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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
    	For the fiscal year ended December 31, 2005	
 
¨	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 1-4801

BARNES GROUP INC.
(Exact name of registrant as specified in its charter)

			
Delaware	 	06-0247840	
(State of incorporation)	 	(I.R.S. Employer Identification No.)	
		
123 Main Street, Bristol, Connecticut	 	06011-0489	
(Address of Principal Executive Office)	 	(Zip Code)	
 
(860) 583-7070
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
	 	Name of each exchange on which registered
	
Common Stock, $0.01 Par Value	 	New York Stock Exchange	
Preferred Stock Purchase Rights	 	New York Stock Exchange	
 
Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   x     No   ¨
 
Indicate by check mark if the registrant is not required to file report pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨     No   x
 
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   x     No   ¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer   x         Accelerated filer   ¨         Non-accelerated filer   ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ¨     No   x
 
The aggregate market value of the voting stock (Common Stock) held by non-affiliates of the registrant as of the close of business on June 30, 2005 was approximately $723,512,543, based on the closing price of the Common Stock on the New York Stock Exchange on that date. The registrant does not have any non-voting common equity.
 
The registrant had outstanding 24,157,167 shares of common stock as of February 21, 2006.
 
Documents Incorporated by Reference
 
Portions of the registrant’s definitive proxy statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held April 20, 2006 are incorporated by reference into Part III.

Table of Contents
 Barnes Group Inc.
Index to Form 10-K
Year Ended December 31, 2005

 	  	 	  	Page
	
Part I	  	 	  	 	
Item 1.	  	Business	  	1	
Item 1A.	  	Risk Factors	  	4	
Item 1B.	  	Unresolved Staff Comments	  	11	
Item 2.	  	Properties	  	12	
Item 3.	  	Legal Proceedings	  	12	
Item 4.	  	Submission of Matters to a Vote of Security Holders	  	12	
			
Part II	  	 	  	 	
Item 5.	  	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	  	13	
Item 6.	  	Selected Financial Data	  	14	
Item 7.	  	Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	15	
Item 7A.	  	Quantitative and Qualitative Disclosures About Market Risk	  	30	
Item 8.	  	Financial Statements and Supplementary Data	  	31	
Item 9.	  	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	  	61	
Item 9A.	  	Controls and Procedures	  	61	
Item 9B.	  	Other Information	  	62	
			
Part III	  	 	  	 	
Item 10.	  	Directors and Executive Officers of the Registrant	  	63	
Item 11.	  	Executive Compensation	  	65	
Item 12.	  	Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters	  	65	
Item 13.	  	Certain Relationships and Related Transactions	  	65	
Item 14.	  	Principal Accounting Fees and Services	  	65	
			
Part IV	  	 	  	 	
Item 15.	  	Exhibits, Financial Statement Schedules	  	66	

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PART I
 
 Item 1. Business
 
THE COMPANY (1) 
 
The Company is a diversified international manufacturer of precision metal components and assemblies and a distributor of industrial supplies, serving a wide range of markets and customers. Founded in 1857 and headquartered in Bristol, Connecticut, the Company was organized as a Delaware corporation in 1925. As of December 31, 2005, the Company had 6,205 employees at over 60 locations worldwide. The Company consists of three businesses:
 
Barnes Distribution, an international, full-service distributor of maintenance, repair, operating and production supplies;
 
Associated Spring, one of the world’s largest manufacturers of precision mechanical and nitrogen gas products and a global supplier of retaining rings, reed valves, shock discs and injection-molded plastic components and assemblies; and
 
Barnes Aerospace, a manufacturer and repairer of highly engineered components and assemblies for aircraft engines, airframes and land-based industrial gas turbines.
 
BARNES DISTRIBUTION
 
Barnes Distribution is an industry leader in the distribution of maintenance, repair, operating and production (“MROP”) supplies. Since 1927, it has grown to be one of the largest value-added MROP distributors in North America, providing a wide variety of high-volume replacement parts and other products as well as inventory management and logistic services to a diversified customer base. Barnes Distribution also distributes products in 33 countries supported by distribution/sales centers in the United Kingdom, France, Spain, Mexico, Singapore, Brazil and China.
 
Barnes Distribution distributes over 100,000 stocked replacement parts and other products and has developed quality brand names such as Bowman ® , Curtis ® , Kar ® Products, Mechanics Choice ® , Autoliaisons and Motalink. These parts and products include fasteners, electrical supplies, hydraulic components, chemicals and security products. Die springs and nitrogen gas springs, mechanical struts and standard parts, such as coil and flat springs, are distributed under the brand names of Raymond ® and SPEC ® . Most of the products sold under the Raymond and SPEC brand names are manufactured by Associated Spring. With the exception of the products from Associated Spring, the products sold by Barnes Distribution are obtained from outside suppliers.
 
Barnes Distribution faces active competition. The products sold by Barnes Distribution are not unique, and its competitors carry substantially similar products. Barnes Distribution competes based on service alternatives, timeliness and reliability of supply, price, and product breadth and quality. In addition, Barnes Distribution positions itself as a partner in the operations of its customers and helps them increase their profitability by working with them to provide supply management solutions.
 
Barnes Distribution offers an array of service options, built around a vendor-managed inventory business model, which are designed to improve the productivity of its customers while substantially reducing procurement and transaction costs. Barnes Distribution has a well-diversified customer base ranging from small repair shops to the largest railroads, utilities, food processors, chemical producers, and vehicle fleet operators. Barnes Distribution’s products are sold directly through its sales force of approximately 1,500 employees and through its distributors.

(1)	As used in this annual report, “Company” refers to the registrant and its consolidated subsidiaries except where the context requires otherwise, and “Barnes Distribution,” “Associated Spring,” and “Barnes Aerospace,” refer to the registrant's businesses, but not to separate corporate entities.	
 
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ASSOCIATED SPRING
 
Associated Spring is the largest precision mechanical components and nitrogen gas products manufacturer in North America, and among the world’s largest precision mechanical and nitrogen gas products manufacturers. Associated Spring is equipped to produce virtually every type of precision spring, from fine hairsprings for electronics and instruments to large heavy-duty springs for machinery. Associated Spring also manufactures nitrogen gas manifold systems used to precisely control stamping presses; retaining rings that position parts on a shaft or other axis; reed valves that are custom-engineered critical components used in compressors; and injection-molded plastic-on-metal and metal-in-plastic components and assemblies used in electronics, medical devices and consumer products.
 
Associated Spring provides complete engineering solutions from concept to manufacturing. These include product design and development, product and material testing, rapid prototyping and reduction of manufacturing cycle times. Associated Spring’s products are sold globally to manufacturers in many industries, chiefly for use as components in their own products. Products are sold primarily through Associated Spring’s direct sales force and through the Raymond division of Barnes Distribution.
 
Nearly all of Associated Spring’s products are highly engineered custom solutions that are designed and developed in collaboration with its customers from concept through manufacturing. Associated Spring has a global and diverse customer base with products purchased primarily by durable goods manufacturers in industries such as transportation, consumer products, farm equipment, telecommunications, medical devices, home appliances and electronics. In the transportation industry, the customers include both original equipment manufacturers (“OEMs”) and their suppliers. Sales by Associated Spring to its four largest customers, which include the Big 3 domestic automakers, accounted for approximately 27% of its sales in 2005.
 
Associated Spring has manufacturing operations in the United States, Brazil, Canada, China, Germany, Mexico, Singapore, Sweden, Thailand and the United Kingdom, and a minority interest of 15% in its former subsidiary in Argentina.
 
Associated Spring competes with many large and small companies engaged in the manufacture and sale of custom metal components and assemblies. Associated Spring competes on the basis of quality, service, reliability of supply, technology, innovation, design and price.
 
BARNES AEROSPACE
 
Barnes Aerospace produces precision-machined and fabricated components and assemblies for OEM turbine engine, airframe and industrial gas turbine builders throughout the world and the United States military. Barnes Aerospace also provides jet engine component overhaul and repair services for many of the world’s major commercial airlines and the United States military. Barnes Aerospace participates in aftermarket Revenue Sharing Programs (“RSPs”) with General Electric Company (“General Electric”) under which Barnes Aerospace receives the exclusive right to supply designated aftermarket parts for the life of the related aircraft engine program. Barnes Aerospace products and services are sold primarily through its sales force. Sales by Barnes Aerospace to General Electric accounted for approximately 65% of its sales in 2005.
 
Barnes Aerospace’s machining and fabrication operations, with facilities in Arizona, Connecticut, Michigan, Ohio, Utah and Singapore, produce critical engine and airframe parts through technically advanced processes such as creep-feed grinding, multi-axis milling and turning, and electrical discharge machining. Barnes Aerospace also specializes in hot and cold forming of complex parts made from difficult materials such as titanium, cobalt, inconel, and other aerospace alloys. Additional capabilities include superplastic forming and diffusion bonding, machining of high temperature superalloys and various automated and manual welding processes. Customers include airframe and gas turbine engine manufacturers for commercial and military jets, business jets, and land-based industrial gas turbines. Barnes Aerospace has long-standing customer relationships which enable Barnes Aerospace to participate in the design phase of components and assemblies through which customers are provided with manufacturing research, testing and evaluation.
 
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Barnes Aerospace’s OEM business competes primarily with both the leading jet engine OEMs and a large number of machining and fabrication companies. Competition is based mainly on quality, engineering and technical capability, product breadth, service and price.
 
Barnes Aerospace’s aftermarket facilities, located in Connecticut, Ohio and Singapore, specialize in the refurbishment of jet engine components such as cases, rotating air seals, honeycomb air seals and housings. Processes performed at these facilities include electron beam welding, plasma coating, vacuum brazing and water jet cleaning. Customers include airlines and engine overhaul businesses throughout the world and the United States military.
 
Competition for the repair and overhaul of turbine engine components comes from three principal sources: OEMs, major commercial airlines and other independent service companies. Some major commercial airlines own and operate their own service centers and sell repair and overhaul services to other aircraft operators. OEMs also maintain service centers that provide repair and overhaul services for the components that they manufacture. Other independent service organizations also compete for the repair and overhaul business of other users of aircraft components. Turnaround time, technical capability, price, quality and overall customer service are important competitive factors.
 
FINANCIAL INFORMATION
 
The backlog of the Company’s orders believed to be firm at the end of 2005 was $356 million as compared with $280 million at the end of 2004. Of the 2005 year-end backlog, $269 million was attributable to Barnes Aerospace and the balance was attributable to Associated Spring. Barnes Aerospace’s backlog included $81 million which is scheduled to be shipped after 2006. Substantially all of the remainder of the Company’s backlog is scheduled to be shipped during 2006.
 
General Electric and its affiliates accounted for 14% of the Company’s total sales in 2005. For an analysis of the Company’s revenue from sales to external customers, operating profit and assets by business segment as well as revenues from sales to external customers and long-lived assets by geographic area, see Note 16 of the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K (“Annual Report”).
 
ACQUISITIONS
 
On August 9, 2005, the Company acquired Toolcom Supplies Ltd. (“Toolcom”), a distributor of maintenance, repair and operating supplies in the United Kingdom. Toolcom is being integrated into the Barnes Distribution segment. On September 30, 2005, the Company acquired the business of Service Plus Distributors, Inc. (“Service Plus Distributors”). Service Plus Distributors is being integrated into the Raymond unit of the Barnes Distribution segment. For more information regarding the acquisitions, see Note 2 of the Notes to the Consolidated Financial Statements of this Annual Report.
 
RAW MATERIALS
 
The principal raw materials used by Associated Spring to manufacture its products are high-grade steel spring wire and flat rolled steel. The principal raw materials used by Barnes Aerospace to manufacture its products are titanium and inconel; however, Barnes Aerospace also requires special materials such as cobalt and other complex aerospace alloys. Prices for steel, titanium and inconel, as well as other specialty materials, increased during the past two fiscal years due to higher demand and, in some cases, reduction of the availability of materials used to make the raw materials. If this combination of events continues, the availability of certain raw materials used by the Company may be negatively impacted.
 
RESEARCH AND DEVELOPMENT
 
Although most of the products manufactured by the Company are custom parts made to customers’ specifications, the Company is engaged in continuing efforts aimed at discovering and implementing new
 
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knowledge that is useful in developing new products or services or significantly improving existing products or services. In particular, Associated Spring’s Product Development Center is focused on design, development, and prototype work and testing of new products and material. The Company spent approximately $6 million on research and development activities in each of 2005 and 2004, as compared to expenditures of approximately $5 million in 2003.
 
PATENTS AND TRADEMARKS
 
Patents, trademarks, licenses, franchises and concessions are not significant to any of the Company’s businesses.
 
EXECUTIVE OFFICERS OF THE COMPANY
 
For information regarding the Executive Officers of the Company, see Part III, Item 10 of this Annual Report.
 
ENVIRONMENTAL
 
Compliance with federal, state, and local laws which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment has not had a material effect, and is not expected to have a material effect, upon the capital expenditures, earnings, or competitive position of the Company.
 
AVAILABLE INFORMATION
 
The Company’s Internet address for its website is www.barnesgroupinc.com. The Company makes its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports available without charge on its website as soon as reasonably practicable after they are filed with, or furnished to, the Securities and Exchange Commission. In addition, the Company has posted on its website, and will make available in print to any stockholder who makes a request, its corporate governance guidelines, its code of business ethics and conduct and the charters of the Audit Committee, Compensation and Management Development Committee and Corporate Governance Committee (the responsibilities of which include serving as the nominating committee) of the Company’s Board of Directors.
 
FORWARD-LOOKING STATEMENTS
 
This Annual Report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements. The risks and uncertainties, which are described in our periodic filings with the Securities and Exchange Commission, include, among others, uncertainties arising from the behavior of financial markets; future financial performance of the industries or customers that we serve; changes in market demand for our products and services; integration of acquired businesses; changes in raw material prices and availability; uninsured claims; and numerous other matters of global, regional or national scale, including those of a political, economic, business, competitive, regulatory and public health nature. The Company assumes no obligation to update our forward-looking statements.
 
 Item 1A. Risk Factors
 
Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Please note that additional risks not presently known to us or that we currently deem immaterial may also impact our business and operations.
 
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RISKS RELATED TO OUR BUSINESS
 
Changes in the availability or price of materials and energy resources could adversely affect our costs and profitability. We may be adversely affected by the availability or price of raw materials and energy resources, particularly related to certain manufacturing operations that utilize high-grade steel spring wire and titanium. The availability and price of raw materials and energy resources may be subject to curtailment or change due to, among other things, new laws or regulations, global economic or political events including strikes, terrorist attacks and war, suppliers’ allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and prevailing price levels. Although we are not dependent upon any single source for any of our principal raw materials or products for resale, and such materials and products have, historically, been readily available, we cannot assure you that such raw materials and products will continue to be readily available. Disruption in the supply of raw materials, products or energy resources or our inability to come to favorable agreements with our suppliers could impair our ability to manufacture, sell and deliver our products and require us to pay higher prices. Any increase in prices for such raw materials, products or energy resources could materially affect our costs and our profitability.
 
We depend on revenues from a small number of significant customers. Any loss, cancellation, reduction or delay in purchases by these customers could harm our business. Our success will depend on our continued ability to develop and manage relationships with significant customers. We cannot assure you that we will be able to retain our largest customers. Some of our customers may in the future shift their purchases from us to our competitors, in-house or to other sources. While we have long-term agreements with most of our significant customers, the terms of some of these agreements provide that until a firm order is placed by a customer for a particular product, the customer may unilaterally reduce or discontinue its projected purchases without penalty. The loss of one or more of our largest customers, any reduction or delay in sales to these customers, our inability to successfully develop relationships with new customers, or future price concessions we make to retain customers could significantly reduce our sales and profitability.
 
The global nature of our business exposes us to foreign currency fluctuations that may affect our future revenues and profitability. We have manufacturing, sales and distribution facilities around the world, and the majority of our foreign subsidiaries use the local currency as their functional currency. Because our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies expose us to translation risk when the local currency financial statements are translated to U.S. dollars, our functional currency. Changes in currency exchange rates may also expose us to transaction risk. We may buy protecting or offsetting positions or hedges in certain currencies to reduce our exposure to currency exchange fluctuations; however, these transactions may not be adequate or effective to protect us from the exposure for which they are purchased. We have not engaged in any speculative hedging activities. Currency fluctuations may impact our revenues and profitability in the future.
 
