay such
      additional amounts as may be necessary so that payment of principal of and
      interest on the Loan and other amounts payable hereunder, after withholding
      or
      deduction for or on account thereof, will not be less than any amount provided
      to be paid hereunder and, in any such case, the Borrower will furnish to the
      Bank certified copies of all tax receipts evidencing the payment of such amounts
      within 45 days after the date any such payment is due pursuant to applicable
      law.

    

    
      
        
        

      

      
        
        

        
          
21

      

      
        
        

      

    

     

                   
      (ii)  In addition, the Borrower agrees to pay any present or future
      stamp or documentary taxes and any other excise or property taxes, charges
      or
      similar levies which arise from any payment made hereunder or under any Note
      or
      Facility LC Application or from the execution or delivery of, or otherwise
      with
      respect to, this Agreement or any Note or Facility LC Application ("Other
      Taxes").

    

    (iii)  The
      Borrower
      indemnifies the Bank for the full amount of Taxes or Other Taxes (including,
      without limitation, any Taxes or Other Taxes imposed on amounts payable under
      this Section 3.5) paid by the Bank and any liability (including penalties,
      interest and expenses) arising therefrom or with respect
      thereto.  Payments due under this indemnification shall be made within
      30 days of the date the Bank makes demand therefor pursuant to Section
      3.6.

     

    3.6.           Bank
      Statements; Survival of Indemnity. To the extent reasonably possible, the
      Bank shall designate an alternate Lending Installation with respect to its
      Eurodollar Loans to reduce any liability of the Borrower to the Bank under
      Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Loans
      under Section 3.3, so long as such designation is not, in the judgment of the
      Bank, disadvantageous to it.  The Bank shall deliver a written
      statement to the Borrower as to the amount due, if any, under Section 3.1,
      3.2,
      3.4 or 3.5.  Such written statement shall set forth in reasonable
      detail the calculations upon which the Bank determined such amount and shall
      be
      final, conclusive and binding on the Borrower in the absence of manifest
      error.  Determination of amounts payable under such Sections in
      connection with a Eurodollar Loans shall be calculated as though the Bank funded
      its Eurodollar Loans through the purchase of a deposit of the type and maturity
      corresponding to the deposit used as a reference in determining the Eurodollar
      Rate applicable to such Credit Extension, whether in fact that is the case
      or
      not.  Unless otherwise provided herein, the amount specified in the
      written statement of the Bank shall be payable on demand after receipt by the
      Borrower of such written statement.  The obligations of the Borrower
      under Sections 3.1, 3.2, 3.4, and 3.5 shall survive payment of the Obligations
      and termination of this Agreement.

    

    

    ARTICLE
      IV

    

    CONDITIONS
      PRECEDENT

     

    4.1.           Initial
      Credit Extension.  The Bank shall not be required to make the
      initial Credit Extension hereunder unless the Borrower has furnished to the
      Bank
      and completed the following matters, all in form and substance satisfactory
      to
      the Bank:

    

    
      	
               

            	
              (i)

            	 	
              Copies
                of the articles or certificate of incorporation of the Borrower and
                the
                Guarantors, together with all amendments, and a certificate of good
                standing or existence for the Borrower and each Guarantor, each certified
                by the appropriate governmental officer in its jurisdiction of
                incorporation.

            

    

    

    
      	
               

            	
              (ii)

            	 	
              Copies,
                certified by the Secretary or Assistant Secretary of the Borrower
                and the
                Guarantors, of each of their respective by-laws and of each of their
                respective Board of Directors' resolutions and of resolutions or
                actions
                of any other body authorizing the execution of the Loan Documents
                to which
                the Borrower and the Guarantors are a
                party.

            

    

    

    
      	
               

            	
              (iii)

            	 	
              An
                incumbency certificate, executed by the Secretary or Assistant Secretary
                of the Borrower and the Guarantors, which shall identify by name
                and title
                and bear the signatures of the Authorized Officers and any other
                officers
                of the Borrower and the Guarantors authorized to sign the Loan Documents
                to which the Borrower and the Guarantors are a party, upon which
                certificate the Bank shall be entitled to rely until informed of
                any
                change in writing by the Borrower or the Guarantors, as the case
                may
                be.

            

    

     

    
      
        
        

      

      
        
        

        
          
22

      

      
        
        

      

    

    
 

    
      	
               

            	
              (iv)

            	 	
              A
                certificate, signed by the chief financial officer of the Borrower,
                stating that on the initial Credit Extension Date no Default or Unmatured
                Default has occurred and is
                continuing.

            

    

    

    
      	
               

            	
              (v)

            	 	
              A
                written opinion of the Borrower's and the Guarantors' counsel, addressed
                to the Bank in substantially the form of Exhibit
                E.

            

    

    

    
      	
               

            	
              (vi)

            	 	
              Any
                Note requested by the Bank pursuant to Section 2.13 payable to the
                order
                of the Bank.

            

    

    

    
      	
               

            	
              (vii)

            	 	
              Written
                money transfer instructions, in substantially the form of Exhibit
                D,
                addressed to the Bank and signed by an Authorized Officer, together
                with
                such other related money transfer authorizations as the Bank may
                have
                reasonably requested.

            

    

    

    
      	
               

            	
              (viii)

            	 	
              If
                the initial Credit Extension will be the issuance of a Facility LC,
                a
                properly completed Facility LC
                Application.

            

    

    

    
      	
               

            	
              (ix)

            	
              The
                Guaranty substantially in the form of Exhibit
                C.

            

    

     

    
      	
               

            	
              (x)

            	
              Reserved.

               

            

    

    
      	
               

            	
              (xi)

            	
              Excepting
                only the form 8-K to be filed by the Borrower post-closing, copies
                of all
                governmental and non-governmental consents, approvals, authorizations,
                declarations, registrations or filings, if any, required on the part
                of
                the Borrower or the Guarantors in connection with the execution,
                delivery,
                and performance of the Loan Documents, or the transactions contemplated
                thereby or as a condition to the legality, validity or enforceability
                of
                the Loan Documents, certified as true and correct and in full force
                and
                effect as of the Effective Date by a duly authorized officer of the
                Borrower or the Guarantors, or, if none are required, a certificate
                of
                such officer to that effect.

            

    

    

    
      	
               

            	
              (xii)

            	
              Such
                other documents as the Bank or its counsel may have reasonably
                requested.

            

    

     

    4.2.           Each
      Credit Extension.  The Bank shall not be required to make any
      Credit Extension unless on the applicable Credit Extension Date:

    

    
      	
               

            	
              (i)

            	 	
              There
                exists no Default or Unmatured
                Default.

            

    

    

    
      	
               

            	
              (ii)

            	 	
              The
                representations and warranties contained in Article V are true and
                correct
                as of such Credit Extension Date except to the extent any such
                representation or warranty is stated to relate solely to an earlier
                date,
                in which case such representation or warranty shall have been true
                and
                correct on and as of such earlier
                date.

            

    

    

    
      	
               

            	
              (iii)

            	 	
              All
                legal matters incident to the making of such Credit Extension shall
                be
                satisfactory to the Bank and its
                counsel.

            

    

    

    
      	
               

            	
              (iv)

            	 	
              The
                Bank shall have received a Borrowing Notice or, in the case of any
                issuance of a Facility  LC, a properly completed Facility LC
                Application and such other documentation in connection therewith
                as
                requested by the Bank.

            

    

     

    Each
      Borrowing Notice or request for issuance of a Facility LC with respect to each
      such Credit Extension shall constitute a representation and warranty by the
      Borrower that the conditions contained in Sections 4.2(i) and (ii) have been
      satisfied.

    

    
      
        
        

      

      
        
        

        
          
23

      

      
        
        

      

    

    

    ARTICLE
      V

    

    REPRESENTATIONS
      AND WARRANTIES

     

    The
      Borrower represents and warrants to the Bank that:

     

    5.1.           Existence
      and Standing.  Each of the Borrower and its Active Subsidiaries is
      a corporation duly and properly incorporated, validly existing and in good
      standing under the laws of its jurisdiction of incorporation or organization
      and
      has all requisite authority to conduct its business in each jurisdiction in
      which its business is conducted.  The Borrower has all requisite
      corporate power to own or lease the properties used in its business and to
      carry
      on its business as now being conducted and as proposed to be
      conducted.

     

    5.2.           Authorization
      and Validity.  The Borrower and each Guarantor, as the case may
      be, has the power and authority and legal right to execute and deliver the
      Loan
      Documents to which it is a party and to perform its obligations
      thereunder.  The execution and delivery by the Borrower and each of
      the Guarantors, as the case may be, of the Loan Documents to which it is a
      party
      and the performance of its obligations thereunder have been duly authorized
      by
      proper corporate proceedings, and the Loan Documents to which the Borrower
      and
      each of the Guarantors is a party, as the case may be, constitute legal, valid
      and binding obligations of the Borrower and each of the Guarantors, as the
      case
      may be, enforceable against the Borrower or each Guarantor, as the case may
      be,
      in accordance with their terms, except as enforceability may be limited by
      bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
      rights generally.

     

    5.3.           No
      Conflict; Government Consent.  Neither the execution and delivery
      by the Borrower or the Guarantors of the Loan Documents to which it is a party,
      nor the consummation of the transactions therein contemplated, nor compliance
      with the provisions thereof will violate (i) any law, rule, regulation, order,
      writ, judgment, injunction, decree or award binding on the Borrower or any
      of
      its Subsidiaries or (ii) the Borrower's or any Subsidiary's articles or
      certificate of incorporation, partnership agreement, certificate of partnership,
      articles or certificate of organization, by-laws, or operating or other
      management agreement, as the case may be, or (iii) the provisions of any
      indenture, instrument or agreement to which the Borrower or any of its
      Subsidiaries is a party or is subject, or by which it, or its Property, is
      bound, or conflict with or constitute a default thereunder, or result in, or
      require, the creation or imposition of any Lien in, of or on the Property of
      the
      Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument
      or agreement.  No order, consent, adjudication, approval, license,
      authorization, or validation of, or filing, recording or registration with,
      or
      exemption by, or other action in respect of any governmental or public body
      or
      authority, or any subdivision thereof, which has not been obtained by the
      Borrower or any of its Subsidiaries, is required to be obtained by the Borrower
      or any of its Subsidiaries in connection with the execution and delivery of
      the
      Loan Documents, the borrowings under this Agreement, the payment and performance
      by the Borrower of the Obligations or the legality, validity, binding effect
      or
      enforceability of any of the Loan Documents.

     

    5.4.           Financial
      Statements.  The July 31, 2007, consolidated financial statements
      of the Borrower and its Subsidiaries heretofore delivered to the Bank were
      prepared in accordance with generally accepted accounting principles in effect
      on the date such statements were prepared and fairly present the consolidated
      financial condition and operations of the Borrower and its Subsidiaries at
      such
      date and the consolidated results of their operations for the period then
      ended.

     

    5.5.           Material
      Adverse Change.  Since October 31, 2006, there has been no change
      in the business, Property, prospects, condition (financial or otherwise) or
      results of operations of the Borrower and its Subsidiaries which could
      reasonably be expected to have a Material Adverse Effect.

     

    
      
        
        

      

      
        
        

        
          
24

      

      
        
        

      

    

     

    5.6.           Taxes.  The
      Borrower and its Subsidiaries have filed all United States federal tax returns
      and all other tax returns which are required to be filed and have paid all taxes
      due pursuant to said returns or pursuant to any assessment received by the
      Borrower or any of its Subsidiaries, except such taxes, if any, as are being
      contested in good faith and as to which adequate reserves have been provided
      in
      accordance with Agreement Accounting Principles and as to which no Lien
      exists.  No tax liens have been filed and no claims are being asserted
      with respect to any such taxes.  The charges, accruals and reserves on
      the books of the Borrower and its Subsidiaries in respect of any taxes or other
      governmental charges are adequate.

     

    5.7.           Litigation
      and Contingent Obligations.  There is no litigation, arbitration,
      governmental investigation, proceeding or inquiry pending or, to the knowledge
      of any of their officers, threatened against or affecting the Borrower or any
      of
      its Subsidiaries which could reasonably be expected to have a Material Adverse
      Effect or which seeks to prevent, enjoin or delay the making of any Credit
      Extensions.  Other than any liability incident to any litigation,
      arbitration or proceeding which could not reasonably be expected to have a
      Material Adverse Effect, the Borrower has no material contingent obligations
      not
      provided for or disclosed in the financial statements referred to in Section
      5.4.

     

    5.8.           Subsidiaries.  Schedule
      5.8 contains an accurate list of all Subsidiaries of the Borrower as of the
      date of this Agreement, setting forth their respective jurisdictions of
      organization and the percentage of their respective Capital Stock or other
      ownership interests owned by the Borrower or other Subsidiaries.  All
      of the issued and outstanding shares of Capital Stock or other ownership
      interests of such Subsidiaries have been (to the extent such concepts are
      relevant with respect to such ownership interests) duly authorized and issued
      and are fully paid and non-assessable.  Each Subsidiary of the
      Borrower has and will have all requisite corporate power to own or lease the
      properties used in its business and to carry on its business as now being
      conducted and as proposed to be conducted.

     

    5.9.           ERISA.  There
      are no Unfunded Liabilities of any Single Employer Plans of the Borrower or
      the
      Guarantors.  Neither the Borrower nor any other member of the
      Controlled Group has incurred, or is reasonably expected to incur, any
      withdrawal liability to Multiemployer Plans.  Each Plan complies in
      all material respects with all applicable requirements of law and regulations,
      no Reportable Event has occurred with respect to any Plan, neither the Borrower
      nor any other member of the Controlled Group has withdrawn from any Plan or
      initiated steps to do so, and no steps have been taken to reorganize or
      terminate any Plan.

     

    5.10.           Accuracy
      of Information.  No information, exhibit or report furnished by
      the Borrower or any of its Subsidiaries to the Bank in connection with the
      negotiation of, or compliance with, the Loan Documents contained any material
      misstatement of fact or omitted to state a material fact or any fact necessary
      to make the statements contained therein not misleading.

     

    5.11.           Regulation
      U.  Margin stock (as defined in Regulation U) constitutes less
      than 25% of the value of those assets of the Borrower and its Subsidiaries
      which
      are subject to any limitation on sale, pledge, or other restriction
      hereunder.

     

    5.12.           Material
      Agreements.  Neither the Borrower nor any Subsidiary is a party to
      any agreement or instrument or subject to any charter or other corporate
      restriction which could reasonably be expected to have a Material Adverse
      Effect.  Neither the Borrower nor any Subsidiary is in default in the
      performance, observance or fulfillment of any of the obligations, covenants
      or
      conditions contained in (i) any agreement to which it is a party, which default
      could reasonably be expected to have a Material Adverse Effect or (ii) any
      agreement or instrument evidencing or governing Indebtedness.

     

    5.13.           Compliance
      With Laws.  The Borrower and its Subsidiaries have complied with
      all applicable statutes, rules, regulations, orders and restrictions of any
      domestic or foreign government or any instrumentality or agency thereof having
      jurisdiction over the conduct of their respective businesses or the ownership
      of
      their respective Property.

     

    
      
        
        

      

      
        
        

        
          
25

      

      
        
        

      

    

     

    5.14.           Ownership
      of Properties.  On the date of this Agreement, the Borrower and
      its Subsidiaries will have good title, free of all Liens other than those
      permitted by Section 6.15, to all of the Property and assets reflected in the
      Borrower's most recent consolidated financial statements provided to the Bank
      as
      owned by the Borrower and its Subsidiaries.

     

    5.15.           Plan
      Assets; Prohibited Transactions.  The Borrower is not an entity
      deemed to hold "plan assets" within the meaning of 29 C.F.R. § 2510.3-101 of an
      employee benefit plan (as defined in Section 3(3) of ERISA) which is subject
      to
      Title I of ERISA or any plan (within the meaning of Section 4975 of the Code),
      and neither the execution of this Agreement nor the making of Credit Extensions
      hereunder gives rise to a prohibited transaction within the meaning of Section
      406 of ERISA or Section 4975 of the Code.

     

    5.16.           Environmental
      Matters. In the ordinary course of its business, the officers of the
      Borrower consider the effect of Environmental Laws on the business of the
      Borrower and its Subsidiaries, in the course of which they identify and evaluate
      potential risks and liabilities accruing to the Borrower due to Environmental
      Laws.  On the basis of this consideration, the Borrower and each of
      its Subsidiaries has concluded that Environmental Laws cannot reasonably be
      expected to have a Material Adverse Effect.  Neither the Borrower nor
      any Subsidiary has received any notice to the effect that its operations are
      not
      in material compliance with any of the requirements of applicable Environmental
      Laws or are the subject of any federal or state investigation evaluating whether
      any remedial action is needed to respond to a release of any toxic or hazardous
      waste or substance into the environment, which non-compliance or remedial action
      could reasonably be expected to have a Material Adverse Effect.

     

    5.17.           Investment
      Company Act.  Neither the Borrower nor any Subsidiary is an
      "investment company" or a company "controlled" by an "investment company",
      within the meaning of the Investment Company Act of 1940, as
      amended.

     

    5.18.           Public
      Utility Holding Company Act.  Neither the Borrower nor any
      Subsidiary is a "holding company" or a "subsidiary company" of a "holding
      company", or an "affiliate" of a "holding company" or of a "subsidiary company"
      of a "holding company", within the meaning of the Public Utility Holding Company
      Act of 1935, as amended.

     

    5.19.           Insurance.  The
      certificate signed by the President or Chief Financial Officer of the Borrower,
      that attests to the existence and adequacy of, and summarizes, the property
      and
      casualty insurance program carried by the Borrower with respect to itself and
      its Subsidiaries and that has been furnished by the Borrower to the Bank, is
      complete and accurate.  This summary includes the insurer's or
      insurers' name(s), policy number(s), expiration date(s), amount(s) of coverage,
      type(s) of coverage, exclusion(s), and deductibles.  This summary also
      includes similar information, and describes any reserves, relating to any
      self-insurance program that is in effect.

     

    5.20           [Reserved]

     

    5.21           Disclosure.  No
      report or other information furnished in writing or on behalf of the Borrower
      or
      any Guarantor to the Bank in connection with the negotiation or administration
      of this Agreement contains any material misstatement of fact or omits to state
      any material fact or any fact necessary to make the statements contained therein
      not misleading in light of the circumstances in which they were
      made.  Neither this Agreement, any Notes or the Guaranty, nor any
      other document, certificate, or report or statement or other information
      furnished to the Bank by or on behalf of the Borrower or any Guarantor in
      connection with the transactions contemplated by this Agreement contains any
      untrue statement of a material fact or omits to state a material fact in order
      to make the statements contained herein and therein not misleading in light
      of
      the circumstances in which they were made.  There is no fact known to
      the Borrower or any Guarantor which materially and adversely affects, or which
      in the future may (so far as the Borrower or any Guarantor can now foresee)
      materially and adversely affect, the business, properties, operations or
      condition, financial or otherwise, of the Borrower, any Guarantor or any of
      their respective Subsidiaries, which has not been set forth in this Agreement
      or
      in the other documents, certificates, statements, reports and other information
      furnished in writing to the Bank by or on behalf of the Borrower or any
      Guarantor in connection with the transactions contemplated by this
      Agreement.

     

    
      
        
        

      

      
        
        

        
          
26

      

      
        
        

      

    

     

    5.22           Intellectual
      Property.  The Borrower and each of its Subsidiaries owns, or is
      licensed to use, all trademarks, trade names, service marks, copyrights,
      technology, know-how and processes necessary for the conduct of its business
      as
      currently conducted (the "Intellectual Property") except for those the
      failure to own or license which could not reasonably be expected to have a
      Material Adverse Effect.  No claim has been asserted and is pending by
      any Person challenging or questioning the use of any such Intellectual Property
      or the validity or effectiveness of any such Intellectual Property, nor does
      the
      Borrower or any of its Subsidiaries know of any valid basis for any such claim,
      the use of such Intellectual Property by the Borrower and each of its
      Subsidiaries does not infringe on the rights of any Person, and, to the
      knowledge of the Borrower, no Intellectual Property has been infringed,
      misappropriated or diluted by any other Person except for such claims,
      infringements, misappropriation and dilutions that, in the aggregate, could
      not
      have a Material Adverse Effect.

    

    

    ARTICLE
      VI

    

    COVENANTS

     

    During
      the term of this Agreement, unless the Bank shall otherwise consent in
      writing:

     

    6.1.           Financial
      Reporting.  The Borrower will maintain, for itself and each
      Subsidiary, a system of accounting established and administered in accordance
      with generally accepted accounting principles, and furnish to the
      Bank:

    

    
      	
               

            	
              (i)

            	
              Within
                110 days after the close of each of its fiscal years, an unqualified
                audit
                report certified by independent certified public accountants acceptable
                to
                the Bank, prepared in accordance with Agreement Accounting Principles
                on a
                consolidated (and if requested by the Bank consolidating) basis (except
                that consolidated balance sheets and statements of operations and
                retained
                earnings need not be given for Inactive Subsidiaries or Active
                Subsidiaries whose only asset is the Capital Stock of another Subsidiary
                of the Borrower and consolidating statements need not be certified
                by such
                accountants) for itself and its Subsidiaries, including balance sheets
                as
                of the end of such period, related profit and loss and reconciliation
                of
                surplus statements, and a statement of cash flows, accompanied by
                a
                certificate of the Borrower's chief financial officer or principal
                accounting officer as required under Section
                6.1(ii).

            

    

    

    
      	
               

            	
              (ii)

            	
              Within
                45 days after the close of each fiscal quarter, for itself and its
                Subsidiaries, consolidated (and if requested by the Bank consolidating)
                unaudited balance sheets as at the close of each such fiscal quarter
                and
                consolidated (and if requested by the Bank consolidating) profit
                and loss
                and reconciliation of surplus statements and a statement of cash
                flows for
                the period from the beginning of such fiscal year to the end of such
                fiscal quarter (except that consolidating balance sheets and statements
                of
                operations and retained earnings need not be given for Inactive
                Subsidiaries or Active Subsidiaries whose only asset is the Capital
                Stock
                of another Subsidiary of the Borrower), all certified by its chief
                financial officer or principal accounting officer as fairly presenting
                the
                consolidated financial position of the Borrower and its Subsidiaries
                for
                the periods contained therein and as having been prepared in accordance
                with Agreement Accounting Principles, together with a compliance
                certificate and attached compliance statement substantially in the
                form of
                Exhibit B.

            

    

     

    
      
        
        

      

      
        
        

        
          
27

      

      
        
        

      

    

    
 

    
      	
               

            	
              (iii)

            	
              As
                soon as possible and in any event within 10 days after the Borrower
                knows
                that any Reportable Event has occurred with respect to any Plan,
                a
                statement, signed by the chief financial officer of the Borrower,
                describing said Reportable Event and the action which the Borrower
                proposes to take with respect
                thereto.

            

    

    

    
      	
               

            	
              (iv)

            	
              As
                soon as possible and in any event within 10 days after receipt by
                the
                Borrower, a copy of (a) any notice or claim to the effect that the
                Borrower or any of its Subsidiaries is or may be liable to any Person
                as a
                result of the release by the Borrower, any of its Subsidiaries, or
                any
                other Person of any toxic or hazardous waste or substance into the
                environment, and (b) any notice alleging any violation of any federal,
                state or local environmental, health or safety law or regulation
                by the
                Borrower or any of its
                Subsidiaries.

            

    

    

    
      	
               

            	
              (v)

            	
              Promptly
                upon the furnishing thereof to the shareholders of the Borrower,
                copies of
                all financial statements, reports and proxy statements so
                furnished.

            

    

    

    
      	
               

            	
              (vi)

            	
              Promptly
                upon the filing thereof, notice regarding the filing of all registration
                statements and annual, quarterly, monthly or other regular reports
                which
                the Borrower or any of its Subsidiaries files with the Securities
                and
                Exchange Commission.

            

    

    

    
      	
               

            	
              (vii)

            	
              [Reserved]

            

    

    

    
      	
               

            	
              (viii)

            	
              [Reserved]

            

    

    

    
      	
               

            	
              (vix)

            	
              Such
                other information (including non-financial information) as the Bank
                may
                from time to time reasonably
                request.

            

    

    
      	
               

            	
               

            	
               

            

    

     

    6.2.           Use
      of Proceeds.  The Borrower will, and will cause each Subsidiary
      to, use the proceeds of the Credit Extensions for general corporate purposes,
      which may include, without limitation, Acquisitions permitted under Section
      6.14(iv), and, with respect to Taiwan Facility LCs, as provided in Section
      2.18.1(a).  The Borrower will not, nor will it permit any Subsidiary
      to, use any of the proceeds of the Loans to purchase or carry any "margin stock"
      (as defined in Regulation U).

     

    6.3.           Notice
      of Default.  The Borrower will, and will cause each Subsidiary to,
      give prompt notice in writing to the Bank of the occurrence of any Default
      or
      Unmatured Default and of any other development, financial or otherwise, which
      could reasonably be expected to have a Material Adverse Effect.

     

    6.4.           Conduct
      of Business.  The Borrower will, and will cause each Subsidiary
      to, carry on and conduct its business in substantially the same manner and
      in
      substantially the same fields of enterprise as it is presently conducted and
      do
      all things necessary to remain duly incorporated or organized, validly existing
      and (to the extent such concept applies to such entity) in good standing as
      a
      domestic corporation, partnership or limited liability company in its
      jurisdiction of incorporation or organization, as the case may be, and maintain
      all requisite authority to conduct its business in each jurisdiction in which
      its business is conducted.

     

    6.5.           Taxes.  The
      Borrower will, and will cause each Subsidiary to, timely file complete and
      correct United States federal and applicable foreign, state and local tax
      returns required by law and pay when due all taxes, assessments and governmental
      charges and levies upon it or its income, profits or Property, except those
      which are being contested in good faith by appropriate proceedings and with
      respect to which adequate reserves have been set aside in accordance with
      Agreement Accounting Principles.

     

    
      
        
        

      

      
        
        

        
          
28

      

      
        
        

      

    

     

    6.6.           Insurance.  The
      Borrower will, and will cause each Subsidiary to, maintain with financially
      sound and reputable insurance companies insurance on all their Property in
      such
      amounts and covering such risks as is consistent with sound business practice,
      and the Borrower will furnish to the Bank upon request full information as
      to
      the insurance carried.

     

    6.7.           Compliance
      with Laws.  The Borrower will, and will cause each Subsidiary to,
      comply with all laws, rules, regulations, orders, writs, judgments, injunctions,
      decrees or awards to which it may be subject including, without limitation,
      all
      Environmental Laws, except where the failure to so comply could not reasonably
      be expected to have a Material Adverse Effect.

     

    6.8.           Maintenance
      of Properties.  The Borrower will, and will cause each Subsidiary
      to, do all things necessary to maintain, preserve, protect and keep its Property
      in good repair, working order and condition, and make all necessary and proper
      repairs, renewals and replacements so that its business carried on in connection
      therewith may be properly conducted at all times.

     

    6.9.           Inspection.  The
      Borrower will, and will cause each Subsidiary to, permit the Bank, by its
      representatives and agents, to inspect any of the Property, books and financial
      records of the Borrower and each Subsidiary, to examine and make copies of
      the
      books of accounts and other financial records of the Borrower and each
      Subsidiary, and to discuss the affairs, finances and accounts of the Borrower
      and each Subsidiary with, and to be advised as to the same by, their respective
      officers at such reasonable times and intervals as the Bank may
      designate.

     

    6.10           Dividends.  The
      Borrower will not, nor will it permit any Subsidiary to, declare or pay any
      dividends or make any distributions on its Capital Stock (other than dividends
      payable in its own Capital Stock) or redeem, repurchase or otherwise acquire
      or
      retire any of its Capital Stock at any time outstanding; provided that if (i)
      no
      Default or Unmatured Default has occurred and is continuing or would be caused
      thereby and (ii) as of the end of the fiscal quarter of the Borrower immediately
      preceding the date of declaration, payment, distribution, redemption,
      repurchase, acquisition or retirement, as the case may be, the Total Funded
      Debt/EBITDA Ratio was less than 3.0, the Borrower may declare and pay such
      dividends, make such distributions and make such redemptions, repurchases or
      other acquisitions or retirements which in the aggregate do not exceed
      $5,000,000 in any fiscal year.

     

    6.11.           Indebtedness.  The
      Borrower will not, nor will it permit any Subsidiary to, create, incur or suffer
      to exist any Indebtedness, except:

    

    
      	
               

            	
              (i)

            	
              The
                Loans, the other Outstanding Facilities, and the Reimbursement
                Obligations.

            

    

    

    
      	
               

            	
              (ii)

            	
              Indebtedness
                arising under Rate Management
                Transactions.

            

    

    

    
      	
               

            	
              (iii)

            	
              The
                Hurco GmbH Facility and a guaranty of payment of the Hurco GmbH Facility
                from the Borrower or any
                Subsidiary.

            

    

    

    
      	
               

            	
              (iv)

            	
              Indebtedness
                of any Subsidiary owing to the Borrower or to any other Subsidiary
                and
                Indebtedness of the Borrower owing to any
                Subsidiary.

            

    

    

    
      	
               

            	
              (v)

            	
              The
                UK Facility, the Taiwan Facility (or one or more Replacement Taiwan
                Facilities in an aggregate principal amount up to the principal amount
                of
                the Taiwan Facility when it was available), the Hurco UK Guaranty
                and the
                Hurco Taiwan Guaranty.

            

    

     

    
      
        
        

      

      
        
        

        
          
29

      

      
        
        

      

    

    
 

    
      	
               

            	
              (vi)

            	
              Product
                warranty obligations incurred in the ordinary course of
                business.

            

    

    

    
      	
               

            	
              (vii)

            	
              [Reserved]

            

    

     

    
      	
               

            	
              (viii)

            	
              [Reserved]

               

            

    

    
      	
               

            	
              (ix)

            	
              Subordinated
                Indebtedness.

            

    

    

    
      	
               

            	
              (x)

            	
              Indebtedness
                (other than Indebtedness permitted above in this Section 6.11) in
                an
                aggregate outstanding principal amount not exceeding $10,000,000
                at any
                time.

            

    

     

    
      6.12.           Merger.  The
        Borrower will not, nor will it permit any Subsidiary to, merge or consolidate
        with or into any other Person, except (i) that a Subsidiary may merge into
        the
        Borrower or a Wholly-Owned Subsidiary and (ii) as permitted under Section
        6.14(iv).

    

     

    6.13.           Sale
      of Assets.  The Borrower will not, nor will it permit any
      Subsidiary to, lease, sell or otherwise dispose of its Property (other than
      cash) to any other Person, except:

    

    
      	
               

            	
              (i)

            	
              Sales
                and leases of inventory in the ordinary course of business, and licensing
                of software, patents, and other assets in the ordinary course of
                business.

            

    

    

    
      	
               

            	
              (ii)

            	
              Leases,
                sales or other dispositions of its Property that, together with all
                other
                Property of the Borrower and its Subsidiaries previously leased,
                sold or
                disposed of (other than inventory in the ordinary course of business)
                as
                permitted by this Section during the twelve-month period ending with
                the
                month in which any such lease, sale or other disposition occurs,
                do not
                constitute a Substantial Portion of the Property of the Borrower
                and its
                Subsidiaries.

            

    

    

    
      	
               

            	
              (iii)

            	
              Sales
                of the Borrower's Capital Stock.

            

    

     

    6.14.           Investments
      and Acquisitions.  The Borrower will not, nor will it permit any
      Subsidiary to, make or suffer to exist any Investments (excluding loans and
      advances to, and other Investments in, Subsidiaries permitted by Section 6.11),
      or commitments therefor, or to create any Subsidiary or to become or remain
      a
      partner in any partnership or joint venture, or to make any Acquisition of
      any
      Person, except:

    

    
      	
               

            	
              (i)

            	
              Cash
                Equivalent Investments, Investments under the Hurco Deferred Compensation
                Plan made pursuant to the Hurco Deferred Compensation Plan Trust
                Agreement
                and existing Investments in wholly-owned
                Subsidiaries.

            

    

    

    
      	
               

            	
              (ii)

            	
              Other
                Investments (other than Investments described in clause (i) above
                of this
                Section 6.14) in existence on the date hereof and described in Schedule
                6.14.

            

    

    

    
      	
               

            	
              (iii)

            	
              Additional
                Investments comprised of capital contributions (whether in the form
                of
                cash, a note, or other assets), up to $1,000,000 in the aggregate,
                to new
                or existing Subsidiaries.

            

    

    

    
      	
               

            	
              (iv)

            	
              The
                Borrower or any Subsidiary may make any Acquisition so long as (i)
                the
                Borrower or such Subsidiary, as the case may be, shall be the survivor
                of
                such Acquisition, (ii) the Acquisition is of or with a Person engaged
                in a
                line of business similar to the lines of business presently engaged
                in by
                the Borrower, which include the manufacturing of machine tools,
                development of software for machine tools and distribution of machine
                tools, or a line of business that reasonably would be considered
                an
                ordinary extension of any such line of business presently engaged
                in by
                the Borrower, (iii) the Acquisition is consensual and not hostile
                or
                contested, (iv) both immediately before and after giving effect to
                such
                Acquisition, no Default or Unmatured Default shall have occurred
                and be
                continuing or would result therefrom and the representations and
                warranties contained in this Agreement and in the other Loan Documents
                shall be true and correct on and as of the date thereof (both before
                and
                after such Acquisition is consummated), (v) as soon as available,
                and in
                any event not less than thirty (30) days prior to the proposed date
                of
                consummation of such Acquisition, the Borrower shall have furnished
                to the
                Bank a summary of the proposed Acquisition, copies of the purchase,
                merger
                or investment agreement and all other documents related to such
                Acquisition (the "Acquisition Documents"), copies of historical financial
                statements with respect to the entity or assets being acquired, and
                a pro
                forma consolidated balance sheet and projected cash flows for the
                Borrower
                and its Subsidiaries, and pro forma covenant compliance calculations,
                taking into account such acquisition, and all other business and
                financial
                information reasonably requested by the Bank, all in form and detail
                satisfactory to the Bank, (vi) all parties to the Acquisition Documents
                shall have consented to the assignment to the Bank of all rights
                of the
                Borrower and its Subsidiaries under the Acquisition Documents and
                to the
                reliance by the Bank on all opinions delivered in connection with
                such
                Acquisition, (vii) neither the Borrower nor any of its Subsidiaries
                shall,
                as a result of or in connection with such Acquisition, assume or
                incur any
                direct or contingent liabilities (whether relating to environmental,
                tax,
                litigation, or other matters) that could reasonably be expected to
                have a
                Material Adverse Effect, (viii) immediately before and after the
                consummation of such Acquisition, the sum of the unused amount of
                the
                Commitment plus the Borrower's cash on hand as demonstrated to the
                Bank to
                its reasonable satisfaction shall be not less than $5,000,000, and
                (ix)
                concurrently with the consummation of such Acquisition, the Borrower
                and
                its Subsidiaries, including without limitation each such Subsidiary
                acquired or created in connection with such Acquisition, shall comply
                with
                all of the requirements of this Agreement and the other Loan Documents,
                including without limitation causing to be executed and/or delivered
                at
                such time all agreements and other documents of the types required
                under
                Sections 4.1, 6.22 and 6.23 of this
                Agreement.

            

    

     

    
      
        
        

      

      
        
        

        
          
30

      

      
        
        

      

    

     

    6.15.           Liens.  The
      Borrower will not, nor will it permit any Subsidiary to, create, incur, or
      suffer to exist any Lien in, of or on the Property of the Borrower or any of
      its
      Subsidiaries, except:

    

    
      	
               

            	
              (i)

            	
              Liens
                for taxes, assessments or governmental charges or levies on its Property
                if the same shall not at the time be delinquent or thereafter can
                be paid
                without penalty, or are being contested in good faith and by appropriate
                proceedings and for which adequate reserves in accordance with Agreement
                Accounting Principles shall have been set aside on its
                books.

            

    

    

    
      	
               

            	
              (ii)

            	
              Liens
                imposed by law, such as carriers', warehousemen's and mechanics'
                liens and
                other similar liens arising in the ordinary course of business which
                secure payment of obligations not more than 60 days past
                due.

            

    

    

    
      	
               

            	
              (iii)

            	
              Liens
                arising out of pledges or deposits under worker's compensation laws,
                unemployment insurance, old age pensions, or other social security
                or
                retirement benefits, or similar
                legislation.

            

    

    

    
      	
               

            	
              (iv)

            	
              Utility
                easements, building restrictions and such other encumbrances or charges
                against real property as are of a nature generally existing with
                respect
                to properties of a similar character and which do not in any material
                way
                affect the marketability of the same or interfere with the use thereof
                in
                the business of the Borrower or its
                Subsidiaries.

            

    

     

    
      
        
        

      

      
        
        

        
          
31

      

      
        
        

      

    

    
 

    
      	
               

            	
              (v)

            	
              The
                interest or title of a lessor under any lease (including without
                limitation Capitalized Leases) otherwise permitted under this Agreement
                with respect to the property subject to such
                lease.

            

    

    

    
      	
               

            	
              (vi)

            	
              Liens
                on the assets of Hurco GmbH and Hurco BV to secure the Hurco GmbH
                Facility.

            

    

    

    
      	
               

            	
              (vii)

            	
              [Reserved]

            

    

     

    
      	
               

            	
              (xiii)

            	
              [Reserved]

               

            

    

    
      	
               

            	
              (ix)

            	
              [Reserved]

            

    

    

    
      	
               

            	
              (x)

            	
              [Reserved]

            

    

    

    
      	
               

            	
              (xi)

            	
              Any
                Lien created to secure payment of a portion of the purchase price
                of any
                tangible fixed asset acquired by the Borrower or any of its Subsidiaries
                (including without limitation any such purchase money liens pre-existing
                on assets acquired pursuant to any Acquisition permitted under Section
                6.14(iv)) may be created or suffered to exist upon such fixed asset
                if the
                aggregate principal amount of all Indebted­ness secured by such Liens
                plus the aggregate amount of obligations of the Borrower and its
                Subsidiaries under the resulting leases under all Sale and Leaseback
                Transactions permitted under Section 6.17 does not exceed $10,000,000
                at
                any time, provided that such Lien does not encumber any other asset
                at any time owned by the Borrower or such Subsidiary, and provided,
                further, that not more than one such Lien shall encumber such fixed
                asset at any one time.

            

    

     

    6.16.           Affiliates.  The
      Borrower will not, and will not permit any Subsidiary to, enter into any
      transaction (including, without limitation, the purchase or sale of any Property
      or service) with, or make any payment or transfer to, any Affiliate except
      in
      the ordinary course of business and pursuant to the reasonable requirements
      of
      the Borrower's or such Subsidiary's business and upon fair and reasonable terms
      no less favorable to the Borrower or such Subsidiary than the Borrower or such
      Subsidiary would obtain in a comparable arms-length transaction.

     

    6.17.           Sale
      and Leaseback Transactions.  The Borrower will not, nor will it
      permit any Subsidiary to, enter into or suffer to exist any Sale and Leaseback
      Transaction if the sum of the aggregate amount of obligations of the Borrower
      and its Subsidiaries under the resulting leases under all such Sale and
      Leaseback Transactions plus the aggregate principal amount of all
      Indebted­ness secured by Liens permitted under Section 6.15(xi) does not
      exceed $10,000,000 at any time.

     

    6.18.           Contingent
      Obligations.  The Borrower will not, nor will it permit any
      Subsidiary to, make or suffer to exist any Contingent Obligation (including,
      without limitation, any Contingent Obligation with respect to the obligations
      of
      a Subsidiary), except (i) by endorsement of instruments for deposit or
      collection in the ordinary course of business, (ii) the Reimbursement
      Obligations, (iii) the Credit Obligations, (iv) the Guaranty and the Hurco
      UK
      Guaranty and Hurco Taiwan Guaranty, (v) the Guaranty of Underlease dated on
      or
      about April 30, 2002, among CMP Batteries Limited, Hurco Europe, and the
      Borrower, and (vii) to the extent permitted by Section 6.11.

     

    6.19.           [Reserved]

     

    6.20.           Financial
      Covenants.

    

    
      	
              6.20.1.

            	
              [Reserved]

            

    

     

    
      
        
        

      

      
        
        

        
          
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    6.20.2.        Maximum
      Consolidated Total Indebtedness to Consolidated Total
      Capitalization.  The Borrower will not permit the ratio,
      determined as of the end of each of its fiscal quarters beginning with the
      fiscal quarter ending October 31, 2007, of (i) Consolidated Total Indebtedness
      to (ii) Consolidated Total Capitalization, to be greater than 0.50 to
      1.0.

     

    6.20.3.        [Reserved]

     

    6.20.4.        Net
      Income.  The Borrower will not permit or suffer Consolidated Net
      Income determined as of the end of any fiscal quarter, for the four fiscal
      quarters then ending, beginning with the period of four fiscal quarters ending
      October 31, 2007, to be less than $0.

     

    6.21.           Banking
      Relationship.  The Borrower will use, and cause its Domestic
      Subsidiaries to use, the Bank as its primary bank of account and related account
      services.

     

    6.22.           Guaranty.  The
      Borrower will promptly, but not more than 10 days after such event, cause each
      Domestic Subsidiary which is acquired or created or which ceases to be an
      Inactive Subsidiary after the date hereof to execute and deliver to the Bank
      a
      Guaranty.  The Borrower shall notify the Bank, within 10 days after
      the occurrence thereof, of any Person becoming a Subsidiary.

     

    6.23.           Further
      Assurances.  The Borrower will, and will cause each Guarantor to,
      execute and deliver within 30 days after request therefor by the Bank, all
      further instruments and documents and take all further action that may be
      necessary or desirable, or that the Bank may request, in order to give effect
      to, and to aid in the exercise and enforcement of the rights and remedies of
      the
      Bank under, this Agreement, the Notes and the Guaranty.  In addition,
      the Borrower agrees to deliver to the Bank within 30 days after the acquisition
      or creation of any Subsidiary not listed in Schedule 5.8 hereto,
      supplements to Schedule 5.8 such that such Schedule, together with such
      supplements, shall at all times accurately reflect the information provided
      for
      thereon.

     

    6.24.           Accounting
      Changes.  Until the Facility Termination Date and thereafter until
      payment in full of accrued interest on the Notes and the performance of all
      other Obligations, the Borrower agrees that, unless the Bank shall otherwise
      consent in writing it shall not, and shall not permit any of its Subsidiaries
      to, change their respective fiscal years or make any significant changes (i)
      in
      accounting treatment and reporting practices except as permitted by Agreement
      Accounting Principles and disclosed to the Bank, or (ii) in tax reporting
      treatment except as permitted by law and disclosed to the Bank.

     

    6.25.           Inconsistent
      Agreements.  Until the Facility Termination Date and thereafter
      until payment in full of accrued interest on the Notes and the performance
      of
      all other Obligations, the Borrower agrees that, unless the Bank shall otherwise
      consent in writing it shall not, and shall not permit any of its Subsidiaries
      to, enter into any agreement containing any provision which would be violated
      or
      breached by this Agreement or any of the transactions contemplated hereby or
      by
      performance by the Borrower or any of its Subsidiaries of the obligations in
      connection therewith.

     

    6.26           Negative
      Pledge Limitation. The Borrower will not, and will not permit any of its
      Subsidiaries to, enter into any agreement with any Person other than the Bank
      pursuant hereto which prohibits or limits the ability of the Borrower or any
      Subsidiary to create, incur, assume or suffer to exist any Lien upon any of
      its
      assets, rights, revenues or property, real, personal or mixed, tangible or
      intangible, whether now owned or hereafter acquired (provided, however, that
      the
      foregoing does not include any prohibition or limitation with respect to further
      Liens on assets that are subject to Permitted Liens).

     

    6.27           Government
      Regulation. The Borrower shall not (i) be or become subject at any time to
      any law, regulation, or list of any government agency (including, without
      limitation, the U.S. Office of Foreign Asset  Control list) that
      prohibits or limits Bank from making any advance or extension of credit to
      Borrower or from otherwise conducting business with Borrower, or (ii) fail
      to
      provide documentary and other evidence of Borrower's identity as may be
      requested by Bank at any time to enable Bank to verify Borrower's identity
      or to
      comply with any applicable law or regulation, including, without limitation,
      Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

    

    
      
        
        

      

      
        
        

        
          
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    ARTICLE
      VII

    

    DEFAULTS

     

    The
      occurrence of any one or more of the following events shall constitute a
      Default:

     

    7.1.           Any
      representation or warranty made or deemed made by or on behalf of the Borrower
      or any of its Subsidiaries to the Bank under or in connection with this
      Agreement, any Credit Extension, or any certificate or information delivered
      in
      connection with this Agreement or any other Loan Document shall be materially
      false on the date as of which made or deemed made and such failure continues
      for
      more than five days following written notice thereof to the
      Borrower.

     

    7.2.           Nonpayment
      of principal of any Credit Obligation when due, nonpayment of any Reimbursement
      Obligation when due, or nonpayment of interest upon any Credit Extension or
      of
      any amendment fee, LC Fee, facility fee or other obligations under any of the
      Loan Documents when due, which nonpayment continues for a period of three days
      following written notice thereof to the Borrower by the Bank.

     

    7.3.           The
      breach by the Borrower of any of the terms or provisions of Section 6.10 through
      Section 6.25, and such breach continues for more than ten days following written
      notice thereof to the Borrower or after the Borrower otherwise becomes aware
      of
      such breach.

     

    7.4.           The
      breach by the Borrower (other than a breach which constitutes a Default under
      another Section of this Article VII) of any of the terms or provisions of this
      Agreement which is not remedied within thirty days after written notice from
      the
      Bank or after the Borrower otherwise becomes aware of such breach.

     

    7.5.           Failure
      of the Borrower or any of its Active Subsidiaries or any Guarantor to pay when
      due any Indebtedness (other than Indebtedness hereunder but including the UK
      Facility and the Taiwan Facility); or the default by the Borrower or any of
      its
      Subsidiaries or any Guarantor in the performance (beyond the applicable grace
      period with respect thereto, if any) of any term, provision or condition
      contained in any agreement under which any such Indebtedness was created or
      is
      governed, including without limitation any event that shall occur or condition
      that shall exist, the effect of which default or event or condition is to cause,
      or to permit the holder or holders of such Indebtedness to cause, such
      Indebtedness to become due prior to its stated maturity; or any Indebtedness
      of
      the Borrower or any of its Subsidiaries or any Guarantor shall be declared
      to be
      due and payable or required to be prepaid or repurchased (other than by a
      regularly scheduled payment) prior to the stated maturity thereof; or the
      Borrower or any of its Subsidiaries or any Guarantor shall not pay, or admit
      in
      writing its inability to pay, its debts generally as they become
      due.

     

    7.6.           The
      Borrower or any of its Subsidiaries or any Guarantor shall (i) have an order
      for
      relief entered with respect to it under the Federal bankruptcy laws as now
      or
      hereafter in effect, (ii) make an assignment for the benefit of creditors,
      (iii)
      apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
      custodian, trustee, examiner, liquidator or similar official for it or any
      Substantial Portion of its Property, (iv) institute any proceeding seeking
      an
      order for relief under the Federal bankruptcy laws as now or hereafter in effect
      or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
      winding up, liquidation, reorganization, arrangement, adjustment or composition
      of it or its debts under any law relating to bankruptcy, insolvency or
      reorganization or relief of debtors or fail to file an answer or other pleading
      denying the material allegations of any such proceeding filed against it, (v)
      take any corporate or partnership action to authorize or effect any of the
      foregoing actions set forth in this Section 7.6 or (vi) fail to contest in
      good
      faith any appointment or proceeding described in Section 7.7.

     

    
      
        
        

      

      
        
        

        
          
34

      

      
        
        

      

    

     

    7.7.           Without
      the application, approval or consent of the Borrower or any of its Active
      Subsidiaries, a receiver, trustee, examiner, liquidator or similar official
      shall be appointed for the Borrower or any of its Subsidiaries or any
      Substantial Portion of its Property, or a proceeding described in Section
      7.6(iv) shall be instituted against the Borrower or any of its Active
      Subsidiaries and such appointment continues undischarged or such proceeding
      continues undismissed or unstayed for a period of 30 consecutive
      days.

     

    7.8.           Any
      court, government or governmental agency shall condemn, seize or otherwise
      appropriate, or take custody or control of, all or any portion of the Property
      of the Borrower and its Active Subsidiaries which, when taken together with
      all
      other Property of the Borrower and its Active Subsidiaries so condemned, seized,
      appropriated, or taken custody or control of, during the twelve-month period
      ending with the month in which any such action occurs, constitutes a Substantial
      Portion.

     

    7.9.           The
      Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond
      or
      otherwise discharge one or more (i) judgments or orders for the payment of
      money
      in excess of $100,000 (or equivalent thereof in currencies other than Dollars)
      in the aggregate, or (ii) nonmonetary judgments or orders which, individually
      or
      in the aggregate, could reasonably be expected to have a Material Adverse
      Effect, which judgment(s), in any such case, is/are not stayed on appeal or
      otherwise being appropriately contested in good faith.

     

    7.10.         There
      are any Unfunded Liabilities of any Single Employer Plans for which the Borrower
      or any Guarantor may be liable or any Reportable Event shall occur in connection
      with any Plan.

     

    7.11.         The
      Borrower or any other member of the Controlled Group shall have been notified
      by
      the sponsor of a Multiemployer Plan that it has incurred withdrawal liability
      to
      such Multiemployer Plan.

     

    7.12.         The
      Borrower or any other member of the Controlled Group shall have been notified
      by
      the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
      reorganization or is being terminated, within the meaning of Title IV of ERISA,
      if as a result of such reorganization or termination the aggregate annual
      contributions of the Borrower and the other members of the Controlled Group
      (taken as a whole) to all Multiemployer Plans which are then in reorganization
      or being terminated have been or will be increased over the amounts contributed
      to such Multiemployer Plans for the respective plan years of each such
      Multiemployer Plan immediately preceding the plan year in which the
      reorganization or termination occurs.

     

    7.13.         The
      Borrower or any of its Subsidiaries shall (i) be the subject of any proceeding
      or, to its knowledge, investigation pertaining to the release by the Borrower,
      any of its Subsidiaries or any other Person of any toxic or hazardous waste
      or
      substance into the environment, or (ii) violate any Environmental Law, which,
      in
      the case of an event described in clause (i) or clause (ii), could reasonably
      be
      expected to have a Material Adverse Effect.

     

    7.14.         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.

     

    7.15.         Nonpayment
      by the Borrower or any Subsidiary of any Rate Management Obligation when due
      or
      the breach by the Borrower or any Subsidiary of any term, provision or condition
      contained in any Rate Management Transaction.

     

    
      
        
        

      

      
        
        

        
          
35

      

      
        
        

      

    

     

    7.16.         Any
      Guaranty shall fail to remain in full force or effect or any action shall be
      taken to discontinue or to assert the invalidity or unenforceability of any
      Guaranty, or any Guarantor shall fail to comply with any of the terms or
      provisions of any Guaranty to which it is a party, or any Guarantor shall deny
      that it has any further liability under any Guaranty to which it is a party,
      or
      shall give notice to such effect.

     

    7.17.         [Reserved]

     

    7.18.         The
      representations and warranties set forth in Section 5.15 shall at any time
      not
      be true and correct.

    

    

    ARTICLE
      VIII

    

    ACCELERATION,
      WAIVERS, AMENDMENTS AND REMEDIES

     

    8.1.           Acceleration;
      Facility LC Collateral Account.  (i) If any Default described in
      Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of
      the
      Bank to make Loans hereunder and the obligation  of the Bank to issue
      Facility LCs shall automatically terminate and the Obligations shall immediately
      become due and payable without any election or action on the part of the Bank
      and the Borrower will be and become thereby unconditionally obligated, without
      any further notice, act or demand, to pay to the Bank an amount in immediately
      available funds, which funds shall be held in the Facility LC Collateral
      Account, equal to the difference of (x) the amount of LC Obligations at such
      time, less (y) the amount on deposit in the Facility LC Collateral Account
      at
      such time which is free and clear of all rights and claims of third parties
      and
      has not been applied against the Obligations (such difference, the "Collateral
      Shortfall Amount").  If any other Default occurs, the Bank may (a)
      terminate or suspend its obligations to make Loans hereunder and its obligation
      to issue Facility LCs, or declare the Obligations to be due and payable, or
      both, whereupon the Obligations shall become immediately due and payable,
      without presentment, demand, protest or notice of any kind, all of which the
      Borrower expressly waives, and (b) upon notice to the Borrower and in addition
      to the continuing right to demand payment of all amounts payable under this
      Agreement, make demand on the Borrower to pay, and the Borrower will, forthwith
      upon such demand and without any further notice or act, pay to the Bank the
      Collateral Shortfall Amount, which funds shall be deposited in the Facility
      LC
      Collateral Account.

    

    (ii)  If
      at any time while
      any Default is continuing, the Bank determines that the Collateral Shortfall
      Amount at such time is greater than zero, the Bank may make demand on the
      Borrower to pay, and the Borrower will, forthwith upon such demand and without
      any further notice or act, pay to the Bank the Collateral Shortfall Amount,
      which funds shall be deposited in the Facility LC Collateral
      Account.

    

    (iii)
      The Bank may at any time or from
      time to time after funds are deposited in the Facility LC Collateral Account,
      apply such funds to the payment of the Obligations and any other amounts as
      shall from time to time have become due and payable by the Borrower to the
      Bank
      under the Loan Documents.

    

    (iv)  At
      any time while any
      Default is continuing, neither the Borrower nor any Person claiming on behalf
      of
      or through the Borrower shall have any right to withdraw any of the funds held
      in the Facility LC Collateral Account.  After all of the Obligations
      have been indefeasibly paid in full and the Commitment has been terminated,
      any
      funds remaining in the Facility LC Collateral Account shall be returned by
      the
      Bank to the Borrower or paid to whomever may be legally entitled thereto at
      such
      time.

     

    8.2.           Amendments.  The
      Bank and the Borrower may enter into agreements supplemental hereto for the
      purpose of adding or modifying any provisions to the Loan Documents or changing
      in any manner the rights of the Borrower hereunder or waiving any Default
      hereunder.

     

    
      
        
        

      

      
        
        

        
          
36

      

      
        
        

      

    

     

    8.3.           Preservation
      of Rights.  No delay or omission of the Bank to exercise any right
      under the Loan Documents shall impair such right or be construed to be a waiver
      of any Default or an acquiescence therein, and the making of a Credit Extension
      notwithstanding the existence of a Default or the inability of the Borrower
      to
      satisfy the conditions precedent to such Credit Extension shall not constitute
      any waiver or acquiescence.  Any single or partial exercise of any
      such right shall not preclude other or further exercise thereof or the exercise
      of any other right, and no waiver, amendment or other variation of the terms,
      conditions or provisions of the Loan Documents whatsoever shall be valid unless
      in writing signed by the Bank, and then only to the extent in such writing
      specifically set forth.  All remedies contained in the Loan Documents
      or by law afforded shall be cumulative and all shall be available to the Bank
      until the Obligations have been paid in full.

    

    

    ARTICLE
      IX

    

    GENERAL
      PROVISIONS

     

    9.1.           Survival
      of Representations.  All representations and warranties of the
      Borrower contained in this Agreement shall survive the making of the Credit
      Extensions herein contemplated.

     

    9.2.           Governmental
      Regulation.  Anything contained in this Agreement to the contrary
      notwithstanding, the Bank shall not be obligated to extend credit to the
      Borrower in violation of any limitation or prohibition provided by any
      applicable statute or regulation.

     

    9.3.           Headings.  Section
      headings in the Loan Documents are for convenience of reference only, and shall
      not govern the interpretation of any of the provisions of the Loan
      Documents.

     

    9.4.           Entire
      Agreement.  The Loan Documents embody the entire agreement and
      understanding among the Borrower and the Bank and supersede all prior agreements
      and understandings among the Borrower and the Bank relating to the subject
      matter thereof.

     

    9.5.           Benefits
      of this Agreement.  This Agreement shall not be construed so as to
      confer any right or benefit upon any Person other than the parties to this
      Agreement and their respective successors and assigns.

     

    9.6.           Expenses;
      Indemnification.  (i)  The Borrower shall reimburse the
      Bank for any costs, internal charges and out-of-pocket expenses (including
      reasonable attorneys' fees and reasonable time charges of attorneys for the
      Bank, which attorneys may be employees of the Bank) paid or incurred by the
      Bank
      in connection with the preparation, negotiation, execution, delivery,
      distribution (including, without limitation, via the internet), review,
      amendment, modification, and administration of the Loan
      Documents.  The Borrower also agrees to reimburse the Bank for any
      costs, internal charges and out-of-pocket expenses (including reasonable
      attorneys' fees and reasonable time charges of attorneys for the Bank, which
      attorneys may be employees of the Bank) paid or incurred by the Bank in
      connection with the collection and enforcement of the Loan
      Documents.  The Borrower acknowledges that from time to time the Bank
      may prepare (but shall have no obligation or duty to prepare) certain audit
      reports (the "Reports") pertaining to the Borrower's assets for internal use
      by
      the Bank from information furnished to it by or on behalf of the Borrower,
      after
      the Bank has exercised its rights of inspection pursuant to this
      Agreement.

    

    (ii)  The
      Borrower further
      agrees to indemnify the Bank, its affiliates, and each of its directors,
      officers and employees against all losses, claims, damages, penalties,
      judgments, liabilities and expenses (including, without limitation, all expenses
      of litigation or preparation therefor whether or not the Bank or any Affiliate
      is a party thereto) which any of them may pay or incur arising out of or
      relating to this Agreement, the other Loan Documents, the transactions
      contemplated hereby or the direct or indirect application or proposed
      application of the proceeds of any Credit Extension hereunder except to the
      extent that they are determined in a final non-appealable judgment by a court
      of
      competent jurisdiction to have resulted from the gross negligence or willful
      misconduct of the party seeking indemnification.  The obligations of
      the Borrower under this Section 9.6 shall survive the termination of this
      Agreement.

     

    
      
        
        

      

      
        
        

        
          
37

      

      
        
        

      

    

     

    9.7.           Accounting.  Except
      as provided to the contrary herein, all accounting terms used herein shall
      be
      interpreted and all accounting determinations hereunder shall be made in
      accordance with Agreement Accounting Principles, except that any calculation
      or
      determination which is to be made on a consolidated basis shall be made for
      the
      Borrower and all its Subsidiaries, including those Subsidiaries, if any, which
      are unconsolidated on the Borrower's audited financial statements.

     

    9.8.           Severability
      of Provisions.  Any provision in any Loan Document that is held to
      be inoperative, unenforceable, or invalid in any jurisdiction shall, as to
      that
      jurisdiction, be inoperative, unenforceable, or invalid without affecting the
      remaining provisions in that jurisdiction or the operation, enforceability,
      or
      validity of that provision in any other jurisdiction, and to this end the
      provisions of all Loan Documents are declared to be severable.

     

    9.9.           Nonliability
      of the Bank.  The relationship between the Borrower on the one
      hand and the Bank on the other hand shall be solely that of borrower and
      lender.  The Bank shall not have any fiduciary responsibilities to the
      Borrower.  The Bank does not undertake any responsibility to the
      Borrower to review or inform the Borrower of any matter in connection with
      any
      phase of the Borrower's business or operations.  The Borrower agrees
      that the Bank shall not have liability to the Borrower (whether sounding in
      tort, contract or otherwise) for losses suffered by the Borrower in connection
      with, arising out of, or in any way related to, the transactions contemplated
      and the relationship established by the Loan Documents, or any act, omission
      or
      event occurring in connection therewith, unless it is determined in a final
      non-appealable judgment by a court of competent jurisdiction that such losses
      resulted from the gross negligence or willful misconduct of the party from
      which
      recovery is sought.  The Bank shall not have any liability with
      respect to, and the Borrower waives, releases and agrees not to sue for, any
      special, indirect, consequential or punitive damages suffered by the Borrower
      in
      connection with, arising out of, or in any way related to the Loan Documents
      or
      the transactions contemplated thereby.

     

    9.10.         Confidentiality.  The
      Bank agrees to hold any confidential information which it may receive from
      the
      Borrower pursuant to this Agreement in confidence, except for disclosure (i)
      to
      its Affiliates, (ii) to legal counsel, accountants, and other professional
      advisors to such Affiliate or to a Transferee, (iii) to regulatory officials,
      (iv) to any Person as requested pursuant to or as required by law, regulation,
      or legal process, (v) to any Person in connection with any legal proceeding
      to
      which such Affiliate is a party, (vi) to such Affiliate's direct or indirect
      contractual counterparties in swap agreements or to legal counsel, accountants
      and other professional advisors to such counterparties, and (vii) permitted
      by
      Section 11.4.

     

    9.11.         Disclosure.  The
      Borrower acknowledges and agrees that the Bank and/or its Affiliates from time
      to time may hold investments in, make other loans to or have other relationships
      with the Borrower and its Affiliates.

     

    9.12.         Construction
      of Certain Provisions.  If any provision of this Agreement refers
      to any action to be taken by any person, or which such person is prohibited
      from
      taking, such provision shall be applicable whether such action is taken directly
      or indirectly by such person, whether or not expressly specified in such
      provision.

     

    9.13.         Independence
      of Covenants. All covenants hereunder shall be given independent effect
      so that if a particular action or condition is not permitted by any such
      covenant, the fact that it would be permitted by an exception to, or would
      be
      otherwise within the limitations of, another covenant shall not avoid the
      occurrence of a Default if such action is taken or such condition
      exists.

     

    
      
        
        

      

      
        
        

        
          
38

      

      
        
        

      

    

     

    9.14.           Interest
      Rate Limitation. Notwithstanding any provisions of this Agreement or
      the Notes, in no event shall the amount of interest paid or agreed to be paid
      by
      the Borrower exceed an amount computed at the highest rate of interest
      permissible under applicable law.  If, from any circumstances
      whatsoever, fulfillment of any provision of this Agreement or the Notes at
      the
      time performance of such provision shall be due shall involve exceeding the
      interest rate limitation validly prescribed by law which a court of competent
      jurisdiction may deem applicable hereto, then, ipsofacto, the
      obligations to be fulfilled shall be reduced to an amount computed at the
      highest rate of interest permissible under applicable law.  If for any
      reason whatsoever the Bank shall ever receive as interest an amount which would
      be deemed unlawful under such applicable law, the amount shall be automatically
      applied to the payment of principal of the Loans outstanding hereunder (whether
      or not then due and payable) and not to the payment of interest, or shall be
      refunded to the Borrower if such principal and all other obligations of the
      Borrower to the Bank have been paid in full.

     

    9.15.           USA
      Patriot Act Notification.  The following notification is provided
      to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C.
      Section 5318:

     

    IMPORTANT
      INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT.  To help the
      government fight the funding of terrorism and money laundering activities,
      Federal law requires all financial institutions to obtain, verify, and record
      information that identifies each person or entity that opens an account,
      including any deposit account, treasury management account, loan, other
      extension of credit, or other financial services product.  What this
      means for Borrower: When Borrower opens an account, Bank will ask for Borrower's
      name, tax identification number, business address, and other information that
      will allow Bank to identify Borrower.  Bank may also ask to see
      Borrower's legal organization documents or other identifying
      documents.

     

    9.16.           Termination
      of Existing Credit Agreement; Existing US Facility LC.  The Third
      Amended and Restated Credit Agreement and Amendment to Reimbursement Agreement
      dated as of December 1, 2003, as amended (the "Existing Credit Agreement"),
      by
      and between the Borrower and the Bank is terminated as of the Effective Date
      and
      on such date, prior to or concurrently with the first Credit Extension under
      this Agreement, the Borrower shall pay in full the Outstanding Credit Exposure
      (as defined in the Existing Credit Agreement) and all other unpaid Obligations
      (as defined in the Existing Credit Agreement); provided that the Existing US
      Facility LC, which was issued pursuant to the Existing Credit Agreement, shall
      continue in effect, shall be deemed a US Facility LC issued and outstanding
      under, and for all purposes of, this Agreement, shall count as usage of the
      Commitment under this Agreement and shall be subject to all the terms and
      conditions of this Agreement, including without limitation the Borrower's
      reimbursement obligation, as fully as if the Existing US Facility LC were a
      US
      Facility LC originally issued and outstanding under this Agreement.

    

    

    ARTICLE
      X

    

    SETOFF

     

    In
      addition to, and without limitation of, any rights of the Bank under applicable
      law, if the Borrower becomes insolvent, however evidenced, or any Default
      occurs, any and all deposits (including all account balances, whether
      provisional or final and whether or not collected or available) and any other
      Indebtedness at any time held or owing by the Bank or any Affiliate of the
      Bank
      to or for the credit or account of the Borrower may be offset and applied toward
      the payment of the Obligations and the Rate Management Obligations owing to
      the
      Bank, whether or not the Obligations and the Rate Management Obligations, or
      any
      part thereof, shall then be due.

    

    
      
        
        

      

      
        
        

        
          
39

      

      
        
        

      

    

    

    ARTICLE
      XI

    

    BENEFIT
      OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

     

     
      11.1.         Successors and
      Assigns.  This Agreement shall be binding upon and inure to the
      benefit of the parties hereto and their respective successors and assigns,
      provided that the Borrower may not, without the prior written consent
      of the Bank, assign its rights or obligations hereunder or under any Notes
      and
      the Bank shall not be obligated to make any Loan hereunder to, or issue any
      Facility LC for the account of, any entity other than the Borrower.

     

     
      11.2.         Participations.

    

    
      	
               

            	
              11.2.1.     
                Permitted Participants; Effect.  The Bank may, in the
                ordinary course of its business and in accordance with applicable
                law, at
                any time sell to one or more banks or other entities ("Participants")
                participating interests in any Outstanding Credit Exposure of the
                Bank,
                any Note held by the Bank, any Commitment or Taiwan Facility LC Commitment
                of the Bank or any other interest of the Bank under the Loan
                Documents.  In the event of any such sale by the Bank of
                participating interests to a Participant, the Bank's obligations
                under the
                Loan Documents shall remain unchanged, the Bank shall remain solely
                responsible to the Borrower for the performance of such obligations,
                the
                Bank shall remain the owner of its Outstanding Credit Exposure and
                the
                holder of any Note issued to it in evidence thereof for all purposes
                under
                the Loan Documents, all amounts payable by the Borrower under this
                Agreement shall be determined as if the Bank had not sold such
                participating interests, and the Borrower shall continue to deal
                solely
                and directly with the Bank in connection with the Bank's rights and
                obligations under the Loan
                Documents.

            

    

    

    
      	
               

            	
              11.2.2.    
                Voting Rights.  Unless otherwise agreed between the Bank
                and any Participant, the Bank shall retain the sole right to approve,
                without the consent of any Participant, any amendment, modification
                or
                waiver of any provision of the Loan
                Documents.

            

    

    

    
      	
               

            	
              11.2.3.    
                Benefit of Setoff.  The Borrower agrees that each
                Participant shall be deemed to have the right of setoff provided
                in
                Article 10 in respect of its participating interest in amounts owing
                under
                the Loan Documents to the same extent as if the amount of its
                participating interest were owing directly to it as the Bank under
                the
                Loan Documents, provided that the Bank shall retain the right of
                setoff provided in Article 10 with respect to the amount of participating
                interests sold to each Participant.  The Bank agrees to share
                with each Participant, and each Participant, by exercising the right
                of
                setoff provided in Article 10, agrees to share with the Bank, any
                amount
                received pursuant to the exercise of its right of setoff, such amounts
                to
                be shared in accordance with their respective pro rata shares of
                the
                Commitment or, if the Commitment is no longer available, in accordance
                with their respective pro rata shares of the Outstanding Credit
                Exposure.

            

    

     

     
      11.3.         Dissemination of
      Information.  The Borrower authorizes the Bank to disclose to any
      Participant or any other Person acquiring an interest in the Loan Documents
      by
      operation of law or otherwise (each a "Transferee") and any prospective
      Transferee any and all information in the Bank's possession concerning the
      creditworthiness of the Borrower and its Subsidiaries, including without
      limitation any information contained in any Reports; provided that each
      Transferee and prospective Transferee agrees to be bound by Section 9.10 of
      this
      Agreement.

    

    
      
        
        

      

      
        
        

        
          
40

      

      
        
        

      

    

     

    ARTICLE
      XII

    

    NOTICES

     

    12.1.           Notices.  Except
      as otherwise permitted by Section 2.8 with respect to borrowing notices, all
      notices, requests and other communications to any party hereunder shall be
      in
      writing (including electronic transmission, facsimile transmission or similar
      writing) and shall be given to such party: in the case of the Borrower or the
      Bank, at its address or facsimile number set forth on the signature pages
      hereof, or in the case of any future party, at such other address or facsimile
      number as such future party may hereafter specify for the purpose by notice
      to
      the Bank and the Borrower in accordance with the provisions of this Section
      12.1.  Each such notice, request or other communication shall be
      effective (i) if given by facsimile transmission, when transmitted to the
      facsimile number specified in this Section and confirmation of receipt is
      received, (ii) if given by mail, 72 hours after such communication is deposited
      in the mails with first class postage prepaid, addressed as aforesaid, or (iii)
      if given by any other means, when delivered (or, in the case of electronic
      transmission, received) at the address specified in this Section;
provided that notices to the Bank under Article II shall not be
      effective until received.

     

    12.2.           Change
      of Address.  The Borrower and the Bank may each change the address
      for service of notice upon it by a notice in writing to the other party
      hereto.

    

    

    ARTICLE
      XIII

    

    COUNTERPARTS

     

    This
      Agreement may be executed in any number of counterparts, all of which taken
      together shall constitute one agreement, and either party hereto may execute
      this Agreement by signing any such counterpart.  This Agreement shall
      be effective when it has been executed by the Borrower and the Bank and the
      Borrower has notified the Bank by facsimile transmission or telephone that
      it
      has taken such action.

    

    

    ARTICLE
      XIV

    

    CHOICE
      OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

     

    14.1.           CHOICE
      OF LAW.  THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
      CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE
      WITH
      THE INTERNAL LAWS (BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS
      PROVISIONS) OF THE STATE OF INDIANA, BUT GIVING EFFECT TO FEDERAL LAWS
      APPLICABLE TO NATIONAL BANKS.

     

    14.2.           CONSENT
      TO JURISDICTION.  THE BORROWER IRREVOCABLY SUBMITS TO THE
      NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR INDIANA STATE COURT
      SITTING IN INDIANAPOLIS, INDIANA, IN ANY ACTION OR PROCEEDING ARISING OUT OF
      OR
      RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER IRREVOCABLY AGREES THAT ALL
      CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
      IN
      ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
      HAVE
      AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
      OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL
      LIMIT THE RIGHT OF THE BANK TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE
      COURTS OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY THE
      BORROWER AGAINST THE BANK OR ANY AFFILIATE OF THE BANK INVOLVING, DIRECTLY
      OR
      INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
      WITH
      ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN INDIANAPOLIS,
      INDIANA.

     

    
      
        
        

      

      
        
        

        
          
41

      

      
        
        

      

    

     

    14.3.           WAIVER
      OF JURY TRIAL.  THE BORROWER AND THE BANK WAIVE TRIAL BY JURY IN
      ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
      SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED
      TO,
      OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED
      THEREUNDER.

    

    [The
      balance of this page is intentionally left blank.]

    

    

    
      
        
        

      

      
        
        

        
          
42

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Borrower and
      the Bank have executed this Agreement as of the date first above
      written.

     

                                                                                                                  
      HURCO COMPANIES, INC.

    

    
 

    
                                             
        By:           /s/ John G.
        Oblazney                                                     

      John
        G. Oblazney

      Title:       Vice
        President, Secretary, Treasurer, andChief Financial Officer

      One
        Technology Way

      Indianapolis,
        Indiana  46268

      Attention:  CFO

      Telephone:  (317)
        293-5309

      FAX:            
        (317) 347-6201

      

      

      JPMORGAN
        CHASE BANK, N.A.

      

      

      By:          /s/John
        C.
        Otteson                                                      

      John
        C. Otteson

      Title:       Vice
        President

      Mail
        Code IN1-0046

      1
        East Ohio Street, 4th Floor

      Indianapolis,
        Indiana
        46277

      Attention:  John
        C.
        Otteson

      Telephone:  (317)
        767-8335

      FAX:            (317)
        767-8008

      
        
          
          

        

        
          
          

          
            
43ex10-1_121207a.htm

    Exhibit
      10.1

     

    

     

    

     

    

     

    

     

    

     

    FIRST
      MID-ILLINOIS BANCSHARES, INC.

     

    2007
      STOCK INCENTIVE PLAN

     

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    STOCK
      OPTION AGREEMENT

    FIRST
      MID-ILLINOIS BANCSHARES, INC.

     

    2007
      STOCK INCENTIVE PLAN

    STOCK
      OPTION AGREEMENT

     

    1.  Stock
      Option Grant.  First Mid-Illinois Bancshares, Inc. (the “Company”)
      hereby grants a stock option to acquire _________ shares of common stock of
      the
      Company (“Shares”) to _____________ (the “Optionee”), subject in all respects to
      the terms and conditions of the First Mid-Illinois Bancshares, Inc. 2007 Stock
      Incentive Plan (the “Plan”), and such other terms and conditions as are set
      forth herein.  Capitalized terms used in this Agreement shall be as
      defined in the Plan.

     

    2.  Acceptance
      By Optionee.  The Option is conditioned on the Optionee’s
      execution of this Agreement and return of an executed copy to the Company within
      30 days after the Optionee receives this Agreement.

     

    3.  Incentive
      Stock Option.  The Option is intended to constitute an Incentive
      Stock Option under Section 422 of the Internal Revenue Code of
      1986.

     

    4.  Option
      Price.  The Option exercise price as determined by the Committee
      is $________ per Share.

     

    5.  Exercise
      of Option.

     

    (a)  Subject
      to the remaining provisions of this Section 5, the Option may be exercised
      at
      any time prior to the expiration date in accordance with the following
      schedule:

     

    
      	
               

              Date

            	
              Number
                of Shares

              Exercisable

            
	
              ______________

            	
              ____________

            
	
              ______________

            	
              ____________

            
	
              ______________

            	
              ____________

            
	
              ______________

            	
              ____________

            

    

    

    (b)  In
      the
      event of the retirement, death or Disability of the Optionee, the outstanding
      portion of the Option shall become immediately and fully exercisable and shall
      continue to be exercisable until the earlier of (i) 12 months from the
      date of
      such retirement (or, if the Optionee is also a director of the Company, 12
      months from the date of the Optionee’s subsequent termination of service on the
      Board), death or Disability, or (ii) the date the Option
      expires
      by its terms.  For purposes of this Section 5(b):  (A)
“retirement” means the Optionee’s termination of employment from the Company and
      its Subsidiaries without Cause (as defined below) when the Optionee meets the
      requirements for normal retirement under the Company’s tax-qualified retirement
      plan; and (B) “Disability” means as defined under the Company’s long-term
      disability plan for employees, or if there is none, a physical or mental
      disability which impairs the Optionee’s ability to substantially perform his or
      her current duties for a period of at least 12 consecutive months, as determined
      by the Committee in its sole discretion.

     

              (c)  Subsidiaries
      is terminated for Cause, the Option shall immediately expire and no portion
      shall be exercisable.  For purposes of this Section 5(c), “Cause”
means the Optionee’s (i)
      conviction in a court of law of (or entering a plea of guilty or no contest
      to)
      any crime or offense involving fraud, dishonesty or breach of trust involving
      a
      felony; (ii) performance
      of any act which, if known to the customers, clients, stockholders or regulators
      of the Company, would materially and adversely impact the business of the
      Company; (iii) act or
      omission that causes a regulatory body with jurisdiction over the Company to
      demand, request, or recommend that the Optionee be suspended or removed from
      any
      position in which the Optionee serves with the Company; (iv) substantial nonperformance
      of any of his or her obligations under this Agreement; or (v) misappropriation of
      or
      intentional material damage to the property or business of the Company or any
      Subsidiary.

     

    (d)  If
      during
      employment with the Company or any Subsidiary, or during any period following
      such employment in which the Option continues to be exercisable, the Optionee
      engages in competition or solicitation with respect to the Company or any
      Subsidiary without the consent of the Company, the Option shall immediately
      expire and no portion shall be exercisable.  For purposes of this
      Section 5(d):  (i)“competition” will exist if
      the Optionee (A) directly
      or indirectly owns, manages, operates, controls, participates in the ownership,
      management, operation or control of, is connected with or has any financial
      interest in, or serves as an officer, employee, advisor, consultant, agent
      or
      otherwise to any person, firm, partnership, corporation, trust or other entity
      which owns or operates a business similar to that of the Company or its
      Subsidiaries; or (B)
      solicits for sale, represents, and/or sells, to any person or entity who or
      which was the Company’s customer or client during the last year of the
      Optionee’s employment, products or services which are similar to, compete with,
      or can be used for the same purposes as products or services sold or offered
      for
      sale by the Company or any Subsidiary or which were in development by the
      Company or any Subsidiary within the last year of the Optionee’s employment; and
(ii)“solicitation” will
      exist if the Optionee (A)
      attempts in any manner to solicit from any client or customer business of the
      type performed by the Company or any Subsidiary or persuade any client or
      customer of the Company or any Subsidiary to cease to do such business or to
      reduce the amount of such business which any such client or customer has
      customarily done or contemplates doing with the Company or any Subsidiary,
      whether or not the relationship between the Company or Subsidiary and such
      client or customer was originally established in whole or in part through the
      Optionee’s efforts; (B)
      renders any services of the type rendered by the Company or any Subsidiary
      for
      any client or customer of the Company; or (C) solicits or encourages,
      or
      assists any other person to solicit or encourage, any employees, agents or
      representatives of the Company or a Subsidiary to terminate or alter their
      relationship with the Company or any Subsidiary.

     

    (e)  In
      the
      event the Optionee’s employment with the Company and its Subsidiaries terminates
      for any reason other than as described above, the then outstanding and vested
      portion of the Option shall continue to be exercisable until the earlier of
      three months after the date of such termination or the date the Option expires
      by its terms.  Notwithstanding the foregoing, if the Optionee is also
      a director of the Company, the Option shall continue to vest in accordance
      with
      its terms until the Optionee’s subsequent termination of service on the Board,
      at which time the then outstanding and vested portion of the Option shall
      continue to be exercisable until the earlier of three months after the date
      of
      such termination of service or the date the Option expires by its
      terms.  The portion of the Option that is not vested as of the date of
      such termination of employment, or if later, such termination of service, shall
      expire and not be exercisable.

     

    
      (f)  In
        the
        event of a Change in Control of the Company, the Option shall become immediately
        and fully exercisable.

    

     

    
      Full
        vesting of an Incentive Stock Option, or the exercise of an Incentive Stock
        Option later than 90 days after termination of employment (or one year in
        the
        event of termination of employment due to death or Disability), may result
        in
        all or part of the Option being treated as a Nonqualified Stock Option in
        accordance with Section 5 of the Plan.

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

         6.  Payment.

     

    (a)  Written
      notice of an election to exercise any portion of the Option shall be given
      by
      the Optionee, or his or her personal representative in the event of the
      Optionee’s death, to the Company’s Director of Human Resources, in accordance
      with procedures established by the Plan Committee as in effect at the time
      of
      such exercise.

     

    (b)  At
      the
      time of exercise of the Option, payment of the exercise price must be made
      by
      one or more of the following methods:  (i) in cash, (ii)
      in cash received from a
      broker-dealer to whom the Optionee has submitted an exercise notice and
      irrevocable instructions to deliver the purchase price to the Company from
      the
      proceeds of the sale of Shares subject to the Option (subject to the Company’s
      right of first refusal as described in Section 14 of the Plan), (iii) by delivery (either
      directly or through attestation) to the Company of other Shares owned by the
      Optionee that are acceptable to the Company, valued at their then Fair Market
      Value, or (iv) by
      directing the Company to withhold such number of Shares otherwise issuable
      upon
      exercise of the Option with a Fair Market Value equal to the exercise
      price.  If applicable, an amount sufficient to satisfy all minimum
      Federal, state and local withholding tax requirements prior to delivery of
      any
      Shares must also accompany the exercise.  Payment of such taxes can be
      made by a method specified above.

     

    (c)  No
      Shares
      shall be issued upon exercise of the Option until full payment of the exercise
      price and tax withholding obligation has been made.

     

    7.  Option
      Nontransferable.  Except as otherwise provided under the Plan, the
      Option may not be transferred in any manner and may be exercised during the
      lifetime of the Optionee only by him or her.  The terms of the Option
      shall be binding upon the Optionee’s executors, administrators, heirs, assigns
      and successors.

     

    8.  Option
      Term.  The Option may not be exercised more than ten (10) years
      after the date indicated below and may be exercised during such term only in
      accordance with the terms and conditions set forth in the Plan.

     

    9.  Right
      of First Refusal.  Shares acquired upon exercise of the Option are
      subject to the Company’s right of first refusal as described in Section 14 of
      the Plan.

     

    10.  Committee
      Determinations.  The Committee shall make all determinations
      concerning the rights to benefits under the Plan.

     

     

     

     

     

     

     

     

    
      	
              Dated:

            	
              First
                Mid-Illinois Bancshares, Inc.

               

               

              By:                                                                

              William
                S. Rowland

              Chairman
&
                CEO

            

    

    

    ATTEST:

    

    The
      Optionee acknowledges that he or she has received a copy of the Plan and
      Prospectus and is familiar with the terms and conditions set forth
      therein.  The Optionee agrees to accept as binding, conclusive, and
      final all decisions and interpretations of the Committee.  As a
      condition to the exercise of the Option, the Optionee authorizes the Company
      to
      withhold from any regular cash compensation payable by the Company any taxes
      required to be withheld under any federal, state or local law as a result of
      exercising the Option.

     

    

     

    
      	
              Dated:

            	
              By:

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