SIGNIFICANT RECENT EVENT

9 Months Ended

Sep. 30, 2011

SIGNIFICANT RECENT EVENT

SIGNIFICANT RECENT EVENT

NOTE 2 .  SIGNIFICANT RECENT EVENT

On July 26, 2011, our Taiwan subsidiary, Hardinge Machine Tools B.V., Taiwan Branch, entered into a new unsecured general credit facility agreement replacing its existing $10.0 million facility. This agreement, which expires on May 30, 2012, provides a $12.0 million facility, or its equivalent in other currencies, for working capital, raw material purchases, and export business purposes. This credit facility charges interest at the Bank’s current base rate of 2.75%, which is subject to change by the Bank based on market conditions. It carries no commitment fees on unused funds. The principal amount outstanding for these facilities was $12.0 million and $1.7 at September 30, 2011 and December 31, 2010, respectively.

On August 31, 2011, our Chinese subsidiary, Hardinge Precision Machinery (Jiaxing) Co., Ltd., entered into a loan agreement with a local bank. This agreement, which expires on January 30, 2014, provides up to 25.0 million in Chinese Renminbi (“RMB”), or $3.9 million equivalent, that the Company may draw for plant construction and fixed assets acquisition purposes. The interest rate is the base rate as published by the People’s Bank of China, currently at 6.65%, plus a 20% mark-up making the effective interest rate 7.98%.  The interest rate is recalculated annually. The agreement calls for scheduled principal repayments in the amounts of RMB 4.0 million, RMB 6.0 million, RMB 6.0 million and RMB 9.0 million on July 20, 2012, January 20, 2013, July 20, 2013, and January 30, 2014, respectively, however, if on any such date the outstanding principal of the loan is less than the scheduled repayment amount, the Company is required to repay the entire outstanding principal balance on such date. The principal amount outstanding was $1.6 million at September 30, 2011.

The Chinese subsidiary’s loan agreement contains financial covenants pursuant to which the subsidiary is required to continually maintain total liabilities to total assets ratio of less than 0.65:1.00 and a current ratio of more than 1.0:1.0. In addition, the subsidiary is not allowed to act as a guarantor to any third party. The loan agreement contains customary events of default and acceleration clauses. The loan is secured by substantially all of the real property and improvements owned by the subsidiary, including improvements currently under construction.  At September 30, 2011, we are in compliance with the covenants under the loan agreement.