Our operations depend on our manufacturing, distribution, sales and service facilities in various parts of the world which are subject to physical, financial, regulatory and other risks that could disrupt our operations. The international scope of our business subjects us to risks such as a threat of war, terrorism or instability of governments and legal systems in countries in which we or our customers conduct business. The terrorist attacks of September 11, 2001 adversely impacted the U.S. and world economies and a wide range of industries. These terrorist attacks and the war in the Middle East may lead to future acts of terrorism and additional hostilities, including possible retaliatory attacks, as well as financial, economic and political instability. In addition, because we depend upon our information systems to help process orders, to manage inventory and accounts receivables collections, to purchase, sell and ship products efficiently and on a timely basis, to maintain cost-effective operations, and to help provide superior service to our customers, any disruption in the operation of our information systems, including widespread power outages such as those that affected the northeastern and midwestern United States in August 2003, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
 
Although we have obtained property damage and business interruption insurance, a major catastrophe such as an earthquake, hurricane, flood or other natural disaster at any of our sites, or significant labor strikes, work
 
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stoppages, political unrest, or any of the events described above, some of which may not be covered by our insurance, in any of the areas where we conduct operations could result in a prolonged interruption of our business. Any disruption resulting from these events could cause significant delays in the manufacture or shipment of products or the provision of repair and other services that may result in our loss of sales and customers. Our insurance will not cover all potential risks, and we cannot assure you that we will have adequate insurance to compensate us for all losses that result from any insured risks. Any material loss not covered by insurance could have a material adverse effect on our financial condition, results of operations and cash flows. We cannot assure you that insurance will be available in the future at a cost acceptable to us or at a cost that will not have a material adverse effect on our gross margins, net income and cash flows.
 
Our significant international operations and assets subject us to additional financial and regulatory risks. We have operations and assets in various parts of the world. In addition, we sell our products and services in foreign countries and seek to increase our level of international business activity. Accordingly, we are subject to various risks, including: U.S.-imposed embargoes of sales to specific countries; foreign import controls (which may be arbitrarily imposed or enforced); export regulations (which require us to comply with stringent licensing regimes); anti-dumping regulations; price and currency controls; exchange rate fluctuations; dividend remittance restrictions; expropriation of assets; war, civil uprisings and riots; government instability; the necessity of obtaining governmental approval for new and continuing products and operations; legal systems or decrees, laws, taxes, regulations, interpretations and court decisions that are not always fully developed and that may be retroactively or arbitrarily applied; and difficulties in managing a global enterprise. We have experienced minor or technical violations of some of these regulations, including export regulations, in the past, none of which have had or, we believe, will have a material adverse effect on our business. However, any significant violations of these regulations in the future could result in civil or criminal sanctions, the loss of export or other licenses which could have a material adverse effect on our business. We may also be subject to unanticipated income taxes, excise duties, import taxes, export taxes or other governmental assessments. In addition, our organizational structure may limit our ability to transfer funds between countries, particularly into and out of the United States, without incurring adverse tax consequences. Any of these events could result in a loss of business or other unexpected costs that could reduce sales or profits and have a material adverse effect on our financial condition, results of operations and cash flows.
 
We maintain pension and other postretirement benefit plans in the U.S. and certain international locations. Declines in the stock market, prevailing interest rates and rising medical costs may cause an increase in our pension and other postretirement benefit expenses in the future and result in reductions in our pension fund asset values and increases in our pension and other postretirement benefit obligations. These changes have caused and may continue to cause a significant reduction in our net worth and may require us to make higher cash contributions to our pension and postretirement plans in the future.
 
We have significant indebtedness that could affect our operations and financial condition. We may incur additional indebtedness to finance future acquisitions. Our level of indebtedness and the significant debt servicing costs associated with that indebtedness could have important effects on our operations and financial condition and may adversely affect the value or trading price of our outstanding equity securities and debt securities. For example, our indebtedness could require us to dedicate a substantial portion of our cash flows from operations to payments on our debt, thereby reducing the amount of our cash flows available for working capital, capital expenditures, acquisitions, dividends and other general corporate purposes; limit our flexibility in planning for, or reacting to, changes in the industries in which we compete; place us at a competitive disadvantage compared to our competitors, some of whom have lower debt service obligations and greater financial resources than we do; limit our ability to borrow additional funds; and increase our vulnerability to general adverse economic and industry conditions.
 
Our failure to meet certain financial covenants required by our debt agreements may materially and adversely affect our assets, financial position and cash flows. Certain of our debt arrangements require us to maintain certain interest coverage and leverage ratios and a minimum net worth. These requirements could limit
 
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our ability to obtain future financing and may prevent us from taking advantage of attractive business opportunities. Our ability to meet the financial covenants or requirements in our debt arrangements may be affected by events beyond our control, and we cannot assure you that we will satisfy such covenants and requirements. A breach of these covenants or our inability to comply with the restrictions could result in an event of default under our debt arrangements, which in turn could result in an event of default under the terms of our other indebtedness. Upon the occurrence of an event of default under our debt arrangements, after the expiration of any grace periods, our lenders could elect to declare all amounts outstanding under our debt arrangements, together with accrued interest, to be immediately due and payable. If this happens, we cannot assure you that our assets would be sufficient to repay in full the payments due under those arrangements or our other indebtedness.
 
We have significant goodwill and an impairment of our goodwill could cause a decline in our net worth. Our total assets include substantial goodwill. The goodwill results from our acquisitions, representing the excess of the purchase price we paid over the fair value of the tangible and intangible assets we acquired. We assess whether there has been an impairment in the value of our goodwill during each calendar year or sooner if triggering events warrant. If future operating performance at one or more of our businesses does not meet expectations, we may be required to reflect, under current applicable accounting rules, a non-cash charge to operating results for goodwill impairment. The recognition of an impairment of a significant portion of goodwill would negatively affect our results of operations and total capitalization, the effect of which could be material. A reduction in our stockholders’ equity due to an impairment of goodwill may affect our ability to maintain the required net worth ratios under our debt arrangements.
 
We may not realize all of the sales expected from our existing Associated Spring and Barnes Aerospace backlog or anticipated orders. There can be no assurances that the revenues projected in our backlog will be realized or, if realized, will result in profits. We consider backlog to be firm customer orders for future delivery. From time to time, OEM customers of Associated Spring and Barnes Aerospace provide projections of components and assemblies that they anticipate purchasing in the future under new and existing programs. Such projections are not included in our backlog unless we have received a firm release from our customers. Our customers may have the right under certain circumstances and with certain penalties or consequences to terminate, reduce or defer firm orders that we have in backlog. If our customers terminate, reduce or defer firm orders, we may be protected from certain costs and losses, but our sales will nevertheless be adversely affected. Although we strive to maintain ongoing relationships with our customers, there is an ongoing risk that orders may be cancelled or rescheduled due to fluctuations in our customers’ business needs or purchasing budgets.
 
Also, our realization of sales from new and existing programs is inherently subject to a number of important risks and uncertainties, including whether our customers will execute the launch of product programs on time, or at all, the number of units that our customers will actually produce and the timing of production. In addition, until firm orders are placed, our customers generally have the right to discontinue a program or replace us with another supplier at any time without penalty. Our failure to realize sales from new and existing programs could have a material adverse effect on our net sales, results of operations and cash flows.
 
We may not recover all of our up-front costs related to new or existing programs. New programs require significant up-front investments and capital expenditures for engineering, design and tooling. As OEMs in the automotive and aerospace industries have looked to suppliers to bear increasing responsibility for the design, engineering and manufacture of systems and components, they have increasingly shifted the financial risk associated with those responsibilities to the suppliers as well. This trend is likely to continue and is most evident in the area of engineering cost reimbursement. Historically, these investments have been fully reimbursed by OEMs, but in the future there may be other mechanisms established by OEMs that could result in less than full reimbursement or no reimbursement. We cannot assure you that we will have adequate funds to make such up-front investments and capital expenditures. In the event that we are unable to make such investments and expenditures, or to recover them through sales or direct reimbursement of our engineering expenses from our customers, our profitability, liquidity and cash flows may be adversely affected. In addition, we incur costs and
 
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make capital expenditures for new program awards based upon certain estimates of production volumes. While we attempt to recover such costs and capital expenditures by appropriately pricing our products, the prices of our products are based in part upon planned production volumes. If the actual production is significantly less than planned, we will be unable to recover such costs. In addition, because a significant portion of our overall costs is fixed, declines in our customers’ production levels can adversely affect the level of our reported results even if our up-front investments and capital expenditures are recovered.
 
We may not recover all of our up-front costs related to RSPs. We participate in aftermarket RSPs under which we receive an exclusive right to supply designated aftermarket parts to a large aerospace manufacturer over the life of an aircraft engine program. As consideration, we pay participation fees, which are recorded as long-lived intangible assets, and are recognized as a reduction to sales over the life of the program. The recoverability of the asset is dependent upon future revenues related to the program’s aftermarket parts. The potential exists that actual revenues will not meet expectations. A shortfall in future revenues may result in the failure to recover the total amount of the investments, which could adversely affect our financial condition and results of operations and cash flows.
 
We face risks of cost overruns and losses on fixed-price contracts. We sell certain of our products under firm, fixed-price contracts providing for a fixed price for the products regardless of the production costs incurred by us. The cost of producing products may be adversely affected by increases in the cost of labor, materials, fuel, outside processing, overhead and other factors, including manufacturing inefficiencies. Increased production costs may result in cost overruns and losses on contracts.
 
The departure of existing management and key personnel, a shortage of skilled employees or a lack of qualified sales professionals could materially affect our business, operations and prospects. Our executive officers are important to the management and direction of our business. Our future success depends, in large part, on our ability to retain these officers and other capable management personnel. Although we believe we will be able to attract and retain talented personnel and replace key personnel should the need arise, our inability to do so could have a material adverse effect on our business, financial condition, results of operations or cash flows. Because of the complex nature of many of our products and services, we are generally dependent on an educated and highly skilled workforce. In addition, there are significant costs associated with the hiring and training of sales professionals. We could be adversely affected by a shortage of available skilled employees or the loss of a significant number of our sales professionals.
 
Any product liability claims in excess of insurance may adversely affect our financial condition. Our operations expose us to potential product liability risks that are inherent in the design, manufacture and sale of our products. For example, we may be exposed to potential liability for personal injury or death as a result of the failure of a spring or other part in a vehicle or an aircraft component designed, manufactured or sold by us or the failure of an aircraft component that has been serviced by us. While we believe that our liability insurance is adequate to protect us from these liabilities, our insurance may not cover all liabilities. Additionally, insurance coverage may not be available in the future at a cost acceptable to us. Any material liability not covered by insurance or for which third-party indemnification is not available could have a material adverse effect on our financial condition, results of operations and cash flows.
 
Our business, financial condition, results of operations and cash flows could be adversely impacted by strikes or work stoppages. Certain of our U.S. employees and our non-U.S. employees are covered by collective bargaining agreements which expire between 2006 and 2009. Although we believe that our relations with our employees are good, we cannot assure you that we will be successful in negotiating new collective bargaining agreements. Any potential strikes or work stoppages, and the resulting adverse impact on our relationships with customers, could have a material adverse effect on our business, financial condition, results of operations or cash flows. Similarly, a protracted strike or work stoppage at any of our major customers, suppliers or other vendors could materially adversely affect our business.
 
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RISKS RELATED TO ACQUISITIONS
 
We may not be able to effectively integrate acquired companies into our operations. We have completed over 10 acquisitions since 1999. We seek acquisition opportunities that complement and expand our operations and that will help create stockholder value over the long term. We cannot assure you that we will be able to effectively integrate our recent or future acquisitions into our operations. We may not be able to do so successfully without substantial costs, delays or other difficulties. We could face significant challenges in consolidating functions and integrating procedures, information technology systems, personnel, product lines and operations in a timely and efficient manner. We may encounter difficulties in training our sales forces to work with new products and customers.
 
We may not be able to realize the anticipated cost savings, synergies or revenue enhancements from acquisitions, and we may incur significant costs to achieve these savings. Even if we are able to integrate successfully the operations of our Company and our recent and any future acquisitions, we may not be able to realize the cost savings, synergies or revenue enhancements that we anticipate from these acquisitions, either as to amount or in the time frame that we expect. Our ability to realize anticipated cost savings, synergies and revenue enhancements may be affected by a number of factors, including the following: our ability to effectively eliminate duplicative backoffice overhead and overlapping sales personnel, rationalize manufacturing capacity, consolidate warehousing and distribution facilities and shift production to more economical facilities; our incurrence of significant cash and non-cash integration and implementation costs or charges in order to achieve those cost savings, which could offset any such savings and other synergies resulting from our recent or future acquisitions; and our ability to avoid labor disruption in connection with integration efforts. In addition, our growth to date has placed, and future acquisitions could continue to place, significant demand on our administrative, operational and financial resources.
 
Future acquisitions are a key component of our anticipated growth. We may not be able to identify or complete future acquisitions. A significant portion of the industries that we serve are mature industries. As a result, our recent growth has resulted in large part from, and our future growth will depend in part on, the successful acquisition and integration of businesses into our existing operations. While we are focused on adding strategic pieces to our operations by acquiring companies, manufacturing and service assets and technologies that complement our three existing businesses, we may not be able to identify and successfully negotiate suitable acquisitions, obtain financing for future acquisitions on satisfactory terms, obtain regulatory approval or otherwise complete acquisitions in the future.
 
RISKS RELATED TO THE INDUSTRIES IN WHICH WE OPERATE
 
We operate in very competitive markets. We may not be able to compete effectively with our competitors, and competitive pressures could adversely affect our business, financial condition and results of operations. Our three business segments compete with a number of larger and smaller companies in the markets we serve. Some of our competitors have greater financial, production, research and development or other resources than we do. Within Barnes Aerospace, certain of our OEM customers compete with our repair and overhaul business. Some of our OEM customers in the aerospace industry also compete with us where they have the ability to manufacture the components and assemblies that we supply to them but have chosen, for capacity limitations, cost considerations or other reasons, to outsource the manufacture to us. Our three businesses compete on the basis of price, service, quality, reliability of supply, technology, innovation and, in the case of Associated Spring and Barnes Aerospace, design. We must continue to make investments to maintain and improve our competitive position. We cannot assure you that we will have sufficient resources to continue to make such investments or that we will be successful in maintaining our competitive position. Our competitors may develop products or services, or methods of delivering those products or services, that are superior to our products, services or methods. Our competitors may also adapt more quickly than we to new technologies or evolving customer requirements. Pricing pressures could cause us to adjust the prices of certain of our products to stay competitive. We cannot assure you that we will be able to compete successfully with our existing or future competitors. Also, if consolidation of our existing competitors occurs, we expect the competitive pressures
 
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we face to increase. Our failure to compete successfully could adversely affect our business, financial condition, results of operations and cash flows.
 
Our customers’ businesses are generally cyclical. Weaknesses in the industries in which our customers operate could impact our revenues and profitability. The industries to which we sell our products are cyclical and tend to decline in response to overall declines in industrial production. Associated Spring is dependent on the transportation industry, and Barnes Aerospace is heavily dependent on the aerospace industry. As a result, our business is also cyclical and impacted by overall levels of industrial production and fluctuations in the transportation and aerospace industries. In addition, many of our customers have historically experienced periodic downturns, which often have had a negative effect on demand for our products. For example, lower production rates in the transportation markets and reduced overall sales of telecommunications and electronics products adversely affect the volume and price of orders placed for products used to manufacture these products, including our springs. Prior industry downturns have negatively affected our net sales, gross margin, net income and cash flows. For instance, the aerospace industry recently had a period of downturn. While there has been a recovery in commercial air traffic, the commercial airline industry continues to be subject to financial difficulties, which could adversely affect our business, financial condition, results of operations and cash flows.
 
Original equipment manufacturers in the automotive and aerospace industries have significant pricing leverage over suppliers and may be able to achieve price reductions over time. There is substantial and continuing pressure from OEMs in the automotive and aerospace industries to reduce the prices they pay to suppliers. We attempt to manage such downward pricing pressure, while trying to preserve our business relationships with our customers, by seeking to reduce our production costs through various measures, including purchasing raw materials and components at lower prices and implementing cost-effective process improvements. However, our suppliers, in the past, have resisted and, in the future, may resist pressure to lower their prices and may seek to impose price increases. In 2005, our efforts to convince our key automotive OEM customers to share in raw material price increases were met with limited success. If we are unable to offset OEM price reductions through these measures, our gross margins, profitability and cash flows could be adversely affected. In addition, OEMs have substantial leverage in setting purchasing and payment terms, including the terms of accelerated payment programs under which payments are made prior to the account due date in return for an early payment discount. OEMs can unexpectedly change their purchasing policies or payment practices, which could have a negative impact on our short-term working capital.
 
Demand for our defense-related products depends on government spending. An increasing portion of Barnes Aerospace’s sales are derived from the military market. The military market is largely dependent upon government budgets, particularly the U.S. defense budget. The funding of government programs is subject to Congressional appropriation. Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may be expected to continue for several years. Consequently, programs are often only partially funded and additional funds are committed only as Congress makes further appropriations. We cannot assure you that an increase in defense spending will be allocated to programs that would benefit our business. Moreover, we cannot assure you that new military aircraft programs in which we participate will enter full-scale production as expected. A decrease in levels of defense spending or the government’s termination of, or failure to fully fund, one or more of the contracts for the programs in which we participate could have a material adverse effect on our financial position and results of operations.
 
A downturn in the automotive industry could adversely affect our business and financial results. We derive a significant portion of our sales from sales to the automotive industry. Recently, the automotive industry has suffered from certain financial pressures which have had negative consequences for companies in or with customers in the automotive industry. The automotive industry has generally suffered from unfavorable pricing pressures in North America and Europe. The operation of our business within the automotive industry subjects us to the pressures applicable to all companies operating in the automotive industry. While the precise effects of such instability on the automotive industry are difficult to determine, they may negatively impact our business, financial condition, results of operations and cash flows.
 
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The consolidation occurring in the industries in which we operate could adversely affect our business and financial results. The industries in which we operate have been experiencing consolidation, particularly in the aerospace industry. There has been consolidation of both suppliers, including us and our competitors, and the customers we serve. Supplier consolidation is in part attributable to OEMs more frequently awarding long-term sole source or preferred supplier contracts to the most capable suppliers in an effort to reduce the total number of suppliers from whom components and systems are purchased. We cannot assure you that our business, financial condition, results of operations or cash flows will not be adversely impacted as a result of consolidation by our competitors or customers.
 
The aerospace industry is highly regulated. Complications related to aerospace regulations may adversely affect Barnes Aerospace. A substantial portion of our income is derived from our aerospace business. The aerospace industry is highly regulated in the United States by the Federal Aviation Administration, or FAA, and in other countries by similar regulatory agencies. We must be certified by these agencies and, in some cases, by individual OEMs in order to engineer and service systems and components used in specific aircraft models. If material authorizations or approvals were delayed in being issued, revoked or suspended, Barnes Aerospace would be adversely affected. New or more stringent governmental regulations may be adopted, or industry oversight heightened, in the future, and we may incur significant expenses to comply with any new regulations or any heightened industry oversight.
 
Environmental regulations impose costs and regulatory requirements on our operations. Environmental compliance may be more costly than we expect, and we may be subject to material environmental-based claims in the future. Our past and present business operations and past and present ownership and operations of real property subject us to extensive and changing federal, state and local environmental laws and regulations, as well as those of other countries, pertaining to the discharge of materials into the environment, the handling and disposition of wastes (including hazardous wastes) or otherwise relating to protection of the environment. We have experienced, and expect to continue to experience, costs to comply with environmental laws and regulations. In addition, new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements could require us to incur costs or become subject to new or increased liabilities that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
 
We use and generate hazardous substances and wastes in our operations. In addition, many of our current and former properties are or have been used for industrial purposes. Accordingly, we monitor hazardous waste management and applicable environmental permitting and reporting for compliance with applicable laws at our locations in the ordinary course of our business. We may be subject to potential material liabilities relating to any investigation and clean-up of our locations or properties where we delivered hazardous waste for handling or disposal that may be contaminated and to claims alleging personal injury.
 
High fuel prices may impact our operating results. Fuel costs constitute a significant portion of operating expenses for companies in the aerospace industry. Recent hurricanes caused widespread disruption to oil production, refinery operations and pipeline capacity in certain areas of the United States, and, as a result, the price of jet fuel has increased significantly. Because many of our customers and we are in the aerospace industry, increased fuel costs could have a material adverse effect on our financial condition or results of operations. Additionally, the sales force of our distribution business incurs significant fuel costs in the course of business.
 
 Item 1B. Unresolved Staff Comments
 
None.
 
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 Item 2. Properties
 
As shown on the following table, at December 31, 2005, the Company had 60 manufacturing, sales, and distribution sites worldwide. Thirteen of the manufacturing sites are leased. The majority of the distribution centers are leased.

Type of Facility
	  	U.S. &
  Canada  
	  	  Europe  
	  	Mexico &
South
America
	  	    Asia    
	  	    Total   
	
Barnes Distribution	  	 	  	 	  	 	  	 	  	 	
Distribution and support centers	  	16	  	6	  	2	  	3	  	27	
						
Associated Spring	  	 	  	 	  	 	  	 	  	 	
Manufacturing	  	11	  	3	  	3	  	3	  	20	
Sales & development	  	3	  	—	  	—	  	—	  	3	
						
Barnes Aerospace	  	 	  	 	  	 	  	 	  	 	
Manufacturing	  	6	  	—	  	—	  	3	  	9	
Sales	  	—	  	1	  	—	  	—	  	1	
 	  		  		  		  		  		
Total	  	36	  	10	  	5	  	9	  	60	

The above table does not include the Corporate Office of the Company, which is owned, or the headquarters for each of the businesses, one of which is owned and the other two of which are leased.
 
 Item 3. Legal Proceedings
 
The Company is subject to litigation from time to time in the ordinary course of business. There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party, or of which any of their property is the subject.
 
 Item 4. Submission of Matters to a Vote of Security Holders
 
No matters were submitted to a vote of security holders during the fourth quarter of 2005.
 
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PART II
 
 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
(a) Market Information
 
The Company’s common stock is traded on the New York Stock Exchange under the symbol “B”. The following table sets forth, for the periods indicated, the low and high sales price per share, as reported by the New York Stock Exchange.

 	  	2005
	
 	  	Low
	  	High
	  	Dividends
	
Quarter ended March 31	  	$	23.72	  	$	28.96	  	$	0.20	
Quarter ended June 30	  	 	25.30	  	 	34.70	  	 	0.20	
Quarter ended September 30	  	 	32.82	  	 	37.20	  	 	0.22	
Quarter ended December 31	  	 	31.95	  	 	36.55	  	 	0.22	
		
 	  	2004
	
 	  	Low
	  	High
	  	Dividends
	
Quarter ended March 31	  	$	26.01	  	$	33.57	  	$	0.20	
Quarter ended June 30	  	 	25.73	  	 	29.58	  	 	0.20	
Quarter ended September 30	  	 	24.20	  	 	29.14	  	 	0.20	
Quarter ended December 31	  	 	24.80	  	 	28.46	  	 	0.20	
 
Stockholders
 
As of February 21, 2006, there were 6,548 holders of record of the Company’s common stock and approximately 10,006 holders, which includes holders of record, brokers and other institutions.
 
Dividends
 
Payment of future dividends will depend upon the Company’s financial condition, results of operations and other factors deemed relevant by the Company’s Board of Directors, as well as any limitations resulting from financial covenants on net worth under the Company’s credit facilities. See the table above for dividend information for 2005 and 2004.
 
(c) Issuer Purchases of Equity Securities

Period
	  	(a) Total Number
of Shares (or
Units)
Purchased
	 	 	(b) Average Price
Paid Per Share
(or Unit)
	  	(c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
	  	(d) Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units) that
May Yet Be
Purchased Under the
Plans or Programs (2)
	
October 1-31, 2005	  	11,262	 	 	$	34.95	  	492	  	408,866	
November 1-30, 2005	  	373,649	 	 	$	35.15	  	2,450	  	406,416	
December 1-31, 2005	  	19,044	 	 	$	34.31	  	—  	  	406,416	
 	  			 	 	 	  		  	 	
Total	  	403,955	(1)	 	$	35.11	  	2,942	  	 	

(1)	Other than 2,942 shares purchased in the fourth quarter of 2005 which were purchased as part of the Company’s publicly announced plan, all acquisitions of equity securities during the fourth quarter of 2005 were the result of the operation of the terms of the Company’s stockholder-approved equity compensation plans and the terms of the equity grants pursuant to those plans to pay through attestation of ownership for the exercise price and related income tax upon the exercise of options. The purchase price of a share of stock used for tax withholding is the market price on the date of the exercise of the option.	
(2)	The program was publicly announced on April 12, 2001 authorizing repurchase of up to 1 million shares of its common stock. During the fourth quarter of 2005, the Company continued to repurchase shares of its common stock in the open market.	
 
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 Item 6. Selected Financial Data

 	  	2005 (3)
	 	 	2004 (4)
	 	 	2003 (4)
	 	 	2002 (4)
	 	 	2001 (4)(5)
	 	
Per common share (1)	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	  	$	2.56	 	 	$	1.49	 	 	$	1.53	 	 	$	1.43	 	 	$	1.03	 	
Diluted	  	 	2.48	 	 	 	1.44	 	 	 	1.49	 	 	 	1.40	 	 	 	1.01	 	
Dividends paid	  	 	0.84	 	 	 	0.80	 	 	 	0.80	 	 	 	0.80	 	 	 	0.80	 	
Stockholders’ equity (at year-end)	  	 	16.46	 	 	 	15.09	 	 	 	14.40	 	 	 	11.39	 	 	 	11.21	 	
Stock price (at year-end)	  	 	33.00	 	 	 	26.51	 	 	 	32.31	 	 	 	20.35	 	 	 	23.99	 	
						
For the year (in thousands)	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	  	$	1,102,174	 	 	$	994,709	 	 	$	890,818	 	 	$	784,036	 	 	$	768,821	 	
Operating income	  	 	86,695	 	 	 	57,582	 	 	 	51,834	 	 	 	44,272	 	 	 	40,171	 	
As a percent of sales	  	 	7.9	%	 	 	5.8	%	 	 	5.8	%	 	 	5.6	%	 	 	5.2	%	
Income before income taxes and cumulative effect of a change in accounting principle	  	$	78,461	 	 	$	43,027	 	 	$	38,202	 	 	$	32,543	 	 	$	23,311	 	
Income taxes	  	 	17,553	 	 	 	8,601	 	 	 	5,289	 	 	 	5,741	 	 	 	4,281	 	
Net income	  	 	60,517	 	 	 	34,426	 	 	 	32,913	 	 	 	26,802	 	 	 	19,030	 	
As a percent of average stockholders’ equity	  	 	16.2	%	 	 	10.1	%	 	 	11.8	%	 	 	12.3	%	 	 	9.1	%	
Depreciation and amortization	  	$	34,858	 	 	$	34,177	 	 	$	34,571	 	 	$	33,626	 	 	$	37,045	 	
Capital expenditures	  	 	26,097	 	 	 	28,509	 	 	 	18,397	 	 	 	19,367	 	 	 	24,857	 	
Average common shares outstanding - basic	  	 	23,599	 	 	 	23,106	 	 	 	21,475	 	 	 	18,750	 	 	 	18,506	 	
						
Year-end financial position (in thousands)	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Working capital	  	$	120,808	 	 	$	126,663	 	 	$	132,952	 	 	$	120,085	 	 	$	87,035	 	
Current ratio	  	 	1.5 to 1	 	 	 	1.6 to 1	 	 	 	1.7 to 1	 	 	 	1.9 to 1	 	 	 	1.5 to 1	 	
Property, plant and equipment	  	$	157,056	 	 	$	166,284	 	 	$	154,088	 	 	$	159,440	 	 	$	152,943	 	
Total assets	  	 	999,908	 	 	 	936,962	 	 	 	838,434	 	 	 	660,246	 	 	 	646,537	 	
Long-term debt and notes payable	  	 	286,025	 	 	 	268,045	 	 	 	241,017	 	 	 	220,962	 	 	 	231,441	 	
Stockholders’ equity	  	 	395,205	 	 	 	350,524	 	 	 	329,353	 	 	 	215,937	 	 	 	206,902	 	
Debt as a percent of total capitalization (2)	  	 	42.0	%	 	 	43.3	%	 	 	42.3	%	 	 	50.6	%	 	 	52.8	%	
						
Year-end statistics	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Employees	  	 	6,205	 	 	 	6,047	 	 	 	6,026	 	 	 	5,172	 	 	 	5,150	 	

(1)	All per share data, other than net income and dividends per common share, are based on actual common shares outstanding at the end of each year. Net income per common share is based on weighted average common shares outstanding during each year.	
(2)	Debt includes all interest-bearing debt and total capitalization includes interest-bearing debt and stockholders’ equity.	
(3)	The 2005 results include approximately $391, or $0.02 per share, of charges related to the cumulative effect of a change in accounting principle, net of taxes. These charges resulted from the adoption of FIN No. 47, “Accounting for Conditional Asset Retirement Obligations.”	
(4)	As of January 1, 2005, the Company changed the method of determining the cost of certain U.S. inventories from the last-in, first-out (“LIFO”) method to the first-in, first-out (“FIFO”) method. All previously reported results have been restated to reflect the retroactive application of the accounting change and were previously reported on the Company’s Current Report on Form 8-K dated July 25, 2005.	
(5)	For periods prior to January 1, 2002 (the effective date of Statement of Financial Accounting Standards No. 142, Goodwill and Intangible Assets), goodwill was amortized on a straight-line basis. As such, the 2001 financial data include $3,449 of goodwill amortization expense, net of taxes.	
 
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 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
OVERVIEW
 
2005 Highlights
 
The Company achieved record sales of $1,102.2 million and 50.6% growth in operating income to $86.7 million in 2005. The record sales year was driven by organic growth in all of the Company’s operating segments and incremental sales from recent acquisitions. Profitability improved in all three operating segments as a result of profitable sales growth and operational improvements.
 
During 2005, Barnes Aerospace entered into two additional aftermarket RSPs, committing approximately $35.5 million in participation fees. The RSPs secure long-term relationships for aftermarket sales of engine parts with attractive financial returns. These programs had a positive impact on 2005 results and are expected to continue to have a positive impact going forward.
 
The Company completed two acquisitions, Toolcom and Service Plus Distributors, within Barnes Distribution, which complemented and increased its product offerings and strengthened its global presence.
 
The Company completed a financial restructuring, which included a legal reorganization of its international operations, and amended its revolving credit facilities in January 2006. The new structure and amended credit facilities will enable rapid financing through efficient deployment of cash to support global operations. During the third quarter of 2005, the Company also completed the sale of $100.0 million of 3.75% Convertible Senior Subordinated Notes due in August 2025. The proceeds were used to repay indebtedness under the Company’s revolving credit facility. As a result of this new fixed rate debt, nearly 90% of the Company’s total borrowings at December 31, 2005 were at a fixed rate.
 
During the second quarter of 2005, the Company sold its 45% investment in NASCO, a joint venture formed in 1986 between the Company and NHK Spring Co., Ltd. of Japan (“NHK”), to NHK for $18.6 million, resulting in an after-tax gain of $4.0 million.
 
In August 2005, the Company was awarded multi-year Pioneer Status in Singapore, retroactive to October, 2003. Pioneer Status provides the Company with special tax benefits on the earnings from the production and sale of certain engine components by Barnes Aerospace. Tax benefits of approximately $4.1 million were recorded during 2005, $1.5 million of which related to periods prior to January 1, 2005.
 
Management Objectives
 
Management has embraced a corporate culture within Barnes Group that has as its common goals the generation of balanced and sustainable profitable growth and building lasting value for its stockholders. The Company’s strategies for generating growth include organic growth from new products and services, markets and customers; and growth from strategic acquisitions, of which 11 have been completed since 1999.
 
Our Business
 
Barnes Group consists of three operating segments: Barnes Distribution, an international distributor of industrial MROP supplies; Associated Spring, one of the world’s largest manufacturers of precision mechanical components and nitrogen gas products, and a global supplier of retaining rings, specialty spring products--reed valves and shock discs, and injection-molded plastic components; and Barnes Aerospace, a manufacturer and repairer of highly engineered assemblies and products for aircraft engines, airframes, and land-based industrial gas turbines.
 
In each of these businesses, Barnes Group is among the leaders in the market niches it serves, and has highly recognized brands for many of the products it sells or manufactures.
 
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Key Performance Indicators
 
Management evaluates the performance of its reportable segments based on the operating profit of the respective businesses, which includes net sales, cost of sales, selling and administrative expenses and certain components of other income and other expenses, as well as the allocation of corporate overhead expenses. Management also uses an internal measurement tool called PPAT, or Performance Profit After Tax. PPAT is an economic value added (“EVA ® ”) -like metric that calculates operating profit after tax, less a charge for the capital employed by the business. Management utilizes PPAT in economic decision making, such as capital expenditures, investments in growth initiatives, customer pricing decisions, and evaluation of acquisitions. The goal of utilizing PPAT is to create a mindset among all employees to use capital in the most efficient way possible and to link decisions to stockholder value creation.
 
In addition to PPAT, which is a measurement tool common among each of the operating groups, each business has its own key performance indicators (“KPIs”), a number of which are focused on customer satisfaction.
 
In Barnes Distribution, KPIs include daily sales average, or DSA; average order size; and fill rate, which is the percentage of order lines filled on the first pass from the distribution center assigned to that customer.
 
At Associated Spring, KPIs include sales and orders per day, which together provide visibility on sales in the next 60 days. Management tracks inventory turns and sales per employee to gauge efficiency, and measures on-time delivery and the number of defective parts per million as means of evaluating customer service levels.
 
At Barnes Aerospace, important KPIs are customer orders and backlog, which are utilized to forecast how sales will develop over the next 12 months. In the OEM operations, management closely tracks quality measurements and on-time delivery to its customers. In the aftermarket operations, management measures quality and turnaround time of overhauled or repaired parts returned to the customers.
 
Key Industry Data
 
In each business, management also tracks a variety of economic and industry data as indicators of the health of a particular sector.
 
At Barnes Distribution, the data includes the Institute for Supply Management’s PMI Composite Index (the “PMI”) and the Federal Reserve’s Industrial Production Index (the “IPI”), which are monthly indicators of the health of U.S. manufacturing activity. Management tracks similar indices in Canada, France and the United Kingdom and also utilizes the Business Conditions Report of the Precision Metalforming Association, which correlates well with demand for Barnes Distribution’s Raymond products.
 
For Associated Spring, key data include the IPI; durable goods orders; tooling build schedules; compressor build forecasts; the production of light vehicles, both in the U.S. and globally; and capital investments in the telecommunications and electronics industries.
 
At Barnes Aerospace, for its OEM operations, management regularly tracks orders and deliveries for each of the major aircraft manufacturers, as well as engine purchases made for new aircraft. In the aftermarket operations, management monitors the number of aircraft in the active fleet, the number of planes temporarily or permanently taken out of service, aircraft utilization rates for the major airlines, shop visits, and traffic growth. Management also monitors annual appropriations for the U.S. military related to new aircraft purchases and maintenance.
 
Acquisitions
 
Acquisitions have been a key growth driver for the Company in each of its three business segments. The Company acquired a number of businesses during the past three years, two of which occurred in 2005 and are
 
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described more fully below. The Company continues to evaluate potential acquisitions that will broaden product line offerings and expand geographic reach, and that provide synergistic opportunities.
 
On September 30, 2005, the Company acquired substantially all of the assets of Service Plus Distributors, a distributor of gas springs, dampers and hardware to equipment and vehicle manufacturers. Service Plus Distributors is being integrated into Barnes Distribution’s Raymond business and complements Raymond’s product offerings. The purchase price to the seller was $13.7 million of which $3.7 million is payable within three years of the closing date and is contingent upon the occurrence of certain events or the achievement of certain performance targets. Such consideration will be recorded if and when paid.
 
On August 9, 2005, the Company acquired the stock of Toolcom, a distributor of maintenance, repair and operating (“MRO”) supplies in the United Kingdom. Toolcom is being integrated into the Barnes Distribution segment, strengthening its presence in Europe through geographic expansion in the United Kingdom and increasing its product offerings. The purchase price to the seller was 7.6 million pounds sterling, or approximately $13.6 million, of which 2.2 million pounds sterling, or approximately $3.8 million, is payable within two years of the closing date and is contingent upon the occurrence of certain events or the achievement of certain performance targets. Such consideration will be recorded if and when paid.
 
In September 2004, the Company acquired DE-STA-CO Manufacturing (“DE-STA-CO”), a world leader in the design and manufacture of specialty spring products--reed valves and shock discs. DE-STA-CO, which is now known as Barnes Precision Valve, was formerly an operating division of Dover Resources, Inc., a subsidiary of Dover Corporation. This acquisition expanded the presence of the Associated Spring segment in these markets, internationally and domestically. The purchase price of this acquisition was $18.2 million. In connection with this acquisition, management approved and committed to a plan in 2005 to reorganize Barnes Precision Valve’s business facilities and involuntarily terminate employees. The reorganization is expected to be completed by the end of 2006.
 
In February 2003, the Company acquired Kar Products, LLC and certain assets of a related company, A.&H. Bolt & Nut Company Ltd. (“Kar”), which was a leading full-service distributor of MRO supplies to industrial, construction, transportation and other markets. The consideration for the acquisition was $76.1 million. This acquisition expanded both the geographic scope and product line reach of the Barnes Distribution segment. Kar had a diversified customer base operating in all 50 states of the U.S., Puerto Rico, and Canada, further enhancing Barnes Distribution’s leadership position within the MROP market and its international presence. In connection with the acquisition, management had approved and committed to certain activities aimed at achieving a number of post-acquisition cost savings and other synergies through headquarters and infrastructure consolidation. This plan included combining the headquarters functions and consolidating warehousing and distribution networks. The Kar integration was completed during 2004.
 
For a further description of acquisitions made over the past three years, refer to Notes 2 and 7 of the Notes to the Consolidated Financial Statements.

RESULTS OF OPERATIONS
 
Sales

($ in millions)	  	2005
	 	 	2004
	 	 	$ Change
	  	% Change
	 	 	2003
	 	
Barnes Distribution	  	$	453.8	 	 	$	424.8	 	 	$	29.0	  	6.8	%	 	$	400.7	 	
Associated Spring	  	 	422.4	 	 	 	373.5	 	 	 	48.9	  	13.1	%	 	 	333.1	 	
Barnes Aerospace	  	 	235.4	 	 	 	205.9	 	 	 	29.5	  	14.4	%	 	 	165.7	 	
Intersegment sales	  	 	(9.4	)	 	 	(9.5	)	 	 	0.1	  	0.5	%	 	 	(8.7	)	
 	  				 				 			  	 	 	 				
Total	  	$	1,102.2	 	 	$	994.7	 	 	$	107.5	  	10.8	%	 	$	890.8	 	

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Barnes Group Inc. reported record net sales of $1,102.2 million in 2005, an increase of $107.5 million, or 10.8%, over 2004 net sales of $994.7 million. The sales increase reflected $70.1 million of organic sales growth; $18.8 million at Barnes Distribution, $21.7 million at Associated Spring and $29.5 million at Barnes Aerospace, including the aftermarket RSPs. Barnes Precision Valve, which was acquired in August 2004, contributed $23.3 million of incremental sales to Associated Spring. The acquisitions of Toolcom and Service Plus Distributors, which were acquired in August and September 2005, respectively, contributed $7.3 million of incremental sales to Barnes Distribution. The strengthening of foreign currencies against the U.S. dollar, primarily in Canada, increased net sales approximately $6.8 million during 2005. Geographically, the Company’s international sales increased 20.1% year-over-year and domestic sales increased 6.8%. Excluding the positive impact on sales of foreign currency translation, the Company’s international sales increased 17.7% in 2005 over 2004.
 
In 2004, the Company reported net sales of $994.7 million, an increase of $103.9 million, or 11.7%, over 2003 net sales of $890.8 million. The sales increase was driven mainly by organic sales growth of $69.3 million; $6.9 million at Barnes Distribution, $23.0 million at Associated Spring and $40.2 million at Barnes Aerospace. The Company’s acquisitions of Kar and Barnes Precision Valve contributed $10.4 million to Barnes Distribution’s sales and $8.5 million to Associated Spring’s sales, respectively. Additionally, the strengthening of foreign currencies against the U.S. dollar, primarily in Europe and Canada, increased sales by approximately $15.7 million. Geographically, the Company’s international sales increased 16.1% year-over-year and domestic sales increased 10.6%. Excluding the positive impact on sales of foreign currency translation, the Company’s international sales increased 9.8% in 2004 over 2003.
 
Expenses and Operating Income

($ in millions)	  	2005
	 	 	2004
	 	 	$ Change
	 	% Change
	 	 	2003
	 	
Cost of sales	  	$	705.5	 	 	$	652.9	 	 	$	52.6	 	8.1	%	 	$	577.0	 	
% sales	  	 	64.0	%	 	 	65.6	%	 	 	 	 	 	 	 	 	64.8	%	
						
Gross profit	  	$	396.7	 	 	$	341.8	 	 	$	54.9	 	16.1	%	 	$	313.8	 	
% sales	  	 	36.0	%	 	 	34.4	%	 	 	 	 	 	 	 	 	35.2	%	
						
Selling and administrative expenses	  	$	310.0	 	 	$	284.2	 	 	$	25.8	 	9.1	%	 	$	262.0	 	
% sales	  	 	28.1	%	 	 	28.6	%	 	 	 	 	 	 	 	 	29.4	%	
						
Operating income	  	$	86.7	 	 	$	57.6	 	 	$	29.1	 	50.6	%	 	$	51.8	 	
% sales	  	 	7.9	%	 	 	5.8	%	 	 	 	 	 	 	 	 	5.8	%	
 
In 2005, operating income improved 50.6% from 2004 to $86.7 million. The results reflect significant operating profit improvement in each of the three business segments, driven by sales growth and operational improvements, which are more fully discussed in the Financial Performance by Business Segment below. Driven by higher sales volume, cost of sales increased, but at a lower rate than sales due to productivity improvements at all three segments. Late 2004 personnel reductions favorably impacted 2005 operating income by generating approximately $4.8 million in personnel costs savings at Associated Spring and Barnes Distribution. These improvements were offset, in part, by a shift in the overall sales mix to the manufacturing businesses which have lower gross margins than the distribution business and higher costs of raw material and purchased parts. Additionally, during 2005, as part of management’s ongoing internal control assessment, the Company identified and recorded an adjustment to accounts payable and cost of sales at Barnes Distribution. The Company determined that cost of sales was overstated in prior periods due to inaccuracies in recording inventory receipts. This overstatement was corrected in 2005 as a $1.8 million reduction to cost of sales. Management concluded that such corrections were immaterial, both quantitatively and qualitatively, to the 2005 financial statements and immaterial to the previously reported results of the prior periods to which they relate. Total selling and administrative expenses decreased as a percentage of sales to 28.1% from 28.6% in 2004. This decrease was driven, in part, by the higher proportion of sales in the manufacturing businesses, which have a lower selling expense component than the distribution business. Additionally, included in selling and administrative expenses in 2004 was $3.5 million related to the fourth quarter severance charge discussed above which did not recur in 2005.
 
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Operating income was $57.6 million in 2004, an increase of 11.1% when compared with 2003. Operating income included a $3.5 million pre-tax charge taken in the fourth quarter of 2004 related to costs of personnel reductions at Associated Spring and Barnes Distribution which occurred in the first quarter of 2005. These costs related to actions needed to offset higher raw material costs going forward at Associated Spring and enable the realization of benefits from the Kar Products integration and improved customer service levels at Barnes Distribution. Operating income also included $1.0 million in inventory and facility charges which were partially offset by $0.7 million of benefits related to the reduction of lease obligations at idle facilities. These results reflect significantly higher operating profit at Barnes Aerospace offset by lower operating profits at both Barnes Distribution and Associated Spring. Operating income margin remained at 5.8% from 2003. Cost of sales, as a percentage of sales, increased to 65.6%, or a 13.2% increase from 2003, which is slightly more than the growth rate in sales for the year. This reflected a shift in overall sales mix to the manufacturing businesses which had lower gross margins than the distribution business combined with lower gross profit margins at Barnes Distribution and Associated Spring. Gross profit margins at Barnes Distribution were negatively impacted by a shift in sales mix to larger accounts which traditionally have lower pricing and to additional costs incurred to improve customer service levels. Associated Spring’s margin compression resulted from higher raw material costs. Total selling and administrative expenses decreased as a percentage of sales to 28.6% from 29.4% in 2003. This decrease was also driven by the higher proportion of sales in the manufacturing businesses, which have a lower selling expense component than the distribution business. Impacting both cost of sales and selling and administrative expenses were higher benefit costs including medical and pension costs. Included in selling and administrative expenses in 2004 was $3.5 million related to the fourth quarter severance charge discussed above as well as approximately $1.0 million of incremental external costs related to the Company’s Sarbanes-Oxley Section 404 compliance effort.
 
Other Income/Expense
 
Other income, net of other expenses, increased in 2005 compared to 2004 primarily as a result of the sale of the Company’s investment in NASCO in 2005 which resulted in a pre-tax gain of $8.9 million. Additionally, the Company recorded lower foreign exchange losses in 2005 as compared to 2004. The Company’s policy is to hedge foreign currency transaction exposure except in locations where the local currency has historically weakened against the U.S. dollar. This higher income was offset, in part, by lower equity income from NASCO in the period through the sale date.
 
The decrease in other income, net of other expenses, from 2004 to 2003 was principally due to lower equity income from NASCO. Additionally, investment of foreign cash in the aftermarket RSPs reduced short-term investments and related interest income.
 
Interest expense increased in 2005 from 2004 as a result of higher interest rates and higher average borrowings. The higher average interest rates resulted from higher rates on the Company’s variable rate revolving credit facility. In August, 2005 the Company completed a $100.0 million convertible senior debt offering. The proceeds from this offering were used to reduce borrowings under the revolving credit agreement. With the addition of the convertible senior debt, the Company’s long-term borrowings are now comprised of approximately 90% fixed rate debt which will result in less earnings volatility in future periods from changing interest rates.
 
Interest expense decreased in 2004 as compared to 2003 due to a reduction in average interest rates. The lower average interest rates resulted from principal payments on higher cost fixed rate debt and favorable terms negotiated in the amended and restated revolving credit agreement completed during the second quarter of 2004.
 
Income Taxes
 
The Company’s effective tax rate was 22.4% in 2005, compared with 20.0% in 2004 and 13.8% in 2003. The 2005 effective tax rate includes certain discrete items including the tax impact of the sale of NASCO and the
 
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Singapore Pioneer Status tax benefits related to periods prior to 2005. Additionally, the 2005 rate reflects a shift in income to jurisdictions with higher tax rates offset, in part, by the current year favorable impact of the Singapore Pioneer Status on 2005 income.
 
The increase in the tax rate in 2004 when compared to 2003 reflects the absence of two discrete beneficial tax matters included in 2003 that effectively reduced the 2003 tax rate from 19.3% to 13.8%. The benefits recorded in 2003 were associated with a Brazilian tax matter which was resolved in 2003 and the anticipated utilization of minimum asset tax carryforwards in Mexico. Among other items impacting the future tax rate is the mix of income between U.S. and foreign operations. See Note 10 of the Notes to the Consolidated Financial Statements for a reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate.
 
In the normal course of business, the Company and its subsidiaries are examined by various tax authorities, including the Internal Revenue Service (“IRS”). The IRS recently completed its review of the Company for the tax years 2000 through 2002. The IRS is proposing changes to these tax years which could result in a tax cost of approximately $16,500, plus a potential penalty of 20% of the tax assessment plus interest. The Company and its advisors believe the Company’s tax position on the issues raised by the IRS is correct and, therefore, the Company will vigorously defend its position. The Company and its advisors believe the Company will prevail on this issue. Any additional impact on the Company’s liability for income taxes cannot presently be determined, but the Company believes the outcome will not have a material impact on its results of operations, financial position or cash flows.
 
Income and Income Per Share

($ in millions, except per share)	  	2005
	  	2004
	  	$ Change
	  	% Change
	 	 	2003
	
Income before change in accounting principle	  	$	60.9	  	$	34.4	  	$	26.5	  	76.9	%	 	$	32.9	
						
Income per share before change in accounting principle:	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	
Basic	  	$	2.58	  	$	1.49	  	$	1.09	  	73.2	%	 	$	1.53	
Diluted	  	 	2.50	  	 	1.44	  	 	1.06	  	73.6	%	 	 	1.49	
 
Basic and diluted net income per share increased in line with the increase in net income. Basic and diluted average shares outstanding increased slightly as a result of shares issued for stock compensation awards. Additionally, diluted average shares outstanding increased due to the increase in the Company’s per share market price.
 
As of December 31, 2005, the Company adopted the provisions of FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations.” The cumulative effect of applying this Interpretation is treated as a change in accounting principle. This cumulative change in accounting principle decreased net income by $0.4 million, net of tax, or $0.02 per share. See Note 19 of the Notes to the Consolidated Financial Statements.
 
Financial Performance by Business Segment
 
Barnes Distribution

($ in millions)	  	2005
	 	 	2004
	 	 	$ Change
	  	% Change
	 	 	2003
	 	
Sales	  	$	453.8	 	 	$	424.8	 	 	$	29.0	  	6.8	%	 	$	400.7	 	
Operating profit	  	 	26.4	 	 	 	13.8	 	 	 	12.6	  	91.5	%	 	 	16.5	 	
Operating margin	  	 	5.8	%	 	 	3.2	%	 	 	 	  	 	 	 	 	4.1	%	
 
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Barnes Distribution achieved record sales of $453.8 million in 2005, a 6.8% increase over 2004. Organic sales grew $18.8 million, or 4.4%, in part due to the positive results of Barnes Distribution’s strategic initiatives in the U.S., particularly its Corporate and Tier II account initiatives. Sales from Barnes Distribution’s Raymond business improved 10.0% over 2004. Toolcom and Service Plus Distributors, which were acquired by Barnes Distribution in 2005, provided incremental sales of $7.3 million while foreign exchange rates had a favorable impact of $2.9 million on 2005 sales. Key performance indicators in the U.S., such as the daily sales average and average order size, improved as compared to 2004. Additionally, Barnes Distribution’s operations in Canada and Europe reported higher year-over-year sales.
 
Barnes Distribution’s operating profit nearly doubled from 2004 due, in large part, to higher sales and improved gross margins driven by cost savings and operational improvements. Higher selling prices in 2005 offset increased vendor costs, primarily for steel-based product and freight costs. The personnel reductions in late 2004 generated $1.9 million in savings during 2005. Operating profit in 2004 also included approximately $4.2 million of integration costs related to the Kar acquisition and costs incurred to address customer service levels which did not recur in 2005. As previously discussed, Barnes Distribution recorded a $1.8 million reduction to cost of sales in 2005 which positively impacted operating profit. These items were offset, in part, by higher sales personnel costs and higher incentive compensation expense. Operating profit in 2004 included a $1.3 million severance charge and approximately $1.0 million in inventory and facility charges which did not recur in 2005.
 
Outlook: Barnes Distribution’s major focus in 2006 is organic sales growth which will be achieved through its strategic growth initiatives with an emphasis on large and regional corporate customers and Tier II relationships. In addition, continued expansion of its team selling model will contribute to future sales growth. Management expects to complete the integration of Toolcom and Service Plus Distributors into Barnes Distribution in 2006. Operating profits are expected to increase due to additional sales volume, operational improvements and management’s effort to share its supplier price increases with its customers. Additionally, Barnes Distribution is continuing its global sourcing initiative to find alternate sources for its products which should mitigate the impact of any price increases on domestically sourced products. Higher fuel costs may negatively impact operating profits going forward.
 
Sales increased in 2004 from 2003 due primarily to the acquisition of Kar, which contributed approximately $10.4 million of incremental sales. Organic sales increased $6.9 million as a result of positive results from the strategic growth initiatives and improvements in customer service levels. These increases were offset by decreases in other customer markets. Sales were also favorably impacted by approximately $6.8 million due to the strengthening of foreign currencies against the U.S. dollar.
 
Operating profit in 2004 was negatively impacted by a $1.3 million charge for severance costs and $1.0 million in inventory and facility charges taken in the fourth quarter of 2004. Barnes Distribution incurred incremental costs of $2.1 million related to strategic growth initiatives, including costs to strengthen the sales force, and $2.4 million to address customer service level issues. Additionally, profits were adversely impacted by a shift in sales mix to large accounts, which traditionally have lower pricing than the core business. Higher product costs, particularly related to steel prices and freight costs, were largely offset by customer price increases. The year-over-year profit comparison was negatively impacted by the $1.3 million gain on the sale of a distribution center in 2003. Synergistic savings from the Kar acquisition of approximately $5.9 million partially  offset these items.
 
Associated Spring

($ in millions)	  	2005
	 	 	2004
	 	 	$ Change
	  	% Change
	 	 	2003
	 	
Sales	  	$	422.4	 	 	$	373.5	 	 	$	48.9	  	13.1	%	 	$	333.1	 	
Operating profit	  	 	32.1	 	 	 	23.4	 	 	 	8.7	  	37.1	%	 	 	26.7	 	
Operating margin	  	 	7.6	%	 	 	6.3	%	 	 	 	  	 	 	 	 	8.0	%	
 
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Associated Spring reported record sales of $422.4 million in 2005, a 13.1% increase over 2004, driven by continued sales growth in its specialty operations, particularly with respect to nitrogen gas products, retaining rings and reed valves. Organic sales growth was $21.7 million in 2005. Barnes Precision Valve, which was acquired during the third quarter of 2004, contributed approximately $23.3 million of incremental sales. Additionally, sales were positively impacted by approximately $3.9 million related to the impact of foreign exchange translation, primarily in Brazil and Canada. Sales from the legacy business were essentially flat year over year.
 
Associated Spring’s operating profit increased 37.1% to $32.1 million in 2005. The increase was driven in large part by the profit contribution on higher sales volume from the specialty operations, and the incremental sales from the Barnes Precision Valve acquisition. Partially offsetting the profit improvement in the specialty operations was a decline in profit at the traditional, legacy spring operations. During 2005, Associated Spring incurred higher raw material costs which were largely offset with customer price increases. The late 2004 personnel reductions positively impacted 2005 operating profit by reducing 2005 operating costs by approximately $2.9 million. These improvements were offset, in part, by higher than anticipated domestic operating costs and continued costs related to the start-up of the Monterrey, Mexico facility. Also, the Company incurred approximately $1.2 million in costs in 2005 related to the successful negotiation of certain union pension and health care agreements. Operating profit in 2004 included $2.2 million of severance costs which did not recur in 2005.
 
Outlook: Key to 2006 performance is continued sales growth in the specialty operations. Management is focused on the development of these operations through investments in capacity and geographic expansion. Modest increases are expected in the markets served by the traditional, legacy spring business including light vehicle, heavy truck and other industrial products. Associated Spring continues to diversify its business portfolio to mitigate any potential exposure to a particular industry or customer. Associated Spring’s relative concentration of sales to the domestic direct light vehicle market has steadily declined since 1999 to less than 20% of Associated Spring’s total sales. Management continues to focus on improving the operational performance of these businesses through the transfer of certain production to lower-cost facilities and other productivity initiatives. Generally, raw material prices continue to increase and Associated Spring continues to manage its exposure to such price increases by seeking cost recovery from its customers. The Company completed negotiations on certain union labor, pension and health care agreements with new contracts being ratified in January 2006. These new agreements will have a negative impact on first quarter 2006 earnings of approximately $0.6 million which is expected to be largely offset by cost savings during 2006. In addition, the Company will be negotiating additional agreements that will expire in 2006. Any costs resulting from reorganizing business facilities, raw material price increases, and new labor actions or labor agreements could negatively impact 2006 profit margins.
 
Associated Spring reported sales of $373.5 million in 2004. This performance was driven in large part by organic sales growth of $23.0 million. Growth came in all of its key market segments, most notably in the industrial product markets which realized sales growth of 23.4% driven primarily by the success of reed products in Brazil. Additionally, the heavy truck, light vehicle, telecommunications and electronics, and nitrogen gas spring markets had positive year-over-year sales trends. Barnes Precision Valve, which the Company acquired in September 2004, contributed approximately $8.5 million in sales in 2004. The strengthening of foreign currencies against the U.S. dollar, primarily in Europe, had a positive impact on sales of approximately $8.9 million during 2004.
 
Associated Spring’s operating profit decreased in 2004 resulting in a 6.3% operating margin, compared to 8.0% in 2003. Operating profit in 2004 was positively impacted by increased sales, mainly in Associated Spring’s international locations. However, overall operating profit was reduced by raw material net cost increases of $5.6 million and a $2.2 million charge for severance costs recorded in the fourth quarter. Additionally in 2004, the Company incurred approximately $2.5 million in costs related to operating improvement initiatives focused
 
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on capacity, quality issues and lean manufacturing, approximately $0.8 million of higher medical costs and approximately $0.4 million of cost of sales expense related to the purchase accounting step-up of inventory to fair value at Barnes Precision Valve.
 
Barnes Aerospace

($ in millions)	  	2005
	 	 	2004
	 	 	$ Change
	  	% Change
	 	 	2003
	 	
Sales	  	$	235.4	 	 	$	205.9	 	 	$	29.5	  	14.4	%	 	$	165.7	 	
Operating profit	  	 	28.4	 	 	 	21.4	 	 	 	7.0	  	32.8	%	 	 	10.6	 	
Operating margin	  	 	12.1	%	 	 	10.4	%	 	 	 	  	 	 	 	 	6.4	%	
 
Barnes Aerospace achieved record sales of $235.4 million in 2005. The sales increase included a 38.3% increase in aftermarket sales, driven by increased sales from the aftermarket RSPs and increased overhaul and repair sales in Asia. Additionally, OEM sales increased 8.6% during 2005. Total orders for 2005 were $311.3 million, compared with $253.6 million in 2004 and $161.9 million in 2003. Included in the 2005 orders were $87.9 million in orders for the GE90 commercial engine program and $66.8 million of direct and indirect military orders. The 2005 increase in orders also includes the impact of extended customer lead times driven by raw material availability. Order backlog increased 39.0% to a record $269.3 million at December 31, 2005, from $193.8 million at December 31, 2004. Approximately 70% of the order backlog as of December 31, 2005 is expected to be shipped in 2006.
 
Barnes Aerospace’s operating profit was $28.4 million in 2005, a 32.8% increase over 2004. Operating profit improvement was driven by the increased sales volume from the high margin aftermarket RSPs and the increase in overhaul and repair sales. In addition, the OEM business’s operating profit improved during a year in which new product introduction was at historically high levels. Both the OEM and aftermarket operating profits benefited from continued focus on Six Sigma and lean initiatives.
 
Outlook: Sales at Barnes Aerospace are expected to increase during 2006 on the strength of the aftermarket RSPs and the OEM backlog. Management is focused on adding capacity and improving productivity through operational improvements and transitioning certain manufacturing activities to Singapore. OEM commercial sales are expected to increase as a result of the strong commercial engine market and Barnes Aerospace’s participation in a large commercial engine program. Management expects OEM military sales to increase based on the strength of its backlog. Aftermarket sales should increase as the repair and overhaul businesses target new repair development and the aftermarket RSP sales increase due to the ramp-up on the new agreements. Operating profits are expected to continue to be positively impacted by the higher-margin aftermarket RSPs and overhaul and repair business and by OEM sales volume. As raw material lead times increase, particularly for titanium, management continues to take actions to minimize potential exposure from running out of stock or price increases by building inventory buffers of key components to the extent practical. Profits could be impacted by raw material prices and availability, and the impact of higher new product introductions.
 
Barnes Aerospace achieved sales of $205.9 million in 2004. Increased sales over 2003 reflected solid growth in aftermarket sales, which increased 53.7% and were driven by $9.6 million in sales from the RSPs and a 19.0% increase in the overhaul and repair business. Barnes Aerospace entered into three additional aftermarket RSPs during 2004 which drove the incremental RSP sales. Additionally, OEM sales increased 19.5%.
 
In 2004, Barnes Aerospace’s operating profit doubled from 2003. Operating profit was positively impacted by the sharply higher aftermarket and OEM sales volumes and the profit contribution from the RSPs. Partially offsetting these factors was higher incentive compensation expense.
 
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LIQUIDITY AND CAPITAL RESOURCES
 
Management assesses the Company’s liquidity in terms of its overall ability to generate cash to fund its operating and investing activities. Of particular importance in the management of liquidity are cash flows generated from operating activities, capital expenditure levels, dividends, capital stock transactions, effective utilization of surplus cash positions overseas and adequate lines of credit.
 
The Company’s ability to generate cash from operations in excess of its internal operating needs is one of its financial strengths. Management continues to focus on cash flow and working capital management, and anticipates that operating activities in 2006 will generate significant cash. This operating cash flow may be supplemented with external borrowings to meet near-term organic business expansion and the Company’s current financial commitments. Any future acquisitions are expected to be financed through internal cash, borrowings and equity, or a combination thereof.
 
Cash Flow

($ in millions)	  	2005
	 	 	2004
	 	 	$ Change
	 	 	% Change
	 	 	2003
	 	
Operating activities	  	$	72.4	 	 	$	54.2	 	 	$	18.2	 	 	33.7	%	 	$	60.1	 	
Investing activities	  	 	(85.5	)	 	 	(75.6	)	 	 	(9.9	)	 	(13.1	)%	 	 	(95.5	)	
Financing activities	  	 	5.2	 	 	 	6.2	 	 	 	(1.0	)	 	(17.2	)%	 	 	53.7	 	
Exchange rate effect	  	 	(0.3	)	 	 	1.7	 	 	 	(2.0	)	 	NM	 	 	 	3.1	 	
 	  				 				 				 	 	 	 				
(Decrease) increase in cash	  	$	(8.2	)	 	$	(13.5	)	 	$	5.3	 	 	38.9	%	 	$	21.4	 	

NM – Not meaningful
 
Operating activities are the principal source of cash flow for the Company, generating $72.4 million in cash during 2005 compared to $54.2 million in 2004. The increase in operating cash flow in 2005 is due primarily to the improved operating performance. This was offset in part by the increased use of cash for working capital as higher investments in working capital were required to support organic sales growth in all three segments. Accounts receivable levels increased in proportion to increased sales levels and were consistent with 2004 when measured on a days sales outstanding basis. However, inventory levels increased at a higher rate than sales, principally due to increased inventory levels at Barnes Aerospace which were required in response to longer lead times, raw material availability and customer build requirements.
 
Cash used by investing activities in 2005 included $56.8 million in participation fees related to the aftermarket RSPs which are more fully discussed in Note 5 of the Notes to the Consolidated Financial Statements. These payments were funded mainly with cash held outside the U.S. As of December 31, 2005, the Company had a $27.8 million liability for participation fees under the RSPs which is included in accounts payable. These payments will also be made mainly with cash generated outside of the U.S. The payment schedule for the aftermarket RSPs follows (in millions):

2003	  	$	17.5	
2004	  	 	32.0	
2005	  	 	56.8	
2006	  	 	27.8	
 	  			
 	  	$	134.0	

Investing activities include proceeds from the sale of NASCO in 2005. Investing activities also include the acquisitions of Toolcom and Service Plus Distributors in 2005, DE-STA-CO in 2004 and Kar in 2003. The Company’s capital spending program focuses on business growth and improvements in productivity and quality. Capital expenditures in 2005 were $26.1 million compared to $28.5 million in 2004. The higher spending in 2004
 
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reflected the investments in new distribution centers for Barnes Distribution in Dallas, Chicago, and Ontario, Canada and a new manufacturing plant for Associated Spring in Monterrey, Mexico. The Company expects capital spending in 2006 to be in the range of $30-35 million.
 
Cash from financing activities in 2005 included a net increase in borrowings of $21.8 million. The proceeds from borrowings along with cash generated from operating activities were used to fund the two acquisitions, capital expenditures and dividends. Included in the net increase in borrowings was the issuance of $100.0 million of convertible subordinated debt, the proceeds of which were used to pay down borrowings under the revolving credit facility. Cash dividends were increased to $0.84 per share compared to $0.80 in 2004. Total cash used to pay dividends increased in 2005 by $1.4 million to $19.9 million. In 2003, the Company’s follow-on public offering of its common stock provided proceeds of approximately $42.2 million (net of expenses incurred) that were used to reduce borrowings under its revolving credit facility.
 
At December 31, 2005, the Company held $28.1 million in cash and cash equivalents, nearly all of which are held outside the U.S. Since the repatriation of this cash to the U.S. would have had adverse tax consequences, the balances remain outside the U.S. to fund future international growth investments, including capital expenditures, acquisitions and aftermarket RSP participation fees. In 2006, the RSP payments as well as the repayment of the outstanding Yen borrowing will be funded with cash generated outside the U.S. Management has evaluated the one-time favorable foreign dividend provisions enacted as part of the American Jobs Creation Act of 2004 and has decided that no cash will be repatriated from its foreign entities under the provisions of this Act due to anticipated international cash requirements. It is management’s intention to continue to indefinitely reinvest undistributed foreign earnings of its international subsidiaries.
 
The Company maintains borrowing facilities with banks to supplement internal cash generation. At December 31, 2005, the Company had a $175.0 million revolving credit agreement with 11 participating banks of which $24.0 million was borrowed at an interest rate of 5.31%. Additionally, the Company had $4.0 million in borrowings under short-term bank credit lines, at an interest rate of 6.33%.
 
The Company recently completed a financial restructuring which was complementary to the Company’s strategy to continue global expansion. As part of this restructuring, the Company reorganized its international operations in 2005, and in January 2006 finalized an Amended and Restated Credit Facility Agreement and amended the terms of its domestic senior note agreements (see Note 20 of the Notes to the Consolidated Financial Statements). This financial restructuring provided a number of key benefits including reduction of refinancing risk, increased financial flexibility, reduced borrowing costs, and the ability of U.S. bank lenders to participate directly in the global expansion of the Company. The new structure provides rapid financing through efficient deployment of cash to support operations wherever needed.
 
Borrowing capacity is limited by various debt covenants in the Company’s debt agreements. The most restrictive borrowing capacity covenant required the Company to maintain a ratio of Total Debt to EBITDA, as defined in the new revolving credit agreement, of not more than 4.00 times at December 31, 2005. The actual ratio at December 31, 2005 was 2.31 times and would have allowed additional borrowings of at least $207.9 million. As part of the January, 2006 financial restructuring discussed above, the covenant ratios were amended (see Note 20 of the Notes to the Consolidated Financial Statements).
 
The Company believes its credit facilities, coupled with cash generated from operations, are adequate for its anticipated future requirements.
 
The funded status of the Company’s pension plans is dependent upon many factors, including returns on invested assets, the level of market interest rates and benefit obligations. In 2005, the fair value of pension plan securities traded in equity markets increased, which had a positive impact on the funded status of the plans. However, the increase in the fair value of plan assets was more than offset by an increase in the benefit obligation due to normal service costs, a reduction in the discount rate and a change in mortality assumptions. In
 
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accordance with Statement of Financial Accounting Standards (“SFAS”) No. 87, “Employers’ Accounting for Pensions,” the Company records a minimum pension liability adjustment for under-funded plans through a non-cash after-tax charge to accumulated other non-owner changes to equity. As of December 31, 2005 and 2004, the under-funded status of the plans increased, resulting in $5.5 million and $8.9 million non-cash after-tax charges to equity, respectively. From a cash perspective, approximately $2.5 million in cash contributions were made by the Company to its various pension plans in 2005 including the required minimum contributions to its qualified U.S. pension plans. The Company expects to contribute approximately $5.6 million to its various plans in 2006.
 
Contractual Obligations and Commitments
 
At December 31, 2005, the Company had the following contractual obligations and commercial commitments:

($ in millions)	 	Total
	 	Less Than
1 Year
	 	1-3
Years
	 	3-5
Years
	 	More than 5
years
	
Long-term debt obligations	 	$	285.6	 	$	43.8	 	$	87.5	 	$	30.3	 	$	124.0	
Estimated interest payments under long-term obligations (1)	 	 	53.7	 	 	16.3	 	 	23.7	 	 	13.2	 	 	0.5	
Capital lease obligations	 	 	0.4	 	 	0.3	 	 	0.1	 	 	—  	 	 	—  	
Operating lease obligations	 	 	40.1	 	 	10.0	 	 	12.4	 	 	8.1	 	 	9.6	
Purchase obligations (2)	 	 	110.4	 	 	101.8	 	 	7.8	 	 	0.4	 	 	0.4	
Expected pension contributions (3)	 	 	5.6	 	 	5.6	 	 	—  	 	 	—  	 	 	—  	
Expected benefit payments – other postretirement benefit plans  (4)	 	 	62.0	 	 	6.9	 	 	13.4	 	 	12.8	 	 	28.9	
 	 			 			 			 			 			
Total	 	$	557.8	 	$	184.7	 	$	144.9	 	$	64.8	 	$	163.4	

(1)	Interest payments under long-term debt obligations have been estimated based on the borrowings outstanding and market interest rates as of December 31, 2005.	
(2)	The amounts do not include purchase obligations already reflected as current liabilities on the consolidated balance sheet. The purchase obligation amount includes all outstanding purchase orders as of the balance sheet date as well as the minimum contractual obligation or termination penalty under other contracts.	
(3)	The amount included in “Less than 1 Year” reflects anticipated contributions to the Company’s various pension plans. Anticipated contributions beyond one year are not determinable.	
(4)	The amounts reflect anticipated future benefit payments under the Company’s various other postretirement benefit plans based on current actuarial assumptions. Expected benefit payments do not extend beyond 2015. See Note 9 of the Notes to the Consolidated Financial Statements.	
 
OTHER MATTERS
 
Inflation
 
Inflation generally affects the Company through its costs of labor, equipment and raw materials. Increases in the costs of these factors have historically been offset by price increases, operating improvements, and other cost saving initiatives. During 2005 and 2004, the Company experienced inflation in raw material prices, specifically steel and titanium.
 
Critical Accounting Policies
 
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting policies are disclosed in Note 1 of the Notes to the Consolidated Financial Statements. The most significant areas involving management judgments and estimates are described below. Actual results could differ from such estimates.
 
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Inventory Valuation: Inventories are valued at the lower of cost, determined on a first-in, first-out (“FIFO”) basis, or market. As discussed in Note 19 of the Notes to the Consolidated Financial Statements, the Company changed the method of determining the cost of certain U.S. inventories which previously utilized the last-in, first-out method to the first-in, first-out method as of January 1, 2005. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable value. Loss provisions, if any, on contracts are established when estimable. Loss provisions are based on the projected excess of manufacturing costs over the net revenues of the products or group of related products under contract. The process for evaluating the value of excess and obsolete inventory often requires the Company to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be sold in the normal course of business. Accelerating the disposal process or incorrect estimates of future sales potential may necessitate future adjustments to these provisions.
 
Business Acquisitions: Assets and liabilities acquired in a business combination are recorded at their estimated fair values at the acquisition date. At December 31, 2005, the Company had $235.3 million of goodwill, representing the cost of acquisitions in excess of fair values assigned to the underlying net assets of acquired companies. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment testing. The assessment of goodwill involves the estimation of the fair value of “reporting units,” as defined by SFAS No. 142. Management completed this annual assessment during the second quarter of 2005 based on the best information available as of the date of the assessment, which incorporated management assumptions about expected future cash flows. Based on this assessment, there was no goodwill impairment in 2005. Future cash flows can be affected by changes in the global economy and local economies, industries and markets in which the Company sells products or services, and the execution of management’s plans, particularly with respect to integrating acquired companies. There can be no assurance that future events will not result in impairment of goodwill or other intangible assets.
 
Revenue Sharing Programs: The Company participates in aftermarket RSPs under which the Company receives an exclusive right to supply designated aftermarket parts over the life of the related aircraft engine program. As consideration, the Company pays participation fees, which are recorded as long-lived intangible assets, and are recognized as a reduction to sales over the life of the program. The recoverability of the intangible asset is subject to significant estimates about future revenues related to the program’s aftermarket parts. Management updates revenue projections periodically, which includes comparing actual experience against projected revenue and obtaining industry projections. The potential exists that actual revenues will not meet expectations due to a change in market conditions. A shortfall in future revenues may indicate an impairment of the intangible asset. The Company evaluates the remaining useful life of this asset to determine whether events and circumstances warrant a revision to the remaining period of amortization. The intangible asset is reviewed for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company has not revised the amortization period or identified any impairment of these intangible assets. See Note 5 of the Notes to the Consolidated Financial Statements.
 
Reorganization of Businesses: For non-acquisition related reorganizations, the Company records the cost of reorganization initiatives at the time the liability is incurred. For reorganization initiatives in connection with acquisitions, the Company records liabilities at the time that management has approved and committed to a reorganization plan. Such a plan identifies all significant actions to be taken and specifies an expected completion date that is within a reasonable period of time. The liability includes those costs that can be reasonably estimated. These estimates are subject to adjustments based upon actual costs incurred.
 
Pension and Other Postretirement Benefits: Accounting policies and significant assumptions related to pension and other postretirement benefits are disclosed in Note 9 of the Notes to the Consolidated Financial Statements.
 
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The following table provides a breakout of the current targeted mix of investments, by asset classification, along with the historical rates of return for each asset class and the long-term projected rates of return for the U.S. plans.

 	  	Target
Asset
Mix %
	  	Annual Return %
	
 	  		  	Historical (1)
	  	Long-Term
Projection
	
Asset class	  	 	  	 	  	 	
Large cap growth	  	17	  	11.6	  	10.6	
Large cap value	  	17	  	14.1	  	13.1	
Mid cap equity	  	12	  	14.7	  	13.7	
Small cap growth	  	7	  	8.9	  	7.9	
Small cap value	  	7	  	15.0	  	14.0	
Non-U.S. equity	  	10	  	11.1	  	10.1	
Real estate-related	  	5	  	14.1	  	13.1	
Fixed income	  	20	  	9.3	  	6.3	
Cash	  	5	  	6.5	  	3.5	
Weighted average	  	 	  	12.3	  	10.8	

(1)	Historical returns based on the life of the respective index, approximately 25 years.	
 
The historical rates of return were calculated based upon compounded average rates of return of published indices. The 25% aggregate target for fixed income and cash investments is lower than the fixed income and cash component of a typical pension trust. The fixed income investments include a higher-than-average component of yield-aggressive investments, including high-yield corporate bonds. Based on the overall historical and projected rates of return, management is projecting the long-term rate of return on its U.S. pension assets to be 9.5%.
 
The discount rate used for the Company’s U.S. pension plans is selected based on highly rated long-term corporate bond indices and yield curves that match the duration of the plans’ benefit obligations. The selected rate reflects the rate at which the pension benefits could be effectively settled. At December 31, 2005, the Company selected a discount rate of 5.60% for its U.S. pension plans. The discount rates for non-U.S. plans were selected based on indices of high-quality bonds using criteria applicable to the respective country.
 
A one-quarter percentage point change in the assumed long-term rate of return would impact the Company’s pretax income by approximately $0.8 million annually. A one-quarter percentage point decrease in the discount rate would decrease the Company’s pretax income by approximately $0.4 million annually. The Company reviews these and other assumptions at least annually.
 
During 2005, the fair value of the Company’s pension plan assets increased by $9.3 million compared to an increase in projected benefit obligations of $31.1 million. The higher increase in the benefit obligation is driven by a 25 basis point decrease in the assumed discount rate and a change in the mortality table assumptions. The Company’s pension expense for 2005 was $1.8 million. Pension expense for 2006 is expected to increase by $5.0 million over 2005 expense, due in part to lower discount rates and changes in the mortality table assumptions.
 
Income Taxes: As of December 31, 2005, the Company had recognized $41.1 million of deferred tax assets, net of valuation reserves. The realization of these benefits is dependent in part on future taxable income. For those jurisdictions where the expiration date of tax loss carryforwards or the projected operating results indicate that realization is not likely, a valuation allowance is provided. Management believes that sufficient income will be earned in the future to realize deferred income tax assets, net of valuation allowances recorded. The recognized net deferred tax asset is based on the Company’s estimates of future taxable income. The realization of these deferred tax assets can be impacted by changes to tax codes, statutory tax rates and future taxable income levels. Additionally, the Company is exposed to certain tax contingencies in the ordinary course of business. The Company records a liability when an exposure item becomes probable and can be reasonably estimated.
 
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Recent Accounting Changes
 
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” This Statement amends the guidance in ARB No. 43 to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material and requires that those items be recognized as current-period charges. Additionally, the Statement requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement will be effective for inventory costs incurred by the Company in 2006. The Company is currently evaluating the impact this Statement will have on the Company’s financial position, results of operations and cash flows.
 
In December 2004, the FASB issued a revision to SFAS No. 123. The revised statement, SFAS No. 123R, “Share-Based Payment,” focuses primarily on the accounting for transactions in which a company obtains employee services in exchange for stock options or share-based payments. Currently, the Company grants stock options and other equity-based compensation to its employees and discloses the pro forma effect of compensation expense had the Company applied the provisions of SFAS No. 123 in Note 1 of the Notes to the Consolidated Financial Statements. Under SFAS No. 123R, the Company will be required to record this compensation expense in the Company’s results of operations. In March 2005, the Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No. 107, “Share-Based Payment,” which expresses the views of the SEC regarding the application of SFAS No. 123R and interpretive guidance. Additionally, the SEC approved a rule which delays the effective date of SFAS No. 123R for public companies. As such, this Statement will be effective for the Company beginning in the first quarter of 2006. Upon adoption, the Company anticipates that it will utilize the modified retrospective method and restate prior period results. Management currently estimates that the incremental impact to annual stock-based compensation expense in 2006 will result in a reduction to earnings per share of approximately $0.05, significantly lower than the impact in 2005 and prior years as disclosed in Note 1 of the Notes to the Consolidated Financial Statements. The lower impact is based on changes made to the structure of the equity-based compensation program. The Company has estimated the cumulative effect upon adoption to be immaterial.
 
EBITDA
 
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for 2005 were $130.3 million compared to $92.6 million in 2004. EBITDA is a measurement not in accordance with generally accepted accounting principles (“GAAP”). The Company defines EBITDA as net income plus income taxes, interest expense, and depreciation and amortization which the Company incurs in the normal course of business. The Company does not intend EBITDA to represent cash flows from operations as defined by GAAP, and the reader should not consider it as an alternative to net income, net cash provided by operating activities or any other items calculated in accordance with GAAP, or as an indicator of the Company’s operating performance. The Company’s definition of EBITDA may not be comparable with EBITDA as defined by other companies. The Company believes EBITDA is commonly used by financial analysts and others in the industries in which the Company operates and, thus, provides useful information to investors. Accordingly, the calculation has limitations depending on its use.
 
Following is a reconciliation of EBITDA to the Company’s net income (in millions). The 2005 EBITDA results include the $8.9 million gain on the sale of NASCO, the $1.5 million tax benefit realized from prior periods related to being awarded Pioneer Status in Singapore and the $1.8 million favorable adjustment to cost of sales at Barnes Distribution:

 	  	2005
	  	2004
	
Net income	  	$	60.5	  	$	34.4	
Add back:	  	 	 	  	 	 	
Income taxes	  	 	17.4	  	 	8.6	
Depreciation and amortization	  	 	34.8	  	 	34.2	
Interest expense	  	 	17.6	  	 	15.4	
 	  			  			
EBITDA	  	$	130.3	  	$	92.6	

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 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 
Market risk is the potential economic loss that may result from adverse changes in the fair value of financial instruments. The Company’s financial results could be impacted by changes in interest rates, foreign currency exchange rates and commodity price changes. The Company uses financial instruments to hedge its exposure to fluctuations in interest rates and foreign currency exchange rates. The Company does not use derivatives for speculative or trading purposes.
 
The Company’s long-term debt portfolio consists of fixed-rate and variable-rate instruments and is managed to reduce the overall cost of borrowing while also minimizing the effect of changes in interest rates on near-term earnings. In August 2002, the Company entered into an interest rate swap agreement that effectively converted its 7.13% fixed-rate Senior Notes to variable-rate debt. The underlying debt was repaid in equal installments with a corresponding reduction in the interest rate swap through its maturity date in December 2005.
 
The Company’s primary interest rate risk is derived from its outstanding variable-rate debt obligations. At December 31, 2005, the result of a hypothetical 1% increase in the average cost of the Company’s variable-rate debt would have reduced annual pretax profit by $0.4 million.
 
At December 31, 2005, the fair value of the Company’s fixed-rate debt was $260.8 million, compared with its carrying amount of $251.0 million. The Company estimates that a 1% decrease in market interest rates at December 31, 2005 would have increased the fair value of the Company’s fixed-rate debt to $269.5 million.
 
The Company has manufacturing, sales and distribution facilities around the world and thus makes investments and conducts business transactions denominated in various currencies. The currencies of the locations where the Company’s business operations are conducted are the U.S. dollar, Brazilian real, British pound sterling, Canadian dollar, Chinese yuan, Euro, Mexican peso, Singapore dollar, Swedish krona, and Thai baht. The Company is exposed primarily to financial instruments denominated in currencies other than the functional currency at its international locations. A 10% adverse change in all currencies at December 31, 2005 would have resulted in a $0.5 million loss in the fair value of those financial instruments.
 
Foreign currency commitments and transaction exposures are managed at the operating units as an integral part of their businesses in accordance with a corporate policy that addresses acceptable levels of foreign currency exposures. The Company does not hedge its foreign currency net investment exposure. To reduce foreign currency exposure, management maintains the majority of foreign cash and short-term investments in local currency and uses forward currency contracts for other U.S. dollar-denominated assets in an effort to reduce the effect of the volatility of changes in foreign exchange rates on the income statement. In historically weaker currency countries, such as Brazil and Mexico, management assesses the strength of these currencies relative to the U.S. dollar and may elect during periods of local currency weakness to invest excess cash in U.S. dollar-denominated instruments.
 
The Company’s exposure to commodity price changes relates to certain manufacturing operations that utilize high-grade steel spring wire, titanium and other specialty metals. The Company attempts to manage its exposure to increases in those prices through its procurement and sales practices.
 
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 Item 8. Financial Statements and Supplementary Data
 
BARNES GROUP INC.
 
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)

 	  	Years Ended December 31,
	
 	  	2005
	 	 	2004
	  	2003
	
Net sales	  	$	1,102,174	 	 	$	994,709	  	$	890,818	
				
Cost of sales	  	 	705,488	 	 	 	652,904	  	 	577,001	
Selling and administrative expenses	  	 	309,991	 	 	 	284,223	  	 	261,983	
 	  				 			  			
 	  	 	1,015,479	 	 	 	937,127	  	 	838,984	
 	  				 			  			
Operating income	  	 	86,695	 	 	 	57,582	  	 	51,834	
				
Other income	  	 	10,449	 	 	 	2,145	  	 	3,337	
				
Interest expense	  	 	17,551	 	 	 	15,390	  	 	15,840	
Other expenses	  	 	1,132	 	 	 	1,310	  	 	1,129	
 	  				 			  			
Income before income taxes and cumulative effect of a change in accounting principle	  	 	78,461	 	 	 	43,027	  	 	38,202	
				
Income taxes	  	 	17,553	 	 	 	8,601	  	 	5,289	
 	  				 			  			
Income before cumulative effect of a change in accounting principle	  	 	60,908	 	 	 	34,426	  	 	32,913	
Cumulative effect of a change in accounting principle, net of income taxes of $190	  	 	(391	)	 	 	—  	  	 	—  	
 	  				 			  			
Net income	  	$	60,517	 	 	$	34,426	  	$	32,913	
 	  				 			  			
Per common share:	  	 	 	 	 	 	 	  	 	 	
Basic:	  	 	 	 	 	 	 	  	 	 	
Income before cumulative effect of change in accounting principle	  	$	2.58	 	 	$	1.49	  	$	1.53	
Cumulative effect of change in accounting principle, net of tax	  	 	(0.02	)	 	 	—  	  	 	—  	
 	  				 			  			
Net income	  	$	2.56	 	 	$	1.49	  	$	1.53	
 	  				 			  			
Diluted:	  	 	 	 	 	 	 	  	 	 	
Income before cumulative effect of change in accounting principle	  	$	2.50	 	 	$	1.44	  	$	1.49	
Cumulative effect of change in accounting principle, net of tax	  	 	(0.02	)	 	 	—  	  	 	—  	
 	  				 			  			
Net income	  	$	2.48	 	 	$	1.44	  	$	1.49	
 	  				 			  			
Dividends	  	 	0.84	 	 	 	0.80	  	 	0.80	
				
Average common shares outstanding:	  	 	 	 	 	 	 	  	 	 	
Basic	  	 	23,598,825	 	 	 	23,105,853	  	 	21,475,336	
Diluted	  	 	24,401,637	 	 	 	23,836,463	  	 	22,101,560	
 
See accompanying notes.
 
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BARNES GROUP INC.
 
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

 	  	December 31,
	 	
 	  	2005
	 	 	2004
	 	
Assets	  	 	 	 	 	 	 	 	
Current assets	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	28,112	 	 	$	36,335	 	
Accounts receivable, less allowances (2005 – $3,063; 2004 – $2,727)	  	 	155,595	 	 	 	138,941	 	
Inventories	  	 	159,238	 	 	 	136,960	 	
Deferred income taxes	  	 	24,563	 	 	 	26,615	 	
Prepaid expenses	  	 	11,157	 	 	 	12,244	 	
 	  				 				
Total current assets	  	 	378,665	 	 	 	351,095	 	
			
Deferred income taxes	  	 	16,526	 	 	 	18,543	 	
Property, plant and equipment, net	  	 	157,056	 	 	 	166,284	 	
Goodwill	  	 	235,299	 	 	 	221,856	 	
Other intangible assets, net	  	 	163,849	 	 	 	125,447	 	
Other assets	  	 	48,513	 	 	 	53,737	 	
 	  				 				
Total assets	  	$	999,908	 	 	$	936,962	 	
 	  				 				
Liabilities and Stockholders’ Equity	  	 	 	 	 	 	 	 	
Current liabilities	  	 	 	 	 	 	 	 	
Notes payable	  	$	4,000	 	 	$	—  	 	
Accounts payable	  	 	120,158	 	 	 	135,983	 	
Accrued liabilities	  	 	93,615	 	 	 	79,039	 	
Long-term debt – current	  	 	40,084	 	 	 	9,410	 	
 	  				 				
Total current liabilities	  	 	257,857	 	 	 	224,432	 	
			
Long-term debt	  	 	241,941	 	 	 	258,635	 	
Accrued retirement benefits	  	 	88,036	 	 	 	85,685	 	
Other liabilities	  	 	16,869	 	 	 	17,686	 	
			
Commitments and Contingencies (Notes 8 and 17)	  	 	 	 	 	 	 	 	
			
Stockholders’ equity	  	 	 	 	 	 	 	 	
Common stock - par value $0.01 per share	  	 	 	 	 	 	 	 	
Authorized: 60,000,000 shares	  	 	 	 	 	 	 	 	
Issued (2005 and 2004 – 24,419,694)	  	 	244	 	 	 	244	 	
Additional paid-in capital	  	 	102,821	 	 	 	102,678	 	
Treasury stock, at cost (2005 – 415,910 shares; 2004 – 1,190,949 shares)	  	 	(14,590	)	 	 	(31,541	)	
Retained earnings	  	 	332,707	 	 	 	292,852	 	
Accumulated other non-owner changes to equity	  	 	(25,977	)	 	 	(13,709	)	
 	  				 				
Total stockholders’ equity	  	 	395,205	 	 	 	350,524	 	
 	  				 				
Total liabilities and stockholders’ equity	  	$	999,908	 	 	$	936,962	 	

See accompanying notes.
 
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BARNES GROUP INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

 	  	Years Ended December 31,
	 	
 	  	2005
	 	 	2004
	 	 	2003
	 	
Operating activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	$	60,517	 	 	$	34,426	 	 	$	32,913	 	
Adjustments to reconcile net income to net cash from operating activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Cumulative effect of change in accounting principle	  	 	391	 	 	 	—  	 	 	 	—  	 	
Depreciation and amortization	  	 	34,858	 	 	 	34,177	 	 	 	34,571	 	
Gain on disposition of property, plant and equipment	  	 	(287	)	 	 	(96	)	 	 	(945	)	
Non-cash stock compensation expense	  	 	6,541	 	 	 	3,746	 	 	 	3,575	 	
Gain on the sale of NASCO	  	 	(8,892	)	 	 	—  	 	 	 	—  	 	
Changes in assets and liabilities, net of the effects of acquisitions:	  	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	  	 	(15,749	)	 	 	(11,566	)	 	 	(2,747	)	
Inventories	  	 	(22,978	)	 	 	(8,559	)	 	 	(4,502	)	
Prepaid expenses	  	 	997	 	 	 	(909	)	 	 	(2,361	)	
Accounts payable	  	 	5,209	 	 	 	2,043	 	 	 	7,410	 	
Accrued liabilities	  	 	11,052	 	 	 	4,714	 	 	 	(1,868	)	
Deferred income taxes	  	 	(211	)	 	 	(5,972	)	 	 	2,272	 	
Long-term pension asset	  	 	(974	)	 	 	1,923	 	 	 	(6,294	)	
Other	  	 	1,958	 	 	 	254	 	 	 	(1,955	)	
 	  				 				 				
Net cash provided by operating activities	  	 	72,432	 	 	 	54,181	 	 	 	60,069	 	
				
Investing activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from disposition of property, plant and equipment	  	 	1,867	 	 	 	4,970	 	 	 	3,220	 	
Proceeds from the sale of NASCO	  	 	18,600	 	 	 	—  	 	 	 	—  	 	
Capital expenditures	  	 	(26,097	)	 	 	(28,509	)	 	 	(18,397	)	
Business acquisitions, net of cash acquired	  	 	(20,591	)	 	 	(17,720	)	 	 	(61,142	)	
Revenue sharing program payments	  	 	(56,750	)	 	 	(32,000	)	 	 	(17,500	)	
Other	  	 	(2,486	)	 	 	(2,305	)	 	 	(1,670	)	
 	  				 				 				
Net cash used by investing activities	  	 	(85,457	)	 	 	(75,564	)	 	 	(95,489	)	
				
Financing activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Net change in other borrowings	  	 	4,138	 	 	 	(11,976	)	 	 	5,933	 	
Payments on long-term debt	  	 	(146,366	)	 	 	(20,804	)	 	 	(41,064	)	
Proceeds from the issuance of long-term debt	  	 	164,029	 	 	 	58,000	 	 	 	56,000	 	
Proceeds from the issuance of common stock	  	 	7,101	 	 	 	4,534	 	 	 	52,562	 	
Common stock repurchases	  	 	(149	)	 	 	(3,498	)	 	 	(206	)	
Dividends paid	  	 	(19,879	)	 	 	(18,509	)	 	 	(17,564	)	
Other	  	 	(3,706	)	 	 	(1,504	)	 	 	(1,917	)	
 	  				 				 				
Net cash provided by financing activities	  	 	5,168	 	 	 	6,243	 	 	 	53,744	 	
				
Effect of exchange rate changes on cash flows	  	 	(366	)	 	 	1,687	 	 	 	3,109	 	
 	  				 				 				
(Decrease) increase in cash and cash equivalents	  	 	(8,223	)	 	 	(13,453	)	 	 	21,433	 	
				
Cash and cash equivalents at beginning of year	  	 	36,335	 	 	 	49,788	 	 	 	28,355	 	
 	  				 				 				
Cash and cash equivalents at end of year	  	$	28,112	 	 	$	36,335	 	 	$	49,788	 	

Supplemental Disclosure of Cash Flow Information:
 
Non-cash financing and investing activities in 2005, 2004 and 2003 include the acquisition of $27.8 million, $47.0 million and $17.0 million, respectively, of intangible assets and the recognition of the corresponding liabilities in connection with the aftermarket RSPs. In 2003, non-cash investing and financing activities include the issuance of $16.5 million of treasury stock in connection with the Kar acquisition.
 
See accompanying notes.
 
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BARNES GROUP INC.
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollars in thousands)

 	 	Common
Stock
	 	Additional
Paid-In
Capital
	 	 	Treasury
Stock
	 	 	Retained
Earnings
	 	 	Accumulated
Other
Non-Owner
Changes to
Equity
	 	 	Total
Stockholders’
Equity
	 	
January 1, 2003	 	$	220	 	$	53,511	 	 	$	(61,847	)	 	$	262,863	 	 	$	(38,811	)	 	$	215,936	 	
							
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	32,913	 	 	 	 	 	 	 	32,913	 	
Foreign currency translation adjustments, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	18,071	 	 	 	18,071	 	
Unrealized gains on hedging activities, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	555	 	 	 	555	 	
Minimum pension liability adjustment, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5,710	 	 	 	5,710	 	
 	 	 	 	 	 	 	 	 	 	 	 	 				 				 				
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	32,913	 	 	 	24,336	 	 	 	57,249	 	
Dividends paid	 	 	 	 	 	 	 	 	 	 	 	 	 	(17,564	)	 	 	 	 	 	 	(17,564	)	
Stock issued for the purchase of Kar	 	 	 	 	 	(2,064	)	 	 	18,561	 	 	 	 	 	 	 	 	 	 	 	16,497	 	
Stock issued, equity offering	 	 	24	 	 	42,188	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	42,212	 	
Stock contribution to Barnes Group Foundation	 	 	 	 	 	168	 	 	 	232	 	 	 	 	 	 	 	 	 	 	 	400	 	
Common stock repurchases	 	 	 	 	 	 	 	 	 	(206	)	 	 	 	 	 	 	 	 	 	 	(206	)	
Employee stock plans	 	 	 	 	 	6,789	 	 	 	8,608	 	 	 	(568	)	 	 	 	 	 	 	14,829	 	
 	 			 				 				 				 				 				
December 31, 2003	 	 	244	 	 	100,592	 	 	 	(34,652	)	 	 	277,644	 	 	 	(14,475	)	 	 	329,353	 	
							
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	34,426	 	 	 	 	 	 	 	34,426	 	
Foreign currency translation adjustments, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	9,637	 	 	 	9,637	 	
Unrealized gains on hedging activities, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	31	 	 	 	31	 	
Minimum pension liability adjustment, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(8,902	)	 	 	(8,902	)	
 	 	 	 	 	 	 	 	 	 	 	 	 				 				 				
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	34,426	 	 	 	766	 	 	 	35,192	 	
Dividends paid	 	 	 	 	 	 	 	 	 	 	 	 	 	(18,509	)	 	 	 	 	 	 	(18,509	)	
Common stock repurchases	 	 	 	 	 	 	 	 	 	(3,498	)	 	 	 	 	 	 	 	 	 	 	(3,498	)	
Employee stock plans	 	 	 	 	 	2,086	 	 	 	6,609	 	 	 	(709	)	 	 	 	 	 	 	7,986	 	
 	 			 				 				 				 				 				
December 31, 2004	 	 	244	 	 	102,678	 	 	 	(31,541	)	 	 	292,852	 	 	 	(13,709	)	 	 	350,524	 	
							
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	60,517	 	 	 	 	 	 	 	60,517	 	
Foreign currency translation adjustments, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(7,353	)	 	 	(7,353	)	
Unrealized gains on hedging activities, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	579	 	 	 	579	 	
Minimum pension liability adjustment, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(5,494	)	 	 	(5,494	)	
 	 	 	 	 	 	 	 	 	 	 	 	 				 				 				
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	60,517	 	 	 	(12,268	)	 	 	48,249	 	
Dividends paid	 	 	 	 	 	 	 	 	 	 	 	 	 	(19,879	)	 	 	 	 	 	 	(19,879	)	
Common stock repurchases	 	 	 	 	 	 	 	 	 	(149	)	 	 	 	 	 	 	 	 	 	 	(149	)	
Employee stock plans	 	 	 	 	 	143	 	 	 	17,100	 	 	 	(783	)	 	 	 	 	 	 	16,460	 	
 	 			 				 				 				 				 				
December 31, 2005	 	$	244	 	$	102,821	 	 	$	(14,590	)	 	$	332,707	 	 	$	(25,977	)	 	$	395,205	 	

See accompanying notes.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts included in the notes are stated in thousands except per share data and the tables in Note 16.)
 
1. Summary of Significant Accounting Policies
 
General: The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
 
Consolidation: The accompanying consolidated financial statements include the accounts of the Company and all of its subsidiaries. Intercompany transactions and account balances have been eliminated. The Company accounted for its 45% investment in the common stock of NASCO, a suspension spring company jointly owned with NHK Spring Co., Ltd. of Japan since 1986, under the equity method. As described in Note 18, the Company sold its investment in NASCO during 2005. The NASCO investment of $10,042 as of December 31, 2004 was included in other assets. The accompanying income statements include other income (expense) of $(45), $700 and $1,309 for 2005 (through the sale date), 2004 and 2003, respectively, from the Company’s investment in NASCO. In addition, other income in 2005 includes the pre-tax gain on the sale of NASCO of $8,892. The Company received dividends from NASCO totaling $17, $323 and $192 in 2005 (through the sale date), 2004 and 2003, respectively.
 
Revenue recognition: Sales and related cost of sales are recognized when products are shipped or delivered to customers depending upon when title and risk of loss have passed.
 
Operating expenses: The Company includes labor, material, overhead and costs of its distribution network within cost of sales. Other costs such as the costs of its sales force, including selling personnel costs and commissions, and other general and administrative costs of the Company are included within selling and administrative expenses.
 
Cash and cash equivalents: Cash in excess of operating requirements is invested in short-term, highly liquid, income-producing investments. All highly liquid investments purchased with an original maturity of three months or less are considered cash equivalents. Cash equivalents are carried at cost which approximates fair value.
 
Inventories: Inventories are valued at the lower of cost, determined on a first-in, first-out basis, or market. Loss provisions, if any, on contracts are established when estimable. Loss provisions are based on the projected excess of manufacturing costs over the net revenues of the products or group of related products under contract.
 
Property, plant and equipment: Property, plant and equipment is stated at cost. Depreciation is recorded over estimated useful lives, ranging from 20 to 50 years for buildings, three to five years for computer equipment, four to 12 years for machinery and equipment and 12 to 17 years for furnaces and boilers. The straight-line method of depreciation was adopted for all property, plant and equipment placed in service after March 31, 1999. For property, plant and equipment placed into service prior to April 1, 1999, depreciation is calculated using accelerated methods.
 
Goodwill: Goodwill represents the excess purchase price over the net assets of companies acquired in business combinations. Goodwill lives are considered indefinite. Goodwill is subject to impairment testing in accordance with SFAS No. 142 on an annual basis or more frequently if an event or change in circumstances indicates that the fair value of a reporting unit has been reduced below its carrying value. Based on this assessment, there was no goodwill impairment in 2005, 2004 or 2003.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
Revenue Sharing Programs: The Company, through its Barnes Aerospace business, participates in aftermarket RSPs under which the Company receives an exclusive right to supply designated aftermarket parts over the life of the related aircraft engine program. As consideration, the Company pays participation fees, which are recorded as long-lived intangible assets, and are recognized as a reduction to sales over the life of the program. The recoverability of the intangible asset is subject to significant estimates about future revenues related to the program’s aftermarket parts. Management updates revenue projections periodically, which includes comparing actual experience against projected revenue and obtaining industry projections. The potential exists that actual revenues will not meet expectations due to a change in market conditions. A shortfall in future revenues may indicate an impairment of the intangible asset. The Company evaluates the remaining useful life of this asset to determine whether events and circumstances warrant a revision to the remaining period of amortization. The intangible asset is reviewed for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. See Note 5.
 
Derivatives: The Company has manufacturing, sales and distribution facilities around the world and thus makes investments and conducts business transactions denominated in various currencies. The Company is also exposed to fluctuations in interest rates and commodity price changes. These financial exposures are monitored and managed by the Company as an integral part of its risk management program. The Company uses financial instruments to hedge its exposure to fluctuations in interest rates and foreign currency exchange rates but does not use derivatives for speculative or trading purposes. The Company also does not use derivatives to manage commodity exposures or hedge its foreign currency net investment exposure.
 
SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, requires that all derivative instruments be recorded on the balance sheet at fair value. Foreign currency contracts may qualify as fair value hedges of unrecognized firm commitments, or cash flow hedges of recognized assets and liabilities or anticipated transactions. Changes in the fair market value of derivatives are recorded directly to earnings or accumulated other non-owner changes to equity, depending on the designation. Amounts recorded to accumulated other non-owner changes to equity are reclassified to earnings in a manner that matches the earnings impact of the hedged transaction. Any ineffective portion, or amounts related to contracts that are not designated as hedges, are recorded directly to earnings. The Company’s policy for classifying cash flows from derivatives is to report the cash flows consistent with the underlying instrument.
 
At December 31, 2005 and 2004, the fair value of derivatives held by the Company was a net liability of $3,316 and $742, respectively. No amounts were reclassified to earnings from accumulated other non-owner changes to equity in 2005, 2004 or 2003. Amounts in accumulated other non-owner changes to equity expected to be reclassified to earnings within the next year are not material. During 2005, gains or losses related to hedge ineffectiveness were immaterial. Foreign currency transaction losses included in income were $243, $695 and $654 in 2005, 2004 and 2003, respectively.
 
Foreign currency translation: The majority of the Company’s international subsidiaries use the local currency as the functional currency. Assets and liabilities of international operations are translated at year-end rates of exchange; revenues and expenses are translated at average annual rates of exchange. The resulting translation gains or losses are reflected in accumulated other non-owner changes to equity within stockholders’ equity.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
Stock-Based Compensation: The Company has stock-based employee compensation plans, which are described more fully in Note 14. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related interpretations. The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

 	  	2005
	 	 	2004
	 	 	2003
	 	
Net income, as reported	  	$	60,517	 	 	$	34,426	 	 	$	32,913	 	
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects	  	 	3,986	 	 	 	2,252	 	 	 	2,121	 	
Deduct: Stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects	  	 	(10,352	)	 	 	(6,651	)	 	 	(5,958	)	
 	  				 				 				
Pro forma net income	  	$	54,151	 	 	$	30,027	 	 	$	29,076	 	
 	  				 				 				
Net income per share:	  	 	 	 	 	 	 	 	 	 	 	 	
Basic – as reported	  	$	2.56	 	 	$	1.49	 	 	$	1.53	 	
Basic – pro forma	  	 	2.29	 	 	 	1.30	 	 	 	1.35	 	
				
Diluted – as reported	  	 	2.48	 	 	 	1.44	 	 	 	1.49	 	
Diluted – pro forma	  	 	2.21	 	 	 	1.25	 	 	 	1.32	 	
 
The average fair value of options granted was $5.47 in 2005, $4.66 in 2004 and $3.98 in 2003. The fair value of each stock option grant on the date of grant was estimated using the Black-Scholes option-pricing model based on the following weighted-average assumptions:

 	  	2005
	 	 	2004
	 	 	2003
	 	
Risk-free interest rate	  	3.90	%	 	2.53	%	 	2.10	%	
Expected life	  	2.4 years	 	 	2.7 years	 	 	3.0 years	 	
Expected volatility	  	30	%	 	30	%	 	33	%	
Expected dividend yield	  	2.79	%	 	3.00	%	 	3.37	%	
 
2. Acquisitions
 
During the past three years, the Company has acquired a number of businesses. The results of operations of these acquired businesses have been included in the consolidated results from their respective acquisition dates. The purchase prices for these acquisitions have been allocated to tangible and intangible assets and liabilities of the businesses based upon estimates of their respective fair values.
 
On February 6, 2003, the Company acquired Kar Products, LLC and certain assets of a related company, A. & H. Bolt & Nut Company Ltd. The acquisition expanded both the geographic scope and product offerings of the Barnes Distribution segment. Kar had a diversified customer base operating in all 50 states of the U.S., Puerto Rico, and Canada, which further enhanced Barnes Distribution’s leadership position within the MROP market and international presence. The adjusted purchase price of $76,148, excluding transaction costs, was financed through a combination of $3,651 of cash, $56,000 of debt and $16,497 of Barnes Group common stock (823,506 shares based upon an average market value preceding the acquisition date).
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
The Company utilized third-party valuations of certain assets acquired with Kar. The purchase price including transaction costs of $1,491 was $77,639. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed:

 	  	February 6, 2003
	 	
Current assets	  	$	26,258	 	
Property, plant and equipment	  	 	2,544	 	
Intangible and other assets	  	 	15,979	 	
Goodwill	  	 	54,884	 	
 	  				
Total assets acquired	  	 	99,665	 	
 	  				
Current liabilities	  	 	(20,077	)	
Other liabilities	  	 	(1,949	)	
 	  				
Total liabilities assumed	  	 	(22,026	)	
 	  				
Net assets acquired	  	$	77,639	 	

On September 17, 2004, the Company acquired Barnes Precision Valve (formerly DE-STA-CO Manufacturing), a world leader in the design and manufacture of specialty spring products--reed valves and shock discs. This acquisition expanded the presence of the Associated Spring segment in these markets. The purchase price of this acquisition was $18,243. The Company reported $8,503 in sales from Barnes Precision Valve from the acquisition date through December 31, 2004. Pro forma operating results for the 2004 acquisition are not presented since the results would not be significantly different than historical results.
 
On August 9, 2005, the Company acquired the stock of Toolcom Supplies Ltd., a distributor of maintenance, repair and operating supplies in the United Kingdom. Toolcom is being integrated into the Barnes Distribution segment, strengthening its presence in Europe through geographic expansion in the United Kingdom and increasing its product offerings. The purchase price to the seller was 7.6 million pounds sterling, or approximately $13,600 of which 2.2 million pounds sterling, or approximately $3,800 is payable within two years of the closing date and is contingent upon the occurrence of certain events or the achievement of certain performance targets. Such consideration will be recorded if and when paid.
 
On September 30, 2005, the Company acquired substantially all of the assets of Service Plus Distributors, Inc., a distributor of gas springs, dampers and hardware to equipment and vehicle manufacturers. Service Plus Distributors is being integrated into Barnes Distribution’s Raymond business and complements Raymond’s product offerings. The purchase price to the seller was $13,654 of which $3,700 is payable within three years of the closing date and is contingent upon the occurrence of certain events or the achievement of certain performance targets. Such consideration will be recorded if and when paid.
 
The Company also recorded $512 of related transaction costs as purchase price in connection with the 2005 acquisitions. The Company reported $7,307 in sales from the two 2005 acquisitions from their respective acquisition dates through December 31, 2005. Proforma operating results for the 2005 acquisitions are not presented since the results would not be significantly different than historical results.
 
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Table of Contents
BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
3. Inventories
 
Inventories at December 31 consisted of:

 	  	2005
	  	2004
	
Finished goods	  	$	100,833	  	$	93,928	
Work-in-process	  	 	32,105	  	 	23,919	
Raw materials and supplies	  	 	26,300	  	 	19,113	
 	  			  			
 	  	$	159,238	  	$	136,960	

4. Property, Plant and Equipment
 
Property, plant and equipment at December 31 consisted of:

 	  	2005
	 	 	2004
	 	
Land	  	$	9,632	 	 	$	10,965	 	
Buildings	  	 	85,593	 	 	 	83,556	 	
Machinery and equipment	  	 	394,521	 	 	 	390,311	 	
 	  				 				
 	  	 	489,746	 	 	 	484,832	 	
Less accumulated depreciation	  	 	(332,690	)	 	 	(318,548	)	
 	  				 				
 	  	$	157,056	 	 	$	166,284	 	

Depreciation expense was $29,501, $29,529 and $30,178 during 2005, 2004 and 2003, respectively.
 
5. Goodwill and Other Intangible Assets
 
Goodwill: The following table sets forth the change in the carrying amount of goodwill for each reportable segment and the Company:

 	  	Associated
Spring
	  	Barnes
Aerospace
	  	Barnes
Distribution
	 	 	Total
Company
	 	
January 1, 2004	  	$	76,455	  	$	30,786	  	$	112,877	 	 	$	220,118	 	
Goodwill acquired, net of adjustments	  	 	1,143	  	 	—  	  	 	(1,240	)	 	 	(97	)	
Foreign currency translation	  	 	—  	  	 	—  	  	 	1,835	 	 	 	1,835	 	
 	  			  			  				 				
December 31, 2004	  	 	77,598	  	 	30,786	  	 	113,472	 	 	 	221,856	 	
Goodwill acquired, net of adjustments	  	 	2,589	  	 	—  	  	 	10,968	 	 	 	13,557	 	
Foreign currency translation	  	 	—  	  	 	—  	  	 	(114	)	 	 	(114	)	
 	  			  			  				 				
December 31, 2005	  	$	80,187	  	$	30,786	  	$	124,326	 	 	$	235,299	 	

The 2004 increase in the Associated Spring goodwill was due to the acquisition of Barnes Precision Valve. The purchase price allocation of this acquisition was finalized in 2005. In 2004, the Barnes Distribution goodwill decreased as a result of adjustments to assumed liabilities from the Kar acquisition.
 
The 2005 increase in goodwill at Associated Spring resulted from the final determination of assumed liabilities, including plans to reorganize certain business facilities related to the Barnes Precision Valve acquisition. This increase was offset, in part, by the completion of the valuation of fixed assets and intangible
 
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Table of Contents
BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
assets. In 2005, the Barnes Distribution goodwill increased primarily due to the third quarter acquisitions of Toolcom and Service Plus Distributors. The purchase price allocations of both acquisitions are subject to the finalization of the valuation of certain assets and liabilities. As a result, preliminary amounts assigned to assets and liabilities are subject to revision in future periods.
 
Of the $235,299 of goodwill at December 31, 2005, $142,466 is tax deductible.
 
Other Intangible Assets: Other intangible assets at December 31 consisted of:

 	  	Range of
Life-Years
	  	2005
	 	 	2004
	 	
 	  		  	Gross
Amount
	  	Accumulated
Amortization
	 	 	Gross
Amount
	  	Accumulated
Amortization
	 	
Amortized intangible assets:	  	 	  	 	 	  	 	 	 	 	 	 	  	 	 	 	
Revenue Sharing Programs	  	Up to 30	  	$	134,000	  	$	(1,957	)	 	$	98,500	  	$	(633	)	
Customer lists/relationships	  	10	  	 	19,133	  	 	(3,735	)	 	 	12,260	  	 	(2,199	)	
Patents, trademarks/trade names	  	5-30	  	 	11,446	  	 	(2,755	)	 	 	11,128	  	 	(2,078	)	
Other	  	4.5-12	  	 	3,331	  	 	(658	)	 	 	1,750	  	 	(416	)	
 	  	 	  			  				 			  				
 	  	 	  	 	167,910	  	 	(9,105	)	 	 	123,638	  	 	(5,326	)	
Foreign currency translation	  	 	  	 	1,038	  	 	—  	 	 	 	2,046	  	 	—  	 	
Unamortized intangible pension asset	  	 	  	 	4,006	  	 	—  	 	 	 	5,089	  	 	—  	 	
 	  	 	  			  				 			  				
Other intangible assets	  	 	  	$	172,954	  	$	(9,105	)	 	$	130,773	  	$	(5,326	)	

Amortization of intangible assets for the year ended December 31, 2005 was $3,779. Over the next five years, the estimated aggregate amortization expense is expected to increase from approximately $5,000 in 2006 to $5,400 in 2010.
 
During 2004 and 2005, the Company entered into multiple aftermarket RSP agreements with a major aerospace customer, General Electric, under which the Company is the sole supplier of certain aftermarket parts. As consideration for these agreements, the Company agreed to pay participation fees to General Electric. The Company has recorded the participation fees as long-lived intangible assets which will be recognized as a reduction to sales over the life of the related aircraft engine program. During 2004, the Company entered into three RSP agreements and agreed to pay participation fees aggregating $64,000, of which $17,000 was paid in 2004 and $47,000 was paid in 2005. During 2005, the Company entered into two additional RSP agreements and agreed to pay participation fees aggregating $35,500, of which $7,750 was paid in 2005 and the remaining $27,750 will be paid in 2006.
 
In connection with the acquisitions of Barnes Precision Valve in 2004 and Toolcom and Service Plus Distributors in 2005, the Company recorded intangible assets of $1,590 and $6,043, respectively, related to customer lists/relationships.
 
6. Accrued Liabilities
 
Accrued liabilities at December 31 consisted of:

 	  	2005
	  	2004
	
Payroll and other compensation	  	$	37,202	  	$	29,638	
Pension and other postretirement benefits	  	 	14,526	  	 	10,715	
Income taxes currently payable	  	 	6,679	  	 	8,542	
Other	  	 	35,208	  	 	30,144	
 	  			  			
 	  	$	93,615	  	$	79,039	

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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
7. Business Reorganization
 
Business reorganization accruals are included in accrued liabilities in the accompanying consolidated balance sheets. In connection with the acquisition of the assets of Curtis Industries, Inc. in May 2000, the Company recorded certain exit costs. As of December 31, 2005 and 2004, the remaining balances of $353 and $428, respectively, related to future lease payments which will continue through the remaining terms of the leases ending in 2013.
 
In connection with the Kar acquisition in February 2003, the Company recorded certain costs. The Company’s reorganization plan included combining the headquarters functions and consolidating warehousing and distribution centers. The accruable exit costs were primarily related to lease consolidations and employee severance payments for reductions primarily in administrative and warehouse personnel. As of December 31, 2005 and 2004, the remaining balