10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission file number: 000-15760

Hardinge Inc.

(Exact name of Registrant as specified in its charter)

New York	16-0470200
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Hardinge Inc. One Hardinge Drive Elmira, NY 14902
(Address of principal executive offices) (Zip code)
(607) 734-2281
(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   ý   No  o

Indicate by check mark whether the registrant is an accelerated filer (as defined by Exchange Act Rule 12b-2).   Yes   ý   No  o

As of September 30, 2004 there were 8,843,139 shares of Common Stock of the Registrant outstanding.

HARDINGE INC. AND SUBSIDIARIES
INDEX
Part I	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets at September 30, 2004 and December 31, 2003.
		Consolidated Statements of Operations and Retained Earnings for the three months ended September 30, 2004 and 2003 and for the nine months ended September 30, 2004 and 2003.
		Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003.
		Notes to Consolidated Financial Statements.
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 3.	Quantitative and Qualitative Disclosures About Market Risks
	Item 4.	Controls and Procedures
Part II	Other Information
	Item 1.	Legal Proceedings
	Item 2.	Changes in Securities
	Item 3.	Default upon Senior Securities
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 6.	Exhibits and Reports on Form 8-K
	Signatures
	Certifications

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PART I, ITEM 1

HARDINGE INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In Thousands)

	Sept. 30, 2004			Dec. 31, 2003
	(Unaudited)
Assets
Current assets:
Cash	$		4,360	$	4,739
Accounts receivable, net	53,533			44,660
Notes receivable, net	6,192			6,354
Inventories	93,915			87,064
Prepaid expenses	5,045			4,540
Total current assets	163,045			147,357
Property, plant and equipment:
Property, plant and equipment	165,594			162,926
Less accumulated depreciation	102,800			96,741
	62,794			66,185
Other assets:
Notes receivable	6,920			7,733
Deferred income taxes	131			131
Intangible pension asset	3,915			3,900
Goodwill	18,180			18,314
Other	2,179			2,087
	31,325			32,165
Total assets	$	257,164		$		245,707

See accompanying notes.

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	Sept. 30, 2004			Dec. 31, 2003
	(Unaudited)
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	20,222		$	13,760
Notes payable to bank	5,015			624
Accrued expenses	14,107			18,224
Accrued income taxes	2,502			2,990
Deferred income taxes	3,708			3,477
Current portion long-term debt	4,885			5,002
Total current liabilities	50,439			44,077
Other liabilities:
Long-term debt	21,435			17,675
Accrued pension plan expense	20,813			23,693
Deferred income taxes	3,253			3,163
Accrued postretirement benefits	5,904			5,864
Derivative financial instruments	4,627			6,194
Other liabilities	4,196			2,267
	60,228			58,856
Equity of minority interest	5,205			3,688
Shareholders' equity:
Preferred stock, Series A, par value $.01:
Authorized - 2,000,000; issued - none
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued shares - 9,919,992 at September 30, 2004 and December 31, 2003	99			99
Additional paid-in capital	60,538			60,586
Retained earnings	96,158			94,150
Treasury shares - 1,076,853 at September 30, 2004 and 1,062,143 at December 31, 2003.	(13,960		)	(13,843		)
Accumulated other comprehensive loss	(356		)	(393		)
Deferred employee benefits	(1,187		)	(1,513		)
Total shareholders' equity	141,292			139,086
Total liabilities and shareholders' equity	$	257,164		$	245,707

See accompanying notes.

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HARDINGE INC AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings

(In Thousands, Except Per Share Data)

	Three months ended September 30,								Nine months ended September 30,
	2004				2003				2004			2003
	(Unaudited)				(Unaudited)				(Unaudited)			(Unaudited)
Net Sales	$	54,606			$	43,993			$	159,853		$	132,389
Cost of sales	38,481				31,204				112,825			92,579
Gross profit	16,125				12,789				47,028			39,810
Selling, general and administrative expenses	13,829				11,648				39,990			36,372
Income from operations	2,296				1,141				7,038			3,438
Interest expense	641				615				1,854			2,157
Interest (income)	(110			)	(97			)	(309		)	(339		)
Income before income taxes and minority interest in consolidated subsidiary and investment of equity company	1,765				623				5,493			1,620
Income taxes	765				13,718				1,790			13,951
Minority interest in (profit) of consolidated subsidiary	(600			)	(374			)	(1,518		)	(691		)
Profit in investment of equity company					39							75
Net income (loss)	400				(13,430			)	2,185			(12,947		)
Retained earnings at beginning of period	95,847				106,007				94,150			105,612
Less dividends declared	89				0				177			88
Retained earnings at end of period	$		96,158		$		92,577		$	96,158		$	92,577
Per share data:
Basic earnings (loss) per share	$		.05		$		(1.54	)	$	.25		$	(1.49	)
Weighted average number of common shares outstanding	8,742				8,716				8,746			8,703
Diluted earnings (loss) per share	$		.05		$		(1.54	)	$	.25		$	(1.49	)
Weighted average number of common shares outstanding	8,785				8,716				8,792			8,703
Cash Dividends Declared	$		.01		$		.00		$	.02		$	.01

See accompanying notes.

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HARDINGE INC AND SUBSIDARIES

Consolidated Statements of Cash Flows

(In Thousands)

	Nine months ended September 30,
	2004			2003
	(Unaudited)			(Unaudited)
Operating activities
Net income (loss)	$	2,185		$	(12,947	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	6,722			6,446
Provision for deferred income taxes	760			13,375
Funds provided by minority interest	1,612			663
Foreign currency transaction (gain) loss	(200		)	49
Changes in operating assets and liabilities:
Accounts receivable	(8,935		)	(3,731		)
Notes receivable	1,003			947
Income tax receivable	—			7,144
Inventories	(6,959		)	6,106
Other assets	(969		)	(2,912		)
Accounts payable	6,516			(1,775		)
Accrued expenses	(7,093		)	171
Investment in equity company	—			(76		)
Accrued postretirement benefits	40			—
Net cash (used in) provided by operating activities	(5,318		)	13,460
Investing activities
Capital expenditures	(2,852		)	(1,181		)
Net cash (used in) investing activities	(2,852		)	(1,181		)
Financing activities
Increase (decrease) in short-term debt	4,245			(2,341		)
Increase (decrease) in long-term debt	3,846			(8,670		)
Net (purchases) sale of treasury stock	(188		)	26
Dividends paid	(177		)	(88		)
Net cash provided by (used in) financing activities	7,726			(11,073		)
Effect of exchange rate changes on cash	65			93
Net (decrease) increase in cash	(379		)	1,299
Cash at beginning of period	4,739			2,175
Cash at end of period	$	4,360		$	3,474

See accompanying notes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2004

NOTE A—BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three month period and the nine month period ended September 30, 2004, are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report for the year ended December 31, 2003.  The Company operates in only one business segment – industrial machine tools.

The consolidated balance sheet at December 31, 2003 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

NOTE B—STOCK-BASED COMPENSATION

The Companygrants restricted shares of common stock and stock options to certain officers, other key employees and directors.  The Company accounts for restricted share grants and stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees.  The stock options issued under the 1996 and 2002 Incentive Stock Plans expire 10 years from the date of grant and are exercisable one-third after the first year, two-thirds after the second year, and 100 percent exercisable after the third year.

In accordance with the provisions of Statement of Financial Accounting Standard No. 123 the Company has elected to continue applying the provisions of Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock-based compensation plans.  The Company amortizes compensation expense for restricted stock over the vesting period of the grant.  The Company does not recognize compensation expense for stock options when the stock option price at the grant date is equal to or greater than the fair market value of the stock at that date.

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The following illustrates the pro forma effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123 on stock options:

	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
	(dollars in thousands)
Reported net income (loss)	$	400		$	(13,430	)	$	2,185		$	(12,947	)
Add: Stock-based employee compensation expense included in reported net income (loss)	109			142			349			426
	509			(13,288		)	2,534			(12,521		)
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects	(137		)	(172		)	(433		)	(514		)
Pro forma net income (loss)	$	372		$	(13,460	)	$	2,101		$	(13,035	)
Earnings (loss) per share:
Basic and Diluted - as reported	$	.05		$	(1.54	)	$	.25		$	(1.49	)
Basic and Diluted - pro forma	$	.04		$	(1.54	)	$	.24		$	(1.50	)

NOTE C—WARRANTIES

The Company offers warranties for its products.  The specific terms and conditions of those warranties vary depending upon the product sold and the country in which the Company sold the product.  The Company generally provides a basic limited warranty, including parts and labor for a period of one year.  The Company estimates the costs that may be incurred under its basic limited warranty, based largely upon actual warranty repair cost history, and records a liability in the amount of such costs in the month that product revenue is recognized. The resulting accrual balance is reviewed during the year. Factors that affect the Company’s warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and cost per claim.

The Company also sells extended warranties for some of its products.  These extended warranties usually cover a 12-24 month period that begins 0-12 months after time of sale.  Revenues for these extended warranties are recognized monthly as a portion of the warranty expires.  Deferred extended warranty revenue was $120,000 at September 30, 2004.

A reconciliation of the changes in the Company’s product warranty liability during the three and nine month periods ended September 30, 2004 and 2003 is as follows:

	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
	(dollars in thousands)
Beginning balance	$	1,511		$	1,548		$	1,671		$	1,975
Provision for warranty	570			309			1,564			1,413
Warranties settlement costs	(591		)	(325		)	(1,733		)	(1,882		)
Other - currency translation impact	4			28			(8		)	54
Quarter end balance	$	1,494		$	1,560		$	1,494		$	1,560

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NOTE D—INVENTORIES

Inventories are summarized as follows (dollars in thousands):

	September 30, 2004		December 31, 2003
Finished products	$	38,312	$	33,217
Work-in-process	26,824		25,705
Raw materials and purchased components	28,779		28,142
	$	93,915	$	87,064

NOTE E—INCOME TAXES

Statement of Financial Accounting Standards No.109 (SFAS 109) requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized.  A review of all available positive and negative evidence needs to be considered, including such matters as the company’s current and past performance, the market conditions in which the Company operates, the utilization of past tax credits, the length of carryback and carryforward periods, and sales backlogs that will result in future profits.  It further states that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years.  Therefore, cumulative losses weigh heavily in the overall assessment.  As a result of the review undertaken at September 30, 2003, Hardinge, Inc. concluded that it was appropriate to establish a full valuation allowance for its U.S. net deferred tax assets.

Subsequent to September 30, 2003, Hardinge Inc. continued to maintain a full valuation allowance for its U.S. net deferred tax assets.  Hardinge Inc. expects to continue to record a full valuation allowance on these future tax benefits until an appropriate level of profitability is sustained in the U.S. operations.  Additionally, until an appropriate level of profitability is reached, the Company does not expect to recognize any significant U. S. tax benefits in future results of operations.

The difference in the three and nine months ended September 30, 2004 tax rates is due to changes in forecasted pre-tax results and taxes thereon for the year.  Each quarter, the Company estimates its full year tax rate based upon its most recent forecast of full year anticipated results and adjusts year to date tax expense to reflect its full year anticipated tax rate.

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NOTE F—EARNINGS (LOSS) PER SHARE AND WEIGHTED AVERAGE SHARES OUTSTANDING

Earnings (loss) per share are computed in accordance with Statement of Financial Accounting Standards No. 128 Earnings per Share.  Basic earnings (loss) per share are computed using the weighted average number of shares of common stock outstanding during the period.  For diluted earnings (loss) per share, the weighted average number of shares includes common stock equivalents related primarily to restricted stock.

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share computations required by Statement No. 128:

	Three months ended September 30,					Nine months ended September 30,
	2004		2003			2004		2003
Numerator: (dollars in thousands)
Net income (loss)	$	400	$	(13,430	)	$	2,185	$	(12,947	)
Numerator for basic earnings (loss) per share	400		(13,430		)	2,185		(12,947		)
Numerator for diluted earnings (loss) per share	400		(13,430		)	2,185		(12,947		)
Denominator: (shares in thousands)
Denominator for basic earnings (loss) per share- weighted average shares	8,742		8,716			8,746		8,703
Effect of diluted securities:
Restricted stock and stock options	43		—			46		—
Denominator for diluted earnings (loss) per share - adjusted weighted average shares	8,785		8,716			8,792		8,703
Basic earnings (loss) per share	$	.05	$	(1.54	)	$	.25	$	(1.49	)
Diluted earnings (loss) per share	$	.05	$	(1.54	)	$	.25	$	(1.49	)

NOTE G - DERIVATIVE FINANCIAL INSTRUMENTS

The Company follows the provision of Financial Accounting Standards Board Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.  The statement requires companies to recognize all of its derivative instruments as either assets or liabilities in the statement of financial position at fair value.  The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.  For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as either a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.

The Company has a cross-currency swap agreement and an interest rate swap agreement related to their term loan accounted for as an investment hedge and a cash flow hedge, respectively.  The fair market values of the currency swap and interest rate swap are liabilities on the Company’s balance sheet.  Also, the Company regularly enters into foreign currency contracts to manage its exposure to fluctuations in foreign currency exchange rates on purchases of materials used in production and cash settlements of intercompany sales.  Gains or losses from these contracts are recognized in the income statement when the contract is settled.

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NOTE H—REPORTING COMPREHENSIVE INCOME (LOSS)

During the three and nine months ended September 30, 2004 and 2003, the components of total comprehensive income (loss) consisted of the following (dollars in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
Net Income (Loss)	$	400		$	(13,430	)	$	2,185		$	(12,947	)
Other Comprehensive Income (Loss):
Foreign currency translation adjustments	534			1,947			(560		)	4,531
Foreign currency translation - pension	2						(3		)
Unrealized gain (loss) on derivatives, net of tax:
Cash flow hedges	63			183			644			185
Net investment hedges	(196		)	(643		)	(44		)	(1,055		)
Other comprehensive income	403			1,487			37			3,661
Total Comprehensive Income (Loss)	$	803		$	(11,943	)	$	2,222		$	(9,286	)

Accumulated balances of the components of other comprehensive income (loss) consisted of the following at September 30, 2004 and December 31, 2003  (dollars in thousands):

	Accumulated balances
	Sept. 30,			Dec. 31,
	2004			2003
Accumulated Other Comprehensive Income (Loss):
Pension liability (net of tax of $3,133 and $3,133, respectively)	$	(9,055	)	$	(9,052	)
Foreign currency translation adjustments	11,947			12,507
Unrealized gain (loss) on derivatives, net of tax:
Cash flow hedges, (net of tax of $633 and $659, respectively)	(252		)	(896		)
Net investment hedges, (net of tax of $715 and $714, respectively)	(2,996		)	(2,952		)
Accumulated Other Comprehensive (Loss)	$	(356	)	$	(393	)

NOTE I—GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets.  Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations completed after June 30, 2001.  Statement 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. Statement 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives.

The Company adopted Statements of Financial Accounting Standards 142 on January 1, 2002.  The Company completed the transitional impairment testing of goodwill during the second quarter of 2002 and the subsequent annual impairment testing during the fourth quarter of 2002 and 2003.  In all cases, the Company determined that there was no goodwill impairment.

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The total carrying amount of goodwill was $18,180,000 as of September 30, 2004 and $18,314,000 as of December 31, 2003.  This entire asset resulted from the December 2000 acquisition of HTT Hauser Tripet Tschudin AG.  The asset value of this goodwill decreased by $134,000, during the first nine months of 2004, with the entire change caused by the decreased dollar value of the Swiss franc, the functional currency of the Company’s HTT subsidiary, whose balance sheet includes this goodwill.

NOTE J—PENSION AND POST RETIREMENT PLANS

The Company accounts for the pension plans and postretirement benefits in accordance with Financial Accounting Standards Board Statements No. 87 and 106.  The following disclosures related to the pension and postretirement benefits are presented in accordance with Financial Accounting Standards Board Statement No. 132, as revised.

A summary of the components of net periodic pension costs for the consolidated company for the three and nine months ended September 30, 2004 and 2003 is presented below:

	Pension Benefits
	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
	(dollars in thousands)
Service cost	$	660		$	681		$	1,979		$	2,046
Interest cost	1,672			1,648			5,012			4,951
Expected return on plan assets	(1,925		)	(1,903		)	(5,770		)	(5,722		)
Amortization of prior service cost	42			98			126			293
Amortization of transition (asset) obligation	(98		)	(65		)	(293		)	(195		)
Amortization of (gain) loss	36			26			106			81
Net periodic benefit cost	$	387		$	485		$	1,160		$	1,454

A summary of the components of net postretirement benefits costs for the consolidated company for the three and nine months ended September 30, 2004 and 2003 is presented below:

	Postretirement Benefits
	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
	(dollars in thousands)
Service cost	$	20		$	22		$	59		$	64
Interest cost	95			90			285			272
Amortization of prior service cost	(6		)	(6		)	(18		)	(18		)
Net periodic benefit cost	$	109		$	106		$	326		$	318

Hardinge Inc. previously disclosed in its financial statements for the year ended December 31, 2003 that it expected to contribute $2,666,000 to its U. S. defined benefit plan in 2004.  As of September 30, 2004, the Company had made contributions of $3,769,747 to its domestic plan and will not make any more

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contributions in 2004.  The additional $1,100,000 contribution will mean that no more contributions for the 2004 plan year will be made until September 2005.  This voluntary contribution was made to insure the fund continues to exceed the IRS funded gateway current liability percentage and will result in lower contributions in future years.  Hardinge expects to contribute $1,199,000 to its foreign defined benefit plans in 2004.  As of September 30, 2004, $839,000 of contributions has been made to the foreign plans.

In January 2004, the FASB issued Financial Staff Position (“FSP”) No. 106-1 “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act 2003.”  The Medicare Prescription Drug, Improvement and Modernization Act (the “Act”) introduced a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D.  Under FSP No. 106-1, a plan sponsor may elect to defer recognizing the effects of the Act until authoritative guidance on the accounting for the federal subsidy is issued.  In May 2004, the FASB issued FSP 106-2, which addresses the accounting and disclosure implications that are expected to arise as a result of the Act.  Under FSP 106-2, the effect of the Federal subsidy shall be accounted for as an actuarial experience gain.  During the third quarter of 2004, in accordance with FSP 106-2, the Company began accounting for the effect of the federal subsidy under the Act and found that there was no impact to the financial statements as the Company does not expect to qualify for the subsidy as set forth in the Act due to the Company’s cost caps on the amount it pays for retiree medical benefits.

NOTE K—SUBSEQUENT EVENT

On November 3, 2004, Hardinge Inc. purchased the intellectual property rights and certain assets associated with Bridgeport Machine Tool worldwide operations from Bridgeport International, a portfolio company of American Capital Strategies Ltd.

Hardinge acquired the name, trademarks, copyrights, designs, patents, know-how, and all other intangibles associated with Bridgeport’s machine tool business throughout the world, with the exception of the Bridgeport knee mill business which Hardinge has the rights to under a previous licensing agreement signed in September, 2002.  Hardinge is also acquiring certain operating assets.  Hardinge will provide uninterrupted sales, service and support to Bridgeport’s customers from offices in Leicester, England and Raamsdonksveer, Holland, formerly owned by Bridgeport.  The total consideration for all of the above was $7,250,000, most of which will be recorded as intangible assets, and was paid in cash funded by the Company’s revolving loan agreement.  The Company will be revisiting the allocation of the purchase price in the fourth quarter to be sure it has been allocated properly among intangible assets & goodwill.  In addition Hardinge acquired finished goods (CNC machining centers) for $4,100,000 to enable uninterrupted service to the marketplace and to fill existing customer orders.

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PART I, ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company’s primary business is manufacturing high-precision computer controlled metal-cutting and grinding machines and related accessories. The Company isgeographically diversified with manufacturing facilities in the U.S., Switzerland, Taiwan, and China and with sales to most industrialized countries. Over 60% of its sales are to customers outside North America, and approximately half of its employees are outside of North America.

The Company’s machine products are considered to be capital goods and are part of what has historically been a highly cyclical industry. The U.S. market activity metric most closely watched by management has been metal-cutting machine orders as reported by the Association of Manufacturing Technology (AMT), the primary industry group for U.S. machine tool manufacturers. Similar information regarding machine tool consumption in foreign countries is published in various trade journals.

Other closely followed U.S. market indicators are tracked to determine activity levels in U.S. manufacturing plants that might purchase the Company’s products.  One such measurement is the PMI (formerly called the Purchasing Manager’s Index), as reported by the Institute for Supply Management. Another is capacity utilization, as reported by the Federal Reserve Board.

Other key performance indicators are geographic distribution of sales and orders, gross margin as percent of sales, income from operations, working capital changes and debt level trends.  In an industry where constant product technology development has led to an average model life of three to five years, effectiveness of technological innovation and development of new products are also key performance indicators.

The Company recorded a deferred tax charge in September 2003. As explained in the Company’s Form 10-K report for the year ended December 31, 2003, this charge was made consistent with the specific requirements of Statement of Financial Accounting Standards No. 109 and established a valuation allowance offsetting the Company’s entire U.S. deferred tax asset.  Furthermore, no tax benefit can be recorded in the financial statements on net operating losses of the U.S. Company in the current year, even though they can be carried forward against future profits.  The Company’s management continues to believe that ultimately these deferred tax assets and currently generated net operating loss carryforwards will be fully utilized as credits against tax expense on future taxable income well before the assets would expire, since the Company’s U. S. operations earned $10,000,000 average annual pretax profit in the years 1990-2000 and the current tax law provides a lengthy carry-forward period, which for the Company’s current deferred tax assets extends until 2021-2024; however the recovery of these tax assets is currently not certain.

The Company’s management believes currency exchange rate changes are significant to reported results for several reasons. The Company’s primary competitors are now largely manufacturers in Japan, Germany, Switzerland, Taiwan, and Korea, which causes the worldwide valuation of the Yen, Euro, Swiss Franc, Taiwanese Dollar and Korean Won to be central to competitive pricing in all of the Company’s markets.  Also, the Company translates the results of its Swiss, Taiwanese, Chinese, English, German and Canadian subsidiaries into U.S. dollars for consolidation and reporting purposes.  Period to period changes in the exchange rate between their local currency and the U.S. dollar may affect comparative data significantly.  The Company also purchases computer controls and other components from suppliers throughout the world, with purchase costs reflecting currency changes.

In the past two years, pension liabilities have represented another significant uncertainty for the Company. The Company provides defined benefit pension plans for eligible employees in the U.S.,

14

Switzerland, England, and Taiwan. Recent declines in interest rates used to calculate the present value of future pension obligations and negative U.S. and UK equity market investment returns in 2002 have resulted in deferred pension charges to equity of $3,940,000 in 2003 and $5,112,000 in 2002.  These non-cash charges were recorded in “other comprehensive income” in the equity section of the consolidated balance sheets.  The underlying economic causes for these charges reflect a risk of increased future pension expense. As discussed later, further large pension charges driven by declines in interest rates or lower than assumed investment returns may require the Company to negotiate changes to its current borrowing arrangements.

Results of Operations

Summarized selected financial data for the three and nine month periods ended September 30, 2004 and 2003:

	Three months ended September 30,											Nine months ended September 30,
	2004			2003			Change			% Change		2004			2003			Change			% Change
	(dollars in thousands, except per share data)
Net Sales	$	54,606		$	43,993		$	10,613		24.1	%	$	159,853		$	132,389		$	27,464		20.7	%
Gross Profit	16,125			12,789			3,336			26.1	%	47,028			39,810			7,218			18.1	%
Income from operations	2,296			1,141			1,155			101.2	%	7,038			3,438			3,600			104.7	%
Profit before taxes	1,765			623			1,142			183.3	%	5,493			1,620			3,873			239.1	%
Net income (loss)	400			(13,430		)	13,830			103.0	%	2,185			(12,947		)	15,132			116.9	%
Diluted earnings (loss) per share	$	.05		$	(1.54	)	$	1.59				$	.25		$	(1.49	)	$	1.74
Weighted average shares outstanding	8,785			8,716								8,792			8,703
Gross Profit as % of sales	29.5		%	29.1		%	.4		%			29.4		%	30.1		%	.7		%
Profit before taxes as % of sales	3.2		%	1.4		%	1.8		%			3.4		%	1.2		%	2.2		%
Net income (loss) as % of sales	.7		%	-30.5		%	31.2		%			1.4		%	-9.8		%	11.2		%

Net Sales.  Net sales of $54,606,000 in the third quarter of 2004 were 24.1% above net sales of $43,993,000 for the same three months of 2003.  Sales for the nine months ended September 30, 2004 totaled $159,853,000, a 20.7% increase over sales of $132,389,000 for the nine months ended September 30, 2003.  The table below summarizes the Company’s September 30, 2004 quarter to date and year to date sales by geographical region, with comparisons to the same periods in 2003:

	Three months ended September 30, (dollars inthousands)						Nine months ended September 30, (dollars in thousands)
Sales to Customers in:	2004		2003		% Change		2004		2003		% Change
North America	$	21,496	$	20,487	4.9	%	$	63,047	$	56,832	10.9	%
Europe	21,659		16,576		30.7	%	64,203		53,279		20.5	%
Asia & Other	11,451		6,930		65.2	%	32,603		22,278		46.4	%
	$	54,606	$	43,993	24.1	%	$	159,853	$	132,389	20.7	%

Quarterly sales and year to date sales increased in each area of the world, with the largest percentage increase coming in Asia.  Comparisons for sales in Asia do reflect some impacts of the slowdown in commerce in China during 2003 related to the SARS outbreak.  During that period, travel to complete

15

orders and to finalize arrangements for shipments, such as customers’ approvals of machines prior to shipment, were delayed.   The Company’s expanding manufacturing base in Asia continues to help capture additional share in this expanding market, and is expected to continue to generate year over year improvements.  Sales to customers in Europe increased 30.7% in the third quarter and 20.5% year to date compared to the same periods last year.  Activity has returned to a more normal level after a depressed 2003.

Machine sales represented 69.1% of revenues in the third quarter of 2004 compared to 67.0% during the third quarter of 2003.  Machine sales represented 68.5% of revenues in the nine months ended September 30, 2004 compared to 66.7% during the same period of 2003.  Sales of non-machine products and services, primarily repair parts and accessories, made up the balance.

Orders and Backlog:     The table below summarizes the Company’s orders by geographical region for the three and nine months ended September 30, 2004 compared to the same periods in 2003:

	Three months ended September 30,						Nine months ended September 30,
Orders from Customers in:	2004		2003		% Change		2004		2003		% Change
North America	$	25,221	$	22,867	10.3	%	$	72,296	$	64,136	12.7	%
Europe	22,587		16,360		38.1	%	62,225		47,145		32.0	%
Asia & Other	13,663		11,485		19.0	%	36,928		25,455		45.1	%
	$	61,471	$	50,712	21.2	%	$	171,449	$	136,736	25.4	%

Orders throughout the world are growing due to new products introduced by the Company in late 2003 and early 2004 and also due to the improved economic climate.  The increased North American orders reflect the general increase in manufacturing activity in the U.S.  The increase in European orders reflects an increase in business activity in Europe resulting in increased orders in all of the Company’s product lines.  Orders in Asia continued to grow in 2004, due to increased demand in China and expanded marketing efforts in other areas of Asia.

The Company’s consolidated backlog was $54,279,000 at September 30, 2004. This was 33.4% above the September 30, 2003 backlog of $40,700,000, and 27.0% above the December 31, 2003 backlog of $42,747,000.

The Company’s third quarter 2004 gross margin was 29.5% of sales, compared to 29.1% in the same quarter of 2003.  Year to date 2004 gross margin was 29.4% versus 30.1% in the same period of 2003.  The year to year margin percentages comparisons have been affected by product mix.  Margins on non-machine products and services, which includes repair parts, service, and consumable accessories, generally tend to be higher than margins on machines.  When the company experiences higher growth in machine sales versus non-machines, the overall gross margin percentage tends to be lower.  Product mix within the machine category can have an impact also as the Company typically achieves better margins on its complex, high dollar machines, versus its more standard machine lines.

Selling, General and Administrative Expenses.   Selling, general and administrative (SG&A) expenses were $13,829,000 or 25.3% of net sales during the three months ended September 30, 2004 compared to $11,648,000, or 26.5% of net sales, during the third quarter of 2003. For the first nine months of 2004, SG&A was $39,990,000, or 25.0% of net sales compared to $36,372,000, or 27.5% of net sales, during the same period of 2003.   The increase in expenses for the quarterly and year to date comparisons reflect higher volume based expenses such as commissions to agents and increased promotional expenses, such as the biennial IMTS show which took place in Chicago in September.  The third quarter amount also includes approximately $250,000 of incremental expenses from temporary help and audit fees due to the work the company is performing to document, evaluate, and test its internal controls in compliance with section 404 of the Sarbanes Oxley act.  The Company anticipates spending a similar amount on such services in the fourth quarter.

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Income from Operations.  For the quarter ended September 30, 2004, income from operations was $2,296,000, or 4.2% of sales, compared to $1,141,000, or 2.6% of sales, in the third quarter of 2003. For the first nine months of 2004, income from operations was $7,038,000, or 4.4% of sales, compared to $3,438,000, or 2.6% of sales, for the same period of 2003.  The year on year improvements have occurred as costs have not increased at the same pace as sales.

Interest Expense & Interest Income.  Interest expense for the quarters ended September 30, 2004 and 2003 was $641,000 and $615,000, respectively.  Interest expense was $1,854,000 for the first nine months of 2004 compared to $2,157,000 for the first nine months of 2003.  The year to date comparison decrease reflects lower borrowing levels in the earlier half of 2004.  There was no significant change in interest income from year to year.

Income Taxes/Benefits.   The third quarter 2004 provision for income taxes was $765,000, or 43.3% of pre-tax income, compared to $13,718,000 tax expense in the third quarter of 2003.  Third quarter 2003 income tax expense included a charge of $13,694,000 to provide a 100% valuation allowance for the Company’s U.S. deferred tax assets in accordance with FAS 109.  For the first nine months of 2004, income tax expense was $1,790,000, or 32.6% of pre-tax income, compared to $13,951,000 tax expense for the first nine months of 2003.  The difference in the three and nine months ended September 30, 2004 tax rates is due to changes in forecasted pre-tax results and taxes thereon for the year.  Each quarter, the Company estimates its full year tax rate based upon its most recent forecast of full year anticipated results and adjusts year to date tax expense to reflect its full year anticipated tax rate.  Consistent with accounting for taxes under FAS109, no tax benefits were recorded as a result of the pre-tax loss of the U.S. operations for the third quarter or first nine months of 2004 or 2003, which, if booked, would have partially offset the taxes accrued for pre-tax earnings from profitable foreign subsidiaries.  The impact of losses in the U.S. combined with taxable earnings on other jurisdictions can create unusual consolidated tax rates and will result in rates different than the U.S. statutory rate.

In October 2004, Congress passed the American Job Creation Act of 2004, which includes some tax relief provisions.  The Company is currently assessing the effects of the act.

Minority Interest In (Profit) of Consolidated Subsidiary.  The Company has a 51% interest in Hardinge Taiwan Precision Machinery Limited, an entity which is recorded as a consolidated subsidiary. For the quarter ended September 30, 2004 and 2003, respectively, reductions in net income of $600,000 and $374,000 represented the minority stockholders’ 49% share in the joint venture’s net income. The elimination of minority interest for the nine months ended September 30, 2004 and 2003, respectively was $1,518,000 and $691,000.  This operation has accounted for a large part of Hardinge’s sales increase on a year to year basis and has generated increasing profits for the Company.

Profit In Investment of Equity Company.  The Company was 50% owner of Hardinge EMAG GmbH, until the Company sold this investment in December 2003. The Company’s 50% share of that joint venture’s profits contributed $39,000 and $75,000 to the Company’s consolidated results in the third quarter and first nine months of 2003, respectively.

Net Income/(Loss).  Net income for the third quarter of 2004 was $400,000, or $.05 per basic and diluted share, and $2,185,000 or $.25 per basic and diluted share for the nine months ended September 30, 2004.  In the period ended September 30, 2003, the Company recorded a net loss of ($13,430,000), or ($1.54) per basic and diluted share for the quarter and a net loss of ($12,947,000), or ($1.49) per basic and diluted share year to date.  The $13,694,000 charge for the higher tax provision for the valuation allowance for U. S. deferred tax assets contributed to the net loss of ($13,430,000) for the quarter ended September 30, 2003.

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Liquidity and Capital Resources

The Company’s current ratio at September 30, 2004 was 3.23:1, compared to 3.34:1 at December 31, 2003.

As shown in the consolidated statements of cash flows, the Company used cash of $5,318,000 in its operating activities during the first nine months of 2004, compared to generating cash of $13,460,000 from operating activities in the first nine months of 2003.

During the first nine months of 2004, cash was impacted by increases in accounts receivable of $8,935,000, increases in inventories of $6,959,000, and decreases in accrued expenses of $7,093,000.  These uses of cash were partially offset by an increase in accounts payable of $6,516,000.  The accounts receivable increase results from the high shipment level in the second and third quarters of 2004 with a large percentage of the third quarter shipments occurring in September.  Worldwide inventory increased during the period as production was increased to reflect current and anticipated order rates.  Accrued expenses decreased due to year to date pension payments made by the Company and decreases in the amounts the Company holds for prepayments from deposits from customers, primarily on international orders that shipped in the first half of the year.  The largest changes that occurred in the comparable period of 2003 included a decrease in inventory of $6,106,000 as production levels were decreasing at that time and a refund of U.S. taxes of $7,144,000 based on returns filed for the year ended December 31, 2002.

Cash used in investing activities increased by $1,671,000 between the first nine months of 2003 and 2004, with the entire amount reflecting capital expenditures. The Company is expanding its manufacturing capacity in China and continues to upgrade its accessory manufacturing in the U.S.  For the nine months ended September 30, 2004, total capital expenditures were $2,852,000.  Total 2004 capital expenditures are projected to be in the range of $3,000,000 to $4,000,000 and are expected to be financed through operations or available bank borrowings.

Cash provided by financing activities was $7,726,000 for the first nine months of 2004 compared to cash used of $11,073,000 for the same period in 2003.  Debt increased $8,091,000 during the first nine months of 2004, due partially to the Company making total contributions of $3,770,000 to its domestic pension plan.  Also, annual tax payments were made in the third quarter of 2004 for the Company’s Swiss operations totaling $1,000,000.  The rest of the 2004 increase in debt was used to fund working capital growth as inventory and receivables reflect higher production levels and higher shipment levels.  In the first nine months of 2003, the cash generated from operations allowed the Company to reduce debt by $11,011,000.

Hardinge maintains various borrowing arrangements.  These include a revolving loan agreement with a group of U.S. banks, which expires in October 2005, providing for borrowings of up to $30,000,000, secured by substantially all of the Company’s domestic assets other than real estate and by a pledge of two-thirds of its investment in its Canadian and European subsidiaries. At September 30, 2004, borrowings under this agreement totaled $10,000,000.  The Company also has a term loan with substantially the same security and financial covenants as provided under the revolving loan agreement described above.  The balance on this term loan as of September 30, 2004 was $14,600,000.  This loan provides for quarterly payments of $1,200,000 through March 2007.  An additional loan agreement with another U.S. bank provides for borrowings up to $8,000,000, of which $3,120,000 was borrowed at September 30, 2004.

The Company’s Swiss subsidiaries maintain unsecured overdraft facilities with commercial banks, providing borrowing up to 9,500,000 Swiss Francs or approximately $7,617,000, and borrowings under these facilities were $1,896,000 at September 30, 2004.  The Company’s Swiss subsidiaries also have loan agreements with a Swiss bank which provide for borrowings up to 7,500,000 Swiss Francs, or approximately $6,014,000.  These facilities, which are secured by the real property owned by the two Swiss subsidiaries did not have any borrowings at September 30, 2004.

These and other borrowing agreements provide for borrowing availability of up to $68,406,000, of which $31,335,000, or 45.8%, was borrowed as of September 30, 2004.

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This report contains statements of a forward-looking nature relating to the financial performance of Hardinge Inc. Such statements are based upon information known to management at this time.  The company cautions that such statements necessarily involve uncertainties and risk and deal with matters beyond the company’s ability to control, and in many cases the company cannot predict what factors would cause actual results to differ materially from those indicated.  Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are fluctuations in the machine tool business cycles, changes in general economic conditions in the U.S. or internationally, the mix of products sold and the profit margins thereon, the relative success of the company’s entry into new product and geographic markets, the company’s ability to manage its operating costs, actions taken by customers such as order cancellations or reduced bookings by customers or distributors, competitors’ actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability and cost of materials and supplies, the implementation of new technologies and currency fluctuations.  Any forward-looking statement should be considered in light of these factors.  The company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy.

PART I.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

All quantitative and qualitative disclosures about market risk were disclosed in the Company’s 2003 10K and there have been no changes in those disclosures.

ITEM 4.  CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2004 and has concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2004.  There were no material changes in the Company’s internal control over financial reporting during the third quarter of 2004.

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PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

None

Item 2.  Changes in Securities

The following tables provides information about issuer repurchases of our common stock by month for the quarter ended September 30, 2004:

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased	Average Price Paid per Share
July 1 - July 31, 2004	4,000	$	12.30
August 1 - August 31, 2004	60	$	12.19
September 1 - September 30, 2004	0
Total	4,060

The above shares were repurchased as part of the Company’s Incentive Compensation Plan to satisfy tax withholding obligations due to the vesting of restricted stock and the exercise of stock options.

Item 3.  Default upon Senior Securities

None

Item 4.  Submission of Matters to a Vote of Security Holders

None

Item 5.  Other Information

Hardinge’s (the “Company”) independent auditor, Ernst & Young LLP (“E&Y”) has recently notified the Audit Committee of the Company’s Board of Directors that certain non-audit work performed by an E&Y affiliate in Taiwan for a subsidiary of the Company has raised concerns regarding E&Y’s independence with respect to its performance of audit services for the Company.

E&Y disclosed that, during fiscal years 2001, 2002, 2003 and 2004, its affiliate in Taiwan held employment tax related funds of a de minimis amount and made payment of such funds to the applicable tax authority for several employees of a subsidiary of the Company in Taiwan.  Custody of the assets of an audit client are not permitted under the auditor independence rules set forth in Regulation S-X promulgated by the SEC.  The actions by the E&Y affiliate in Taiwan that are not permitted under the SEC rules and regulations have been discontinued.  The Audit Committee of the Board of Directors of the Company met on November 2, 2004 to consider the impact of this matter on the independence of E&Y as external auditor for the Company.  Both the Audit Committee and E&Y have considered the impact that the holding and paying of these funds may have had on E&Y’s independence with respect to the Company and have each independently concluded that there has been no impairment of E&Y’s independence.  In making this determination, the Audit Committee considered the de minimis amount of funds involved, the ministerial nature of the actions, the minimal fees associated with this service which amounted to approximately $300 per year, and that E&Y was in no way acting as management in performing this function. The Audit Committee and E&Y continue to evaluate and review matters relevant to the maintenance of E&Y’s independence.

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Item 6.  Exhibits and Reports on Form 8-K

  A.Exhibits

10.1Asset Purchase Agreement dated November 3, 2004 by and between BPT IP LLC and Hardinge Inc.

31.1Chief Executive Officer Certification pursuant to Rule 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2Chief Financial Officer Certification pursuant to Rule 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  B.Reports on Form 8-K:

Current Report on Form 8-K, filed August 2, 2004 in connection with a July 29, 2004 press release announcing the Company’s 2004 second quarter results and the declaration of a dividend payment.

Current Report on Form 8-K, filed October 4, 2004 to disclose that the Board of Directors amended the Corporations By-Laws on September 28, 2004.

Current Report on Form 8-K, filed November 5, 2004 in connection with a November 3, 2004 press release announcing that the Company has purchased the intellectual property rights associated with Bridgeport’s worldwide operations from Bridgeport International, a portfolio company of American Strategies Ltd.

Current Report on Form 8-K, filed November 5, 2004 in connection with a November 4, 2004 press release announcing the Company’s 2004 third quarter results.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Hardinge Inc.
November 9, 2004	By:	/s/ J. Patrick Ervin
Date		J. Patrick Ervin
		Chairman of the Board, President/CEO
November 9, 2004	By:	/s/ Richard L. Simons
Date		Richard L. Simons
		Executive Vice President/CFO
		(Principal Financial Officer)

22

EX-10.1

EHIBIT 10.1

ASSET PURCHASE AGREEMENT

DATED AS OF

NOVEMBER 3, 2004

BY AND BETWEEN

BPT IP LLC

AND

HARDINGE, INC.

TABLE OF CONTENTS

DESCRIPTION
ARTICLE I - DEFINITIONS
	Section 1.1	Definitions
	Section 1.2	Construction
ARTICLE II - PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
	Section 2.1	Purchase of Assets and Assumption of Liabilities
	Section 2.2	Purchased Assets
	Section 2.3	Excluded Assets
	Section 2.4	Excluded Liabilities
ARTICLE III - PURCHASE PRICE AND CLOSING
	Section 3.1	Closing
	Section 3.2	Purchase Price
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER
	Section 4.1	Organization
	Section 4.2	Authorization of Transaction
	Section 4.3	Noncontravention; Consents
	Section 4.4	Permits
	Section 4.5	Intellectual Property
	Section 4.6	Litigation
	Section 4.7	Legal Compliance
	Section 4.8	Contracts
	Section 4.9	Brokers’ Fees
	Section 4.10	No Operations
	Section 4.11	Title
	Section 4.12	LIMITATION ON WARRANTIES
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER
	Section 5.1	Organization
	Section 5.2	Authorization of Transaction
	Section 5.3	Noncontravention; Consents
	Section 5.4	Litigation
	Section 5.5	Availability of Funds
	Section 5.6	Brokers’ Fees
	Section 5.7	LIMITATION ON THE SELLER’S WARRANTIES
ARTICLE VI - COVENANTS
	Section 6.1	General
	Section 6.2	Post-Closing Consents
	Section 6.3	Litigation Support
	Section 6.4	Use of Excluded Names
ARTICLE VII - CLOSING DELIVERIES
	Section 7.1	Closing Deliveries of the Seller
	Section 7.2	Closing Deliveries of the Buyer

	Section 7.3	Conditions to Buyer’s Performance
ARTICLE VIII - LICENCE BACK OF INTELLECTUAL PROPERTY
	Section 8.1
	Section 8.2
ARTICLE IX - REMEDIES
	Section 9.1	Survival
	Section 9.2	Indemnification by the Seller
	Section 9.3	Indemnification by the Buyer
	Section 9.4	Procedures for Indemnification
	Section 9.5	Certain Limitations
	Section 9.6	Certain Benefits
	Section 9.7	Treatment of Indemnity Payments
	Section 9.8	Exclusive Remedy
	Section 9.9	Mitigation
ARTICLE IX - MISCELLANEOUS
	Section 10.1	Notices
	Section 10.2	Expenses; No Offset
	Section 10.3	Disclosure Schedules
	Section 10.4	Publicity
	Section 10.5	SEC Filing
	Section 10.6	Transfer Taxes; Bulk Sales or Transfer Laws
	Section 10.7	Assignment; Successors and Assigns
	Section 10.8	Amendment; Waiver
	Section 10.9	Severability; Specific Performance
	Section 10.10	Counterparts
	Section 10.11	Descriptive Headings
	Section 10.12	No Third-Party Beneficiaries
	Section 10.13	Entire Agreement
	Section 10.14	Exhibits and Schedules
	Section 10.15	Governing Law

ii

EXHIBITS:
Exhibit A	Bill of Sale and Assignment and Assumption Agreement
Exhibit B	Assignment of Patent
Exhibit C	Assignment of Trademarks
DISCLOSURE SCHEDULES:
Schedule 1.1	Knowledge of Sellers
Schedule 2.2(a)(i)	Purchased Patents
Schedule 2.2(a)(ii)	Purchased Trademarks
Schedule 2.2(a)(iii)	Purchased Copyrights
Schedule 2.2(b)	Purchased Contracts
Schedule 2.3	Excluded Assets
Schedule 4.3	Noncontravention; Consents
Schedule 4.5	Intellectual Property
Schedule 4.6	Litigation
Schedule 4.7	Legal Compliance
Schedule 4.9	Broker’s Fees

iii

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “Agreement”) dated as of November 3, 2004 is made by and between BPT IP LLC, a Delaware limited liability company (the “Seller”), andHARDINGE, INC., a New Yorkcorporation (the “Buyer”).

WHEREAS, the Seller owns and holds certain Contracts and intellectual property assets for the use of certain of its Affiliates.

WHEREAS, Hardinge Machine Tools Limited (“HTML”), an English company and Affiliate of the Buyer, is simultaneously entering into an Asset SaleAgreement (the “British Asset Sale Agreement”) with Bridgeport Machines Limited (“BML”), an Englishcompany and Affiliate of the Seller and its administrative receivers, to purchase certain assets from BML for a purchase price of US$4,464,778 (the “British Transaction”).

WHEREAS, this Agreement contemplates a transaction in which the Buyer will acquire certain Contracts and Intellectual Property assets of the Seller on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, and for other good and valuable consideration, the value, receipt and sufficiency of which are acknowledged, the Parties hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1            Definitions.  For purposes of this Agreement, the following terms have the meanings set forth below:

“Affiliates” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.

“Agreement” has the meaning set forth in the Preamble.

“Ancillary Documents” means the Bill of Sale and Assignment and Assumption Agreement, the Assignment of Patent, the Assignment of Trademarks and each certificate and other document to be delivered pursuant to Article VII.

“Assignment of Patents” has the meaning set forth in Section 7.1(b).

“Assignment of Trademarks” has the meaning set forth in Section 7.1(c).

“Basket Amount” has the meaning set forth in Section 9.2(b).

“Bill of Sale and Assignment and Assumption Agreement” has the meaning set forth in Section 7.1(a).

“BML” has the meaning set forth in the Preamble.

1

“British Asset Sale Agreement” has the meaning set forth in the Preamble.

“British Transaction” has the meaning set forth in the Preamble.

“Buyer” has the meaning set forth in the Preamble.

“Buyer Claims” has the meaning set forth in Section 9.2(a).

“Buyer Indemnified Party” has the meaning set forth in Section 9.2(a).

“Buyer Material Adverse Effect” has the meaning set forth in Section 5.1.

“Ceiling Amount” has the meaning set forth in Section 9.2(b).

“Claims” has the meaning set forth in Section 9.3(a).

“Closing Date” has the meaning set forth in Section 3.1.

“Closing” has the meaning set forth in Section 3.1.

“Contract” means an agreement, commitment or other binding obligation to which the Seller is a party in connection with the Purchased Assets.

“Disclosure Schedules” means all of the disclosure schedules accompanying this Agreement.

“Excluded Assets” has the meaning set forth in Section 2.3.

“Excluded Liabilities” has the meaning set forth in Section 2.5.

“Excluded Names” means BPT IP, LLC, and any derivations thereof.

“Governmental Entity” means the United States, any state or other political subdivision thereof and any other foreign or domestic entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission, court, tribunal or instrumentality of the United States or any foreign entity, any state of the United States, or any political subdivision of any of the foregoing.

“Indemnified Party” has the meaning set forth in Section 9.4(a).

“Indemnifying Party” has the meaning set forth in Section 9.4(a).

“Intellectual Property” has the meaning set forth in Section 2.2(a).

“Law” means any applicable federal, state, local or foreignlaw, statute, rule, regulation, ordinance, permit, order, writ, injunction, judgment or decree of any Governmental Entity.

“Lien” means any lien, pledge, security interest, charge, claim or other encumbrance.

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“Losses” means any losses, damages, penalties, fines, costs and expenses (including reasonable and documented attorneys’ and accountants’ fees and disbursements).

“Material Adverse Effect” means a material adverse effect on the value of the Purchased Assets taken as a whole (and for these purposes a series of related effects shall be considered as one “effect”) ; provided, however, that “Material Adverse Effect” shall not include any of the following: (a) changes in securities markets or general economic, regulatory or political conditions in the United States not uniquely related to the Seller (including terrorism or the escalation of any war whether declared or undeclared or other hostilities), (b) changes or effects arising out of, or attributable to, the announcement of the execution of this Agreement, the consummation of the transactions contemplated hereby or the identity of the Buyer or (c) effects due to changes in any Laws affecting the Purchased Assets.

“Parties” means the Seller and the Buyer together, and “Party” means the Seller or the Buyer individually, as the case may be.

“Permits” means any license, permit, franchise, certificate of authority or order, or any waiver of the foregoing, issued by any Governmental Entity.

“Permitted Encumbrances” means any (a) mechanics’, materialmens’ and similar Liens with respect to amounts not yet due and payable, (b) Liens for Taxes not yet due and payable or the validity of which is being contested in good faith by appropriate proceedings, and (c) such other encumbrances or imperfections in or failure of title which would not reasonably be expected to have a Material Adverse Effect.

“Person” means an individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization or Governmental Entity.

“Purchase Price” has the meaning set forth in Section 3.2.

“Purchased Assets” has the meaning set forth in Section 2.2.

“Schedule” means a schedule to this Agreement that is contained in the Disclosure Schedules and incorporated herein pursuant to Section 12.12.

“Seller” has the meaning set forth in the Preamble.

“Seller Claims” has the meaning set forth in Section 9.3(a).

“Seller Indemnified Parties” has the meaning set forth in Section 9.3(a).

“Seller’s Knowledge” means the actual knowledge of the individuals listed on Schedule 1.1.

“Tax” or “Taxes” means a tax or taxes of any kind or nature, however denominated.

“Third Party Claim” has the meaning set forth in Section 9.4(a).

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Section 1.2            Construction.

(a)           For purposes of this Agreement, whenever the context requires, the singular number will include the plural, and vice versa, the masculine gender will include the feminine and neuter genders, the feminine gender will include the masculine and neuter genders, and the neuter gender will include masculine and feminine genders.

(b)           As used in this Agreement, the words “include” and “including,” and variations thereof, will not be deemed to be terms of limitation, but rather will be deemed to be followed by the words “without limitation.”

(c)           Except as otherwise indicated, all references in this Agreement to “Sections” and “Exhibits” are intended to refer to Sections and Exhibits to this Agreement.

(d)           As used in this Agreement, the terms “hereof,” “hereunder,” “herein” and words of similar import will refer to this Agreement as a whole and not to any particular provision of this Agreement.

(e)           Each Party hereto has participated in the drafting of this Agreement, which each Party acknowledges is the result of extensive negotiations between the parties.  Consequently, this Agreement will be interpreted without reference to any rule or precept of law that states that any ambiguity in a document be construed against the drafter.

ARTICLE II
PURCHASE AND SALE OF ASSETS AND ASSUMPTION
OF LIABILITIES

Section 2.1            Purchase of Assets and Assumption of Liabilities.  On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Buyer will purchase from the Seller, and the Seller will sell, transfer, assign, convey and deliver to the Buyer, the Purchased Assets.

Section 2.2            Purchased Assets.  The “Purchased Assets” are all of the right, title and interest, as the same may exist on the Closing Date, that the Seller possesses and has the right to transfer in and to the following:

(a)           intellectual and proprietary property of the Seller which is owned, used or held for use (other than the Excluded Assets), by the Seller as it exists in any jurisdiction (the “Intellectual Property”), including, without limitation, the following:

(i)            United States and foreign patents, patent applications and other patent rights (including, without limitation, any divisions, continuations, continuations-in-part, renewals, substitutions or reissues thereof, whether or not patents are issued on any such applications and whether or not any such applications are amended, modified, withdrawn or re-filled), and improvements thereto, including the patents and patent applications set forth on Schedule 2.2(a)(i);

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(ii)           United States, state and foreign trademarks, service marks, trade dress, trade names, brand names, Internet domain names, websites or web pages, designs, logos, and corporate names (including, in each case, the goodwill associated therewith), whether registered or unregistered, and all registrations and applications or registration thereof, including the trademarks and trademark registrations set forth on Schedule 2.2(a)(ii);

(iii)          United States and foreign copyrights, whether registered or unregistered, including all renewals and extensions thereof, copyright registrations and applications for registration thereof, including the copyrights and copyright registrations set forth on Schedule 2.2(a)(iii);

(iv)          computer software programs and software systems, including, without limitation, all databases, compilations, tool sets, compilers, related source codes, object code, and any other code in human readable form, and all documentation related thereto;

(v)           trade secrets, including, without limitation, all confidential designs, research and development information, technical information, specifications, operating and maintenance manuals, methods, technology, engineering data and drawings, ideas, concepts, know-how, processes, proprietary data, formulae, algorithms, customer lists, mailing lists, business plans, mask words, inventions and discoveries, industrial designs and other proprietary information, whether or not patentable or subject to copyright, mask work, or other similar protection;

(vi)          all licenses, sublicenses, and other agreements or permissions related to the property described in Clause (i) through Clause (v);

(vii)         The rights to sue for, and remedies against, past, present, and future misappropriations and infringements thereof, and the rights of priority and protection of interests therein under applicable laws and all documentation that embodies or relates to the property described in Clause (i) through Clause (v);

(b)           those Contracts specifically set forth on Schedule 2.2(b); and

(c)           All other assets of Seller, tangible or intangible, except as specifically set forth on Schedule 2.3.

Section 2.3            Excluded Assets.  The Purchased Assets will include all assets of Seller other than those described in Schedule 2.3.  The Seller or one of its Affiliates will retain all of its right, title and interest in and to, and will not sell, transfer, assign, convey or deliver to the Buyer, and the Purchased Assets will not include, the “Technical Information”, as that term is defined in the alliance agreement by and between Seller and Buyer and dated as of the date hereof.

Section 2.4            Excluded Liabilities.  The Buyer will not assume or become responsible for, and will not be deemed to have assumed or to have become responsible for, any liability or obligation arising out of or related to (a) any Excluded Asset or (b) the ownership, use or operation of the Assets prior to the Closing Date (together, the “Excluded Liabilities”).   The

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Buyer acknowledges and agrees that theBuyer shall assume and is responsible for any liability or obligation arising out of or related to the ownership, use or operation of the Assets after the Closing Date.

ARTICLE III
PURCHASE PRICE AND CLOSING

Section 3.1            Closing.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur concurrent with the execution of this Agreement, unless another date is agreed upon in writing by the Parties hereto or on such other date as the Parties may agree.  The date on which the Closing actually occurs shall be referred to as the “Closing Date”.

Section 3.2            Purchase Price.  On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Buyer will pay and deliver to the Seller $6,500,000 (the “Purchase Price”), in cash by wire transfer of immediately available funds to an account or accounts designated by the Seller.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER

The Seller represents and warrants as of the date hereof to the Buyer as follows:

Section 4.1            Organization.  The Seller is a limited liability companyduly organized, validly existing and in good standing under the laws of the State of Delaware.  The Seller is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification or license is required, except where the failure to so qualify or be so licensed would not reasonably be expected to result in a Material Adverse Effect.  The Seller has all requisite corporate power and authority to own, hold or otherwise possess, as the case may be, the Purchased Assets.

Section 4.2            Authorization of Transaction.  The Seller has all requisite corporate power and authority to execute, deliver and perform this Agreement and each of the Ancillary Documents to which it is a party.  This Agreement constitutes, and each of the Ancillary Documents when executed and delivered by the Seller will constitute a valid and legally binding obligation of the Seller (assuming that this Agreement and such Ancillary Documents constitute valid and legally binding obligations of the other parties thereto), enforceable in accordance with its terms and conditions, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights, or by general equity principles, including principles of commercial reasonableness, good faith and fair dealing.

Section 4.3            Noncontravention; Consents.

(a)           Except (i) for filings to be made with the United States Patent, Trademark and Copyright offices (or their respective foreign equivalents, if necessary) in connection with the registration and/or transfer of Intellectual Property or (ii) as set forth on Schedule 4.3, the execution and delivery by the Seller of this Agreement and the Ancillary Documents to which it is a party, and the consummation by the Seller of the transactions contemplated hereby and

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thereby, do not: (i) to the Seller’s Knowledge, violate any material applicable Law to which the Purchased Assets are subject; (ii) conflict with or result in a breach of any provision of the certificate of formation or operating agreement of the Seller; (iii) create a breach, default, termination, cancellation or acceleration of any obligation of the Seller pursuant to any Contracts, which would reasonably be expected to have a Material Adverse Effect; or (iv) result in the creation or imposition of any Lien, other than a Permitted Encumbrance, upon the Purchased Assets.

(b)           Except as set forth on Schedule 4.3, no notices, Permits, consents, approvals, authorizations, qualifications or orders of Governmental Entities or third parties are required for the consummation by the Seller of the transactions contemplated hereby or by the Ancillary Documents, other than such of the foregoing that, if not obtained or made, would not reasonably be expected to have a Material Adverse Effect or have a material adverse effect upon the Seller’s ability to consummate the transactions contemplated by, and discharge its obligations under, this Agreement and the Ancillary Agreements.

Section 4.4            Permits.  The Seller has obtained or applied for, and is in compliance with, all Permits that are required by any Governmental Entity to own, hold or otherwise possess the Purchased Assets, except for such failures to hold or comply with such Permits that would not reasonably be expected to have a Material Adverse Effect.

Section 4.5            Intellectual Property.

(a)           Except as set forth on Schedule 4.5(a), the Seller owns or has the right to use pursuant to license, sublicense, agreement or permission all of the Intellectual Property.

(b)           Except as set forth on Schedule 4.5(b), to the Seller’s Knowledge, the Purchased Assets do not infringe upon or otherwise misappropriate in any material respect any intellectual property rights of third parties, and the Seller has not received, within the past 24 months, any written charge, complaint, claim, demand or notice alleging any such infringement or misappropriation (including any such claim that the Seller must license or refrain from using any intellectual property rights of any third party).  Except as set forth on Schedule 4.5(b), to the Seller’s Knowledge, no third party is currently infringing upon any of the Purchased Assets.

(c)           The Seller has not transferred ownership of, or granted any license of or exercise right to use or authorized the retention of any exclusive rights to use or joint ownership of, any Purchased Asset, to any other Person, except as set forth on Schedule 4.5(c).

(d)           With respect to each item of Intellectual Property, except as set forth in Schedule 4.5(a): (i) to the Seller’s Knowledge, the Seller has the sole and exclusive right to bring actions for infringement, misappropriation, dilution, violation or unauthorized use of such item, and to the Seller’s Knowledge, there is no basis for any such action, (ii) to the Seller’s Knowledge, such item is not subject to any outstanding injunction, judgment, order, decree, ruling or charge, and (iii) the Seller has not agreed to indemnify any Person for or against any interference, infringement, misappropriation or other conflict with respect to such item.

Section 4.6            Litigation.  Except as set forth on Schedule 4.6, there are no legal, administrative, arbitration or other formal proceedings or governmental investigations pending

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or, to the Seller’s Knowledge, threatened, (a) against the Seller relating to the Purchased Assets or (b) that question the validity of this Agreement or any of the Ancillary Documents, or any action taken or to be taken by the Seller in connection with this Agreement or any of the Ancillary Documents.

Section 4.7            Legal Compliance.  Except as set forth on Schedule 4.7, since January 1, 2003, (a) the Seller, in connection with the Purchased Assets, has, to the Seller’s Knowledge, complied in all material respects with all applicable Laws and (b) no action, proceeding, investigation, complaint, demand or notice has been filed or commenced or, to the Seller’s Knowledge, threatened, against the Seller alleging any failure to so comply.

Section 4.8            Contracts.  To the Seller’s Knowledge, each Contract included in the Purchased Assets is a valid, binding and enforceable obligation of the Seller and the other party or parties thereto and is in full force and effect, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights, or by general equity principles, including principles of commercial reasonableness, good faith and fair dealing.  Neither the Seller nor, to the Seller’s Knowledge, any other party to a Contract included in the Purchased Assets is in breach of any material term of such Contract.

Section 4.9            Brokers’ Fees.  Except as set forth on Schedule 4.9, the Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

Section 4.10         No Operations.  Since the formation of the Seller, the Seller has operated only as a holding company for the Purchased Assets and has never operated as a going concern.

Section 4.11         Title. Except as set forth in Schedule 4.5(a), Seller has good title to all the Purchased Assets.  The Purchased Assets are free and clear of all liens, security interests, mortgages, deeds of trust, pledges, conditional sales contracts, charges, leases, claims, administrative orders or decrees or encumbrances, except for Permitted Encumbrances and except as disclosed in Schedule 4.11.   All of the Purchased Assets are in the possession of Seller.

Section 4.12         LIMITATION ON WARRANTIES.  EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE IV, THE SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF ANY OF THE PURCHASED ASSETS OR OTHERWISE, OR WITH RESPECT TO ANY INFORMATION PROVIDED TO THE BUYER, INCLUDING WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE.  ALL OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY DISCLAIMED.

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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER

The Buyer represents and warrants to the Seller as follows:

Section 5.1            Organization.  The Buyer is a corporationduly organized, validly existing and in good standing under the laws of the state of New York.  The Buyer is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification or license is required, except where the failure to so qualify or be so licensed would not reasonably be expected to adversely affect the Buyer’s ability to consummate the transactions contemplated by, and discharge its obligations under, this Agreement and the Ancillary Documents to which it is a party (a “Buyer Material Adverse Effect”).

Section 5.2            Authorization of Transaction.  The Buyer has all requisite corporate power and authority to execute and deliver this Agreement and each of the Ancillary Documents to which it is a party, and to perform its obligations hereunder and thereunder.  This Agreement constitutes, and each of the Ancillary Documents executed and delivered by the Buyer constitutes, a valid and legally binding obligation of the Buyer (assuming that this Agreement and such Ancillary Documents will constitute valid and legally binding obligations of the other parties thereto), enforceable in accordance with its terms and conditions, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights or by general equity principles, including principles of commercial reasonableness, good faith and fair dealing.

Section 5.3            Noncontravention; Consents.

(a)           The execution and delivery by the Buyer of this Agreement and the Ancillary Documents to which it is a party, and the consummation by the Buyer of the transactions contemplated hereby or thereby, do not: (i) violate any Law to which the Buyer is subject, which would reasonably be expected to have a Buyer Material Adverse Effect (ii) conflict with or result in a breach of any provision of the certificate of incorporation or bylaws of the Buyer, or (iii) create a breach, default, termination, cancellation or acceleration of any obligation under any contract, agreement or binding commitment to which the Buyer is a party or by which the Buyer or any of its assets or properties are bound or subject, which would reasonably be expected to have a Buyer Material Adverse Effect.

(b)           Except for filings to be made with the United States Patent, Trademark and Copyright offices (or their respective foreign equivalents, if necessary) in connection with the registration and/or transfer of Intellectual Property, no notices, licenses, Permits, consents, approvals, authorizations, qualifications or orders of Governmental Entities or third parties are required for the consummation by the Buyer of the transactions contemplated hereby or by the Ancillary Documents, other than such of the foregoing that, if not obtained or made, would not reasonably be expected to have a Buyer Material Adverse Effect.

Section 5.4            Litigation.  There are no legal, administrative, arbitration or other formal proceedings or governmental investigations pending or, to the Buyer’s knowledge, threatened,

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that question the validity of this Agreement or any of the Ancillary Documents, or any action taken or to be taken by the Buyer in connection with this Agreement or any of the Ancillary Documents, other than such of the foregoing that would not reasonably be expected to have a Buyer Material Adverse Effect.

Section 5.5            Availability of Funds.  The Buyer has funds available to it sufficient to pay to the Seller the Purchase Price and to perform all of the Buyer’s obligations pursuant to, and to consummate the transactions contemplated by, this Agreement and each of the Ancillary Documents to which it is a party.

Section 5.6            Brokers’ Fees.  The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

Section 5.7            LIMITATION ON THE SELLER’S WARRANTIES.  THE BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH IN ARTICLE IV, THE SELLER MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF ANY OF THE PURCHASED ASSETS OR OTHERWISE, OR WITH RESPECT TO ANY INFORMATION PROVIDED TO THE BUYER, INCLUDING WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE.

ARTICLE VI
COVENANTS

The Buyer and the Seller agree to the following with respect to the period following the Closing:

Section 6.1            General.  In case at any time after the Closing Date any further action is reasonably necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as the other Party reasonably may request, at the sole cost and expense of the requesting Party (unless otherwise specified herein).

Section 6.2            Post-Closing Consents.  The Seller and the Buyer each will use commercially reasonable efforts after the Closing Date to obtain all consents, approvals or authorizations of any third parties that are not obtained prior to the Closing Date and that are required in connection with the transactions contemplated by this Agreement.

Section 6.3            Litigation Support.  In the event and for so long as either Party is actively contesting or defending against any third party charge, complaint, action, suit, proceeding, hearing, investigation, claim or demand in connection with any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act or transaction involving the Purchased Assets, the other Party will reasonably cooperate with the contesting or defending Party and its counsel in the contest or defense, make available its personnel and provide such testimony and access to its books and records as may be reasonably requested in connection with the contest or defense, at the sole cost and expense of the contesting

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or defending Party (unless such contesting or defending Party is entitled to indemnification therefor under Article IX in which case, the costs and expense will be borne by the Parties as set forth in Article IX).

Section 6.4            Use of Excluded Names.  Except as otherwise expressly provided in this Section 6.4, no interest in or right to use the Excluded Names is being assigned, transferred or otherwise conveyed to the Buyer pursuant to this Agreement.  Neither the Buyer nor any of its Affiliates will use any Excluded Name, trademark, service mark, brand name, certification mark, trade name, corporate name, domain name or other indication of source or origin that is likely to cause confusion with any of the Excluded Names or be associated with the Seller or any of its Affiliates after the Closing Date, except as expressly permitted pursuant to this Section 6.4.  The Parties acknowledge and agree that, pursuant to Section 2.2(a)(ii), the Seller’s interest in the website www.bpt.com shall transfer to the Buyer and that the Buyer’s use thereof following Closing shall not constitute a breach of the Buyer’s obligations under this Section 6.4.

ARTICLE VII
CLOSING DELIVERIES

Section 7.1            Closing Deliveries of the Seller.  At the Closing, the Seller will deliver the following:

(a)           a duly executed counterpart of the bill of sale and assignment and assumption agreement in substantially the form attached hereto as Exhibit A (the “Bill of Sale and Assignment and Assumption Agreement”);

(b)           a duly executed counterpart of the assignment of patents in substantially the form attached hereto as Exhibit B (the “Assignment of Patent”);

(c)           a duly executed counterpart of the assignment of trademarks in substantially the form attached hereto as Exhibit C (the “Assignment of Trademarks”);

(d)           such other instruments of sale, transfer, conveyance and assignment as the Buyer and its counsel may reasonably request to vest in the Buyer all of the Seller’s right, title and interest in and to the Purchased Assets;

(e)           duly executed counterparts of all certificates, instruments and other documents necessary to consummate the British Transaction; and

(f)            Counsel for Seller shall deliver to Buyer a favorable opinion, dated as of the Closing Date and in form and substance reasonably satisfactory (including customary assumptions and qualifications) to Buyer with respect to the matters set forth in sections 4.1, 4.2 and 4.3(a):

Section 7.2            Closing Deliveries of the Buyer.  At the Closing, the Buyer will deliver the following:

(a)           the Purchase Price in cash by wire transfer of immediately available funds to the account or accounts designated by the Seller;

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(b)           a duly executed counterpart of the Bill of Sale and Assignment and Assumption Agreement and such other instruments of assumption as the Seller and its counsel may reasonably request;

(c)           a duly executed counterpart of the Assignment of Patent;

(d)           a duly executed counterpart of the Assignment of Trademarks; and

(e)           duly executed counterparts of all certificates, instruments and other documents necessary to consummate the British Transaction.

Section 7.3            Conditions to Buyer’s Performance

Buyer’s obligations to purchase and pay the purchase price for the Purchased Assets are subject to the following express conditions:

(a)           The representations and warranties of Seller contained in this Agreement shall be true and correct on and as of the Closing Date.

(b)           All of the covenants of Seller set forth herein and which were to be performed at or prior to the Closing Date shall have been duly performed.

(c)           There shall not have been instituted or threatened, on or before the Closing Date, any action or proceeding before any court or governmental agency or body, or by a public authority, with respect to the acquisition of the Purchased Assets as contemplated hereby.

(d)           All agreements between Buyer and another party hereto shall have been fully executed and delivered.  Seller shall have executed and delivered the General Assignment and Bill of Sale and other instruments provided for herein, and such other documents, reasonably satisfactory to Buyer’s counsel, as shall be necessary or appropriate to the transfer of the Purchased Assets to Buyer.

(e)           Seller shall have obtained all required consents or approvals in writing of all parties whose consent or approval is necessary for the transfer of the Purchased Assets.

(f)            Counsel for Seller shall have delivered to Buyer an opinion of counsel as set forth in Paragraph 7.1(f).

ARTICLE VIII
LICENCE BACK OF INTELLECTUAL PROPERTY

The Buyer hereby grants to the Sellers (on behalf of itself and no trust for BML and the Seller’s other Affiliates), effective upon Closing and expiring on the date upon which the licence back of intellectual property rights set forth in section 14 of the British Asset Sale Agreement expires, a non-exclusive, royalty-free, worldwide right and licence to use the Intellectual Property for the purposes of the Seller, BML and the Seller’s other Affiliates marketing and selling any Excluded Assets (as that term is defined in the British Asset Sale Agreement),

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manufacturing products, fulfilling customer orders placed prior to Closing or selling products to other customers as a result of the cancellation of any such orders.

Section 8.2

The Seller’s rights under the licences contained in subsection 8.2 are personal and may not be sublicensed, assigned, or otherwise transferred, except with the consent of the Purchaser and except in the case of any sublicense, assignment of other transfer of such rights to BML.

ARTICLE IX
REMEDIES

Section 9.1            Survival.  The representations and warranties of the Parties contained in this Agreement and in the Ancillary Documents will survive until the one-year anniversary of the Closing Date.  The covenants or agreements of the Parties contained in this Agreement and the Ancillary Documents will survive the Closing indefinitely, except that those covenants and agreements which by their terms are to be performed or observed for shorter periods will survive until the expiration of such shorter period.  Notwithstanding anything to the contrary, no claim may be made with respect to any representations or warranties under this Agreement or any Ancillary Document after the expiration of the applicable survival period set forth in this Section 9.1.

Section 9.2            Indemnification by the Seller.

(a)           Subject to the terms and conditions of this Article IX, the Seller agrees to reimburse, indemnify and hold harmless the Buyer, its directors, officers, employees, agents, representatives and its present and future Affiliates (each, a “Buyer Indemnified Party”) from, against and in respect of any and all Losses incurred by a Buyer Indemnified Party resulting from, or that exist or arise due to, any of the following (collectively, “Buyer Claims”):

(i)            prior to their expiration in accordance with Section 9.1, any inaccuracy of any representation or the breach of any warranty made by the Seller in this Agreement or contained in any Ancillary Document;

(ii)           the nonfulfillment of any covenant or agreement of the Seller pursuant to this Agreement or any Ancillary Document (other than the retention of the Excluded Liabilities by the Seller as set forth in Section 9.2(a)(iii) below); and

(iii)          any of the Excluded Liabilities.

(b)           Notwithstanding Section 9.2(a), the obligations of the Seller pursuant to Section 9.2(a)(i) and 9.2(a)(ii) will: (i) not apply to any Buyer Claims until, and then only to the extent that, the aggregate amount of all Losses incurred by all Buyer Indemnified Parties exceeds 2% of the Purchase Price(the “Basket Amount”); and (ii) be limited to, and will not exceed, the aggregate amount of 30% of the Purchase Price (the “Ceiling Amount”).

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Section 9.3            Indemnification by the Buyer.

(a)           Subject to the terms and conditions of this Article VIII, the Buyer agrees to reimburse, indemnify and hold harmless the Seller, its directors, officers, employees, agents, representatives and its present and future Affiliates (collectively, the “Seller Indemnified Parties”) from, against and in respect of any and all Losses incurred by a Seller Indemnified Party resulting from, or that exist or arise due to, any of the following (collectively “Seller Claims,” and together with Buyer Claims, the “Claims”):

(i)            prior to their expiration in accordance with Section 9.1, any inaccuracy of any representation or the breach of any warranty made by the Buyer in this Agreement or in any Ancillary Document; and

(ii)           the nonfulfillment of any covenant or agreement of the Buyer pursuant to this Agreement or any Ancillary Document.

(b)           Notwithstanding Section 9.3(a), the obligations of the Buyer pursuant to Section 9.3(a)(i) and 9.3(a)(ii) will: (i) not apply to any Seller Claims until, and then only to the extent that, the aggregate amount of all Losses incurred by all Seller Indemnified Parties exceeds the Basket Amount; and (ii) be limited to, and will not exceed, the Ceiling Amount.

Section 9.4            Procedures for Indemnification.

(a)           No party hereto will be liable for any Claim for indemnification under this Article IX unless written notice of a Claim for indemnification is delivered by the party seeking indemnification (the “Indemnified Party”) to the Party from whom indemnification is sought (the “Indemnifying Party”) prior to the expiration of the applicable survival period, if any, set forth in Section 9.1.  If any third party notifies the Indemnified Party with respect to any matter which may give rise to a Claim for indemnification (a “Third Party Claim”) against the Indemnifying Party under this Article IX, then the Indemnified Party will notify the Indemnifying Party promptly thereof in writing and in any event within 15 days after receiving notice from a third party; provided that no delay on the part of the Indemnified Party in notifying the Indemnifying Party will relieve the Indemnifying Party from any obligation hereunder unless the Indemnifying Party is prejudiced thereby.  All notices given pursuant to this Section 9.4 will describe with reasonable specificity the Third Party Claim and the basis of the Indemnified Party’s Claim for indemnification.  Once the Indemnified Party has given notice of the Third Party Claim to the Indemnifying Party, the Indemnifying Party will be entitled to participate therein and, to the extent desired, to assume the defense thereof with counsel of its choice, provided, however, the Indemnified Party may participate (but not control) such defense and after notice of its election to assume the defense thereof, the Indemnifying Party will not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense of the Third Party Claim, other than reasonable costs of investigation, unless the Indemnifying Party does not actually assume the defense thereof following notice of such election.  If the Indemnifying Party does not assume the defense of such Third Party Claim, the Indemnified Party will have the right to undertake the defense of such Third Party Claim, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the Indemnifying Party (subject to the limitations on the Indemnifying Party’s obligations to

14

indemnify otherwise set forth in this Article IX and to the right of the Indemnifying Party to assume the defense of or opposition to such Third Party Claim at any time prior to settlement, compromise or final determination thereof).

(b)           Neither the Indemnified Party nor the Indemnifying Party will consent to the entry or any judgment or enter into any settlement of any Third Party Claim that might give rise to liability of the other Party under this Article IX without such Party’s consent, which will not be unreasonably withheld or delayed.  If the Indemnifying Party elects to settle any such Third Party Claim, and the Indemnified Party refuses to consent to such compromise or settlement, then the liability of the Indemnifying Party to the Indemnified Party will be limited to the amount offered by the Indemnifying Party in compromise or settlement.

Section 9.5            Certain Limitations.

(a)           AN INDEMNIFYING PARTY WILL NOT BE LIABLE UNDER THIS ARTICLE IX IN RESPECT OF A CLAIM FOR INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING CONSEQUENTIAL DAMAGES RESULTING FROM BUSINESS INTERRUPTION OR LOST PROFITS.

(b)           The obligations of the Indemnifying Party to provide indemnification under this Article IX will be terminated, modified or abated as appropriate to the extent that the underlying Claim (i) would not have arisen but for a voluntary act that is carried out at the express written request of, or with the express written approval, concurrence of or with the knowing assistance of the Indemnified Party, (ii) is based, in whole or in part, on the negligence, bad faith or willful misconduct of the Indemnified Party, or (iii) relates to the inaccuracy or breach of a representation, warranty, covenant or agreement set forth in this Agreement of which the Indemnified Party had knowledge prior to the Closing.  For purposes of this Section 9.5, “voluntary” will mean an act other than any act which is required to be taken by Law or which, if taken, would constitute prudent business practice.

Section 9.6            Certain Benefits.  The amount of any indemnification payable under this Article IX will be net of (a) any Tax benefits that the Indemnified Party receives or is entitled to by reason of the Claim giving rise to the indemnification payment and (b) the receipt of any insurance proceeds paid or payable to the Indemnified Party under any policies of insurance covering the Loss giving rise to the Claim.  The Indemnified Party will use commercially reasonable efforts to collect any such insurance and will account to the Indemnifying Party therefor.  If, at any time subsequent to the Indemnified Party receiving an indemnity payment for a Claim under this Article IX, the Indemnified Party receives payment in respect of the Loss underlying such Claim through recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against another Person, the amount of such payment, less any costs, expenses or premiums incurred directly in connection therewith, will promptly be repaid by the Indemnified Party to the Indemnifying Party.

Section 9.7            Treatment of Indemnity Payments.  All indemnification payments made pursuant to this Agreement will be treated by the Parties as adjustments to the Purchase Price.

15

Section 9.8            Exclusive Remedy.  Other than as set forth in Section 9.9, the remedies provided in this Article IX will be the sole and exclusive remedies of the Parties for all disputes arising out of or relating to this Agreement or any Ancillary Document, and will supersede and replace all other rights and remedies that any of the Parties may have under any Law.

Section 9.9            Mitigation.  Each Party agrees to use commercially reasonable efforts to mitigate any Loss which forms the basis of a Claim hereunder.

ARTICLE X
MISCELLANEOUS

Section 10.1         Notices.  Any notice, request, instruction or other document to be given hereunder will be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by facsimile, according to the instructions set forth below. Such notices will be deemed given: at the time delivered by hand, if personally delivered; at the time received if sent by registered or certified mail; and at the time when confirmation of successful transmission is received by the sending facsimile machine if sent by facsimile.

If to the Seller:	BPT IP LLC C/o American Capital Strategies, Inc. 2 Bethesda Metro Center 14th Floor Bethesda, MD 20814, USA Attention: Facsimile No.:
If to the Buyer:	HARDINGE, INC. 1 Hardinge Drive, Elmira, NY, 14902-1507, USA Attention: Facsimile No.:

or to such other address or to the attention of such other party that the recipient party has specified by prior written notice to the sending party in accordance with the preceding.

Section 10.2         Expenses; No Offset.  Except as expressly provided in this Agreement, each of the Buyer and the Seller, and their respective Affiliates, will bear its own costs and expenses (including legal, accounting and investment banking fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby, whether or not such transactions are consummated.  Neither Party may make any offset against amounts due to the other Party pursuant to this Agreement, the Ancillary Documents or otherwise.  Without limiting

16

the foregoing, any fees or expenses necessary to transfer any Intellectual Property or any Contract after the Closing Date shall be the sole responsibility of the Buyer.

Section 10.3         Disclosure Schedules.  The representations and warranties of the Seller set forth in this Agreement are made and given subject to the disclosures contained in the Disclosure Schedules.  The Seller will not be or be deemed to be in breach of any such representations and warranties (and no claim will lie in respect thereof) in respect of any such matter so disclosed in the Disclosure Schedules.  Where only brief particulars of a matter are set out or referred to in the Disclosure Schedules, or a reference is made only to a particular part of a disclosed document, full particulars of the matter and the full contents of the document are deemed to be disclosed where such brief particulars are reasonably sufficient to place Purchase on notice.  Inclusion of information in the Disclosure Schedules will not be construed as an admission that such information is material to the Seller or the Purchased Assets, taken as a whole.  The specific disclosures set forth in the Disclosure Schedules have been organized to correspond to section references in this Agreement to which the disclosure may be most likely to relate, together with appropriate cross references when disclosure is applicable to other sections of this Agreement; provided, however, that any disclosure in the Disclosure Schedules will apply to and will be deemed to be disclosed for the purposes of this Agreement generally.  In the event that there is any inconsistency between this Agreement and matters disclosed in the Disclosure Schedules, information contained in the Disclosure Schedules will prevail and will be deemed to be the relevant disclosure.

Section 10.4         Publicity  Except as required by law or applicable regulation, including, but not limited to, the reporting and disclosure requirements under U.S. securities laws, and subject to the provisions of section 10.5, none of the parties will disclose or make public the terms or existence of this Agreement without the prior written consent of the other parties hereto.  Any public announcement or similar publicity with respect to this Agreement or the transactions contemplated herein will be issued, if at all, at such time and in such manner as the parties mutually agree.  Notwithstanding this Section 10.4, a party may disclose the terms of this Agreement to a third party (the “Potential Buyer”) with whom it is in good faith negotiations for the proposed acquisition of Control of such party or of a portion of the business of such party by the Potential Buyer, provided that three (3) days’ prior written notice has been provided to the other parties hereto and provided further that such party and the Potential Buyer have entered into a binding written agreement pursuant to which the Potential Buyer is required to keep the terms of this Agreement confidential.

Section 10.5         SEC Filing  The parties acknowledge that the transactions contemplated by this Agreement will give rise to an obligation upon the Buyer to disclose the terms of this Agreement pursuant to federal securities laws.  Hardinge agrees that it will (i) solely with respect to the first filing of this Agreement with respect to federal securities laws, consult with the Seller prior to any such disclosure in order to allow the Seller to comment on the content and form of the proposed disclosure, provided however that the final form and content of any such proposed disclosure shall be within the sole discretion of the Buyer, (ii) use good faith efforts to seek and obtain protective or other confidentiality orders with respect to such of the terms of this Agreement as the Buyer in its sole discretion determines, (iii) except as required by law or applicable regulation, including but not limited to the reporting and disclosure requirements under U.S. securities laws, not disclose, prior to a written decision by the Securities and Exchange Commission (“SEC”) on any confidential information request made by the Buyer,

17

any specific information that is the subject of such confidential information request, (iv) except as required by law or applicable regulation, including but not limited to the reporting and disclosure requirements under U.S. securities laws, commencing on the date of the SEC’s written decision on such confidential information request and ending on the expiration of the period for which the SEC grants any confidential treatment, not disclose any specific information in respect of which the SEC grants confidential treatment, and (v) promptly provide the Seller with a copy of all correspondence to and from the SEC concerning such confidential information request, including but not limited to copies of the confidential treatment itself and of the SEC’s written decision in respect thereof.

Section 10.6         Transfer Taxes; Bulk Sales or Transfer Laws.  The Buyer will pay all Taxes that are required to be paid in respect of any transfer, sales, use, recording, value-added or similar Taxes that may be imposed by reason of the sale, assignment, transfer and delivery of the Purchased Assets.  The Buyer will timely file all Tax Returns required to be filed in connection with the payment of such Taxes.  The Buyer waives compliance by the Seller with the provisions of any bulk sales laws that may be applicable to the transactions contemplated by this Agreement.

Section 10.7         Assignment; Successors and Assigns.  Neither this Agreement nor any of the rights, interests or obligations provided by this Agreement may be assigned by either Party (whether by operation of Law or otherwise) without the prior written consent of the other Party.  Subject to the preceding sentence and except as otherwise expressly provided herein, this Agreement will be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

Section 10.8         Amendment; Waiver.  This Agreement may be amended by a written instrument executed and delivered by the Seller and the Buyer.  At any time prior to the Closing, the Parties may extend the time for performance of or waive compliance with any of the covenants or agreements of the other Party to this Agreement, and may waive any breach of the representations or warranties of such other Party.  No agreement extending or waiving any provision of this Agreement will be valid or binding unless it is in writing and is executed and delivered by or on behalf of the Party against which it is sought to be enforced.

Section 10.9         Severability; Specific Performance.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable Law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.  Each Party acknowledges and agrees that the other Party may be irreparably damaged if any provision of this Agreement is not performed in accordance with its terms or otherwise is breached.  Accordingly, each Party agrees that the other Party may be entitled, subject to a determination by a court of competent jurisdiction, to injunctive relief to prevent any such failure of performance or breach and to enforce specifically this Agreement and any of the terms and provisions hereof.

Section 10.10       Counterparts.  This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all such counterparts taken together will constitute one and the same Agreement.

18

Section 10.11       Descriptive Headings.  The descriptive headings of this Agreement are inserted for convenience only and will not constitute a part of this Agreement.

Section 10.12       No Third-Party Beneficiaries.  This Agreement will not confer any rights or remedies upon any Person or entity other than the Parties hereto, their respective successors and permitted assigns and the Buyer Indemnified Parties and the Seller Indemnified Parties under Article IX.

Section 10.13       Entire Agreement.  This Agreement and the Ancillary Documents collectively constitute the entire agreement among the Parties and supersede any prior and contemporaneous understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof.

Section 10.14       Exhibits and Schedules.  The Exhibits and Disclosure Schedules attached to this Agreement are made a part of this Agreement as if set forth fully herein.

Section 10.15       Governing Law.  THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OFNEW YORK, WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED.

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19

IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this Agreement on the date first written above.

BPT IP LLC
By:	/s/ GORDON O’BRIEN
Name: Gordon O’Brien
HARDINGE, INC.
By:	/s/ J. PATRICK ERVIN
Name: J. Patrick Ervin
Title:President and CEO

20

Exhibit A

BILL OF SALE AND

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT, made and delivered pursuant to that Asset Purchase Agreement dated as of the date hereof (the “Asset Purchase Agreement”), by and between BPT-IP LLC, a Delaware limited liability company (the “Seller”), and Hardinge, Inc., a New York corporation (the “Buyer”).  Unless otherwise indicated, capitalized terms used and not defined herein will have the meanings ascribed to such terms in the Asset Purchase Agreement.

In consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.             The Seller hereby sells, assigns, transfers, conveys and delivers to the Buyer, its successors and assigns, forever, and the Buyer hereby accepts, all right, title and interest in and to the Purchased Assets effective as of the date hereof.

2.             The Seller hereby covenants with the Buyer, and its successors and assigns, that the Seller and its successors and assigns will do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, all such further acts, transfers, assignments and conveyances, powers of attorney and assurances for the better selling, transferring, assigning, assuring, conveying and confirming unto the Buyer, its successors and assigns, all and singular, the Purchased Assets, as the Buyer and its successors and assigns shall reasonably request.

3.             The Buyer hereby covenants with the Seller, and its successors and assigns, that the Buyer and its successors and assigns will do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, all such further acts, transfers, assignments and conveyances, powers of attorney and assurances for the better selling, transferring, assigning, assuring, conveying and confirming unto the Seller, its successors and assigns, all and singular, the Purchased Assets, as the Seller and its successors and assigns shall reasonably request.

4.             This Bill of Sale and Assignment and Assumption Agreement is subject to all of the representations, warranties, covenants, exclusions and indemnities set forth in the Asset Purchase Agreement, all of which are incorporated herein by reference and nothing contained herein shall be construed to limit, terminate or expand any terms and conditions contained in the Asset Purchase Agreement.

5.             Notwithstanding the foregoing, this Bill of Sale and Assignment and Assumption Agreement shall not constitute an assignment or attempted assignment of any agreement if the attempted assignment thereof, without the consent, approval or waiver of a third party or entity (including a governmental authority), would constitute a breach thereof or a violation of any law, rule or regulation.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the undersigned parties have caused this Bill of Sale and Assignment and Assumption Agreement to be executed on this 3rd day of November, 2004.

BPT-IP LLC
By:	/s/ GORDON O’BRIEN
Name:	Gordon O’Brien
Its:
HARDINGE, INC.
By:	/s/ J. PATRICK ERVIN
Name:	J. Patrick Ervin
Its:	President and CEO

EXHIBIT B

ASSIGNMENT OF PATENTS

In connection with the consummation on the date hereof of the transactions contemplated in that Asset Purchase Agreement dated as of the date hereof (the “Asset Purchase Agreement”), by and between BPT-IP LLC, a Delaware limited liability company (the “Assignor”), and HARDINGE, INC., a New York corporation (the “Assignee”), the Assignor has agreed to transfer all of its rights in and to all of the patents listed on Exhibit A attached hereto to the Assignee.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Assignor does hereby sell, assign and transfer to the Assignee, and its successors and assigns, all right, title, and interest of the Assignor in, to, and under the patents listed on Schedule I (which is incorporated into and made a part of this Assignment of Patents), together with all rights to sue and recover for any past, present or future infringements, dilution, damage or injury (and including the right to take over and continue any and all existing suits) to any of the foregoing and collect profits or damages with respect to same, the same to be held and enjoyed hereinafter by the Assignee for its own use and for the use of its successor and assigns, to the full end of the term for which the Patent was granted, as fully and entirely as the same when have been held by Assignor had this Assignment not been made.

Assignor hereby covenants to execute and deliver to Assignee such additional assignments and instruments of transfer as Assignee may require to evidence Assignee’s ownership of the Patents or the conveyance of the Patents to Assignee.

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IN WITNESS WHEREOF, the undersigned parties have executed this Assignment as of this 3rd day of November, 2004.

BPT-IP LLC
By:	/s/ GORDON O’BRIEN
Name:	Gordon O’Brien
Its:
HARDINGE, INC.
By:	/s/ J. PATRICK ERVIN
Name:	J. Patrick Ervin
Its:	President and CEO

Schedule I

Patent	Application No.	Filing Date
5,672,145	Tool Carousel	09/30/97

Exhibit C

ASSIGNMENT OF TRADEMARKS

In connection with the consummation on the date hereof of the transactions contemplated in that Asset Purchase Agreement dated as of the date hereof (the “Asset Purchase Agreement”), by and between BPT-IP LLC, a Delaware limited liability company (the “Assignor”), and HARDINGE, INC., a New York corporation (the “Assignee”) (the “Assignee”), the Assignor has agreed to transfer all of its rights in all of the trademarks listed on Exhibit A attached hereto to the Assignee (“Trademarks”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Assignor does hereby assign, grant and transfer to the Assignee, and its successors and assigns, all right, title, and interest of the Assignor in, to, and under the Trademarks and trade names listed on Schedule I (which is incorporated into and made a part of this Assignment of Trademarks) together with all of the goodwill of the business symbolized by such Trademarks and trade names, together with all rights to sue and recover for any past, present or future infringements, dilution, damage or injury (and including the right to take over and continue any and all existing suits) to any of the foregoing and collect profits or damages with respect to any of the foregoing, the same to be held and enjoyed hereinafter by the Assignee for its own use and for the use of its successor and assigns.

Assignor hereby covenants to execute and deliver to Assignee such additional assignments and instruments of transfer as Assignee may require to evidence Assignee’s ownership of the Trademarks or the conveyance of the Trademarks to Assignee.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the undersigned parties have executed this Assignment as of this 3rd day of November, 2004.

BPT-IP LLC
By:	/s/ GORDON O’BRIEN
Name:	Gordon O’Brien
Its:
HARDINGE, INC.
By:	/s/ J. PATRICK ERVIN
Name:	J. Patrick Ervin
Its:	President and CEO

Schedule I

International Trademarks:

Country	File No.	Trademark	App.No.	Filing Date	Reg. No.	Reg. Date
Australia	TM153-001	BRIDGEPORT	331,297	04/10/1979	5,331,297	09/19/1963
Canada	TM153-002	BRIDGEPORT	405,159	01/21/1977	243,145	04/15/1950
China	TM163A-010	BRIDGEPORT	950438940	11/05/1995	999,187	05/06/1997
China	TM163B-018	BRIDGEPORT	950138941	11/05/1995	1,005,858	05/13/1997
European Community	TM153-003	BRIDGEPORT	165836	04/01/1995	166835	10/23/1998
European Community	TM248-003	EZ-CAM	165934	04/01/1998	166934	09/11/1995
European Community	TM497-003	EZFEATUREMILL	167007	04/01/1995	167007	07/10/1998
European Community	TM498-003	EZPATH	156554	04/01/1998	165884	07/10/1995
European Community	TM516-005	POWERPATH	335249	07/30/1996	335349	07/30/1996
Hong Kong	TM163C-03	BRIDGEPORT	13516/95	10/24/1995	1999/07544	06/14/1999
Indonesia	TM153-059	BRIDGEPORT	—	05/21/1979	267294	—
Japan	TM163A-004	BRIDGEPORT	35,908/77	06/23/1977	1,741,752	01/23/1995
Japan	TM—	BRIDGEPORT	4-11-754	05/07/1992	4220636	12/11/1998
Japan	TM248B-004	BRIDGEPORT	4-110755	05/07/1992	4,031,341	07/15/1997
Korea, Republic of (Sou	TM153-005	BRIDGEPORT	—	—	70358	07/-/1980
Malaysia	TM153-103	BRIDGEPORT	M/52119	04/2-/1979	M/082119	04/24/1979
Mexico	TM153C-010	BRIDGEPORT	104,3-9	01/09/1991	495,081	01/0-/1991
Mexico	TM153D-010	BRIDGEPORT	104,370	01/09/1991	405,082	02/09/1992
Singapore	TM153-040	BRIDGEPORT	79,964	04/19/1979	T79/79964A	01/10/1979
Taiwan	TM153-008	BRIDGEPORT	(65)08153	08/17/1977	96,716	02/26/1978
United Kingdom	TM153C-019	BRIDGEPORT	2004487	10/31/1994	2004487	08/02/1998
United Kingdom	TM248-019	EZ-CAM	1,287,949	10/21/1986	B1287949	10/21/1986

U.S. Trademarks:

Trademark	Serial No.	Filing Date
BRIDGEPORT (and Design)	672,452	1/13/59
QUILL MASTER (and Design)	681,116	6/30/59
EZ-CAM	1,338,961	6/4/85
INTERACT	1,361,441	9/24/85
AIR-FLO	1,424,600	1/13/87
BRIDGEPORT	1,742,918	12/29/92
EZ-MILL	1,595,123	5/8/90
EZ PATH-II (and Design)	2,034,307	1/28/97
EZ-TURN	1,594,029	5/1/90
POWERPATH	2,086,548	8/5/97
TORQ-CUT TC	2,374,841	8/8/00

Unregistered Trademarks:

1.  DISCOVERY TORQ-CUT 22

2.

3.  EXPLORER

4.  EZPATH

5.  EZTRAK

Disclosure Schedules

These Disclosure Schedules (the “Schedules”), dated as of November 3, 2004, are being delivered by BPT IP LLC (“Seller”) toHardinge, Inc., a New York Corporation (“Buyer”), in connection with that certain Asset Purchase Agreement by and between Seller and Buyer, dated as of the date hereof (the “Agreement”).  Unless the context otherwise requires, all capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Agreement.

The Schedules are qualified in their entirety by reference to the specific provisions of the Agreement and are not intended to constitute, and will not be construed as constituting, additional representations and warranties of Seller.  The specific disclosures set forth in the Schedules have been organized to correspond to section references in the Agreement to which the disclosure may be most likely to relate, but such disclosure will apply to and will be deemed to be disclosed for purposes of the Agreement generally, and will be deemed to be exceptions to or modifications or qualifications of all of the representations and warranties contained in the Agreement to the extent reasonable.

1

Schedule 1.1

Knowledge Group

Gordon Jude O’Brien

Thomas L. Gregory

2

Schedule 2.2(a)(i)

Purchased Patents

Patent Number	Description	Issue Date
5,672,145	Tool Carousel	09/30/97

3

Schedule 2.2(a)(ii)

Purchased Trademarks

Purchased Trademarks:

1.  DISCOVERY TORQ-CUT 22

2. 

3.  EXPLORER

4.  EZPATH

5. EZTRAK

Purchased Registered Trademarks:

Country	File No.	Trademark	App.No.	Filing Date	Reg. No.	Reg. Date
Australia	TM153-001	BRIDGEPORT	331,297	04/10/1979	5,331,297	09/19/1963
Canada	TM153-002	BRIDGEPORT	405,159	01/21/1977	243,145	04/15/1950
China	TM163A-010	BRIDGEPORT	950438940	11/05/1995	999,187	05/06/1997
China	TM163B-018	BRIDGEPORT	950138941	11/05/1995	1,005,858	05/13/1997
European Community	TM153-003	BRIDGEPORT	165836	04/01/1995	166835	10/23/1998
European Community	TM248-003	EZ-CAM	165934	04/01/1998	166934	09/11/1995
European Community	TM497-003	EZFEATUREMILL	167007	04/01/1995	167007	07/10/1998
European Community	TM498-003	EZPATH	156554	04/01/1998	165884	07/10/1995
European Community	TM516-005	POWERPATH	335249	07/30/1996	335349	07/30/1996
Hong Kong	TM163C-03	BRIDGEPORT	13516/95	10/24/1995	1999/07544	06/14/1999
Indonesia	TM153-059	BRIDGEPORT	—	05/21/1979	267294	—
Japan	TM163A-004	BRIDGEPORT	35,908/77	06/23/1977	1,741,752	01/23/1995
Japan	TM—	BRIDGEPORT	4-11-754	05/07/1992	4220636	12/11/1998
Japan	TM248B-004	BRIDGEPORT	4-110755	05/07/1992	4,031,341	07/15/1997
Korea, Republic of (Sou	TM153-005	BRIDGEPORT	—	—	70358	07/-/1980
Malaysia	TM153-103	BRIDGEPORT	M/52119	04/2-/1979	M/082119	04/24/1979
Mexico	TM153C-010	BRIDGEPORT	104,3-9	01/09/1991	495,081	01/0-/1991
Mexico	TM153D-010	BRIDGEPORT	104,370	01/09/1991	405,082	02/09/1992
Singapore	TM153-040	BRIDGEPORT	79,964	04/19/1979	T79/79964A	01/10/1979
Taiwan	TM153-008	BRIDGEPORT	(65)08153	08/17/1977	96,716	02/26/1978
United Kingdom	TM153C-019	BRIDGEPORT	2004487	10/31/1994	2004487	08/02/1998
United Kingdom	TM248-019	EZ-CAM	1,287,949	10/21/1986	B1287949	10/21/1986

4

USA

BRIDGEPORT (and Design)	672,452	1/13/59
QUILL MASTER (and Design)	681,116	6/30/59
EZ-CAM	1,338,961	6/4/85
INTERACT	1,361,441	9/24/85
AIR-FLO	1,424,600	1/13/87
BRIDGEPORT	1,742,918	12/29/92
EZ-MILL	1,595,123	5/8/90
EZ PATH-II (and Design)	2,034,307	1/28/97
EZ-TURN	1,594,029	5/1/90
POWERPATH	2,086,548	8/5/97
TORQ-CUT TC	2,374,841	8/8/00

5

Schedule 2.2(a)(iii)

Purchased Copyrights

Title	Reg. No.	Reg. Date
Series I CNC, Machining Center	TX-954-329	4/2/82
Series I CNC: BridgeportSeries I CNC Mill	TX-954-328	4/2/82
O-C 14A	TX-954-327	4/2/82
Series II CNC	TX-954-326	4/2/82
Series I MDI	TX-954-325	4/2/82
E-Z CAM	TX-954-324	4/2/82
R2D3	TX-954-323	4/2/82
Bridgeport Attachments And Accessories For Standard Vertical Milling Machines	TX-954-322	4/2/82
Bridgeport Winners, E-Z CAM/CNC: Two Powerful Tools For One Low Price	TX-954-321	4/2/82
Top Shops: 1: For And About Shops That Are Tops In Their Field	TX-954-320	4/2/82
America Invades America	TX-954-319	4/2/82
The Bridgeport Standard Machines	TX-954-317	4/2/82
American Classics At Import Prices	TX-954-316	4/2/82
Choice Cut	TX-954-314	4/2/82
Make Your Used Bridgeport Work Like New	TX-882-049	4/2/82
Supplemental Mass Storage Boosts CNC Productivity	TX-882-048	4/2/82
Add DNC Power to Your CNC Bridgeports	TX-882-047	4/2/82
Buy From Bridgeport Direct, 1-800-243-4292	TX-864-141	2/24/82
Why Bridgeport Has Decided To Sell To You Direct	TX-864-140	2/24/82
An American Classic At A Foreign Price	TX-864-139	2/24/82
The Bridgeport CNC’s	TX-864-138	2/24/82
Get The Point	TX-864-137	2/24/82

6

Think Sharp	TX-864-136	2/24/82
There’s More to Bridgeport Than Meets The Eye	TX-864-135	2/24/82
The Bridgeport CNC’s	TX-823-895	12/24/81
The Real World	TX-823-894	12/24/81
The Easy Life	TX-823-893	12/24/81
Life Rolls On	TX-823-92	12/24/81
The Bridgeport CNC’s	TX-793-474	10/30/81
Don’t Buy A Cheap CNC (Buy A Bridgeport CNC Cheaper)	TX-793-473	10/30/81
Life line	TX-811-219	11/16/81
Introducing the automatic Bridgeport	TX-811-217	11/16/81

7

Schedule 2.2(b)

Purchased Contracts

1. Agreement between the Company and Strathclyde Machine Tools, a company organised under the laws of Australia, dated 2 September, 2004.

8

Schedule 2.3

Excluded Assets

1. All Seller’s right, title and interest in the Alliance Agreement between Seller and Buyer dated as of the date hereof;

2. All Seller’s cash and cash equivalents on hand and in banks and other financial institutions;

3. Insurance policies and payments related thereto;

4. All accounts receivable owing to the Seller, including but not limited to those (a) arising in respect of royalty payments pursuant to an alliance agreement between the Seller, the Buyer and BML dated October 29, 2002 (the “Original Alliance Agreement”), and (b) owing from BML and all other Affiliates of the Seller;

5. All Seller’s right, title and interest under the Termination Agreement dated as of the date hereof in respect of the Original Alliance Agreement.

9

Schedule 4.3

Noncontravention; Consents

None

10

Schedule 4.5

Intellectual Property

Schedule 4.5(a)

Registrations for the following U.S. trade marks have been cancelled.  BPT transfers to Hardinge whatever rights it may have in these marks on the basis that these trade marks are excluded from the representations and warranties that BPT gives at sections 4.5(a) and 4.5(d) of the Agreement:

1.  DISCOVERY TORQ-CUT 22

2. 

3.  EXPLORER

4.  EZPATH

5. EZTRAK

Schedule 4.5(b)

None

Schedule 4.5(c)

None

11

Schedule 4.6

Litigation

None

12

Schedule 4.7

Legal Compliance

None

13

Schedule 4.9

Broker’s Fees

None

14

Schedule 4.11

Title

None

15

EX-31.1

EXHIBIT 31.1

HARDINGE INC.

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, J. Patrick Ervin, certify that:

1.  I have reviewed this quarterly report on Form 10Q for the period ended September 30, 2004 of Hardinge Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 9, 2004	/s/ J. Patrick Ervin
		J. Patrick Ervin
		Chairman, President and Chief
		Executive Officer

EX-31.2

EXHIBIT 31.2

HARDINGE INC.

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard L. Simons, certify that:

1.  I have reviewed this quarterly report on Form 10Q for the period ended September 30, 2004 of Hardinge Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 9, 2004	/s/ Richard L. Simons
		Richard L. Simons
		Executive Vice President
		Chief Financial Officer

EX-32

EXHIBIT 32

HARDINGE INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hardinge Inc. (the “Company”) on Form 10Q for the period ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Patrick Ervin, Chairman and Chief Executive Officer of the Company and I, Richard L. Simons, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J. Patrick Ervin

J. Patrick Ervin

Chief Executive Officer

November 9, 2004

/s/ Richard L. Simons

Richard L. Simons

Chief Financial Officer

November 9, 2004

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to Hardinge Inc. and will be retained by Hardinge Inc. and furnished to the Securities and Exchange Commission or its staff upon request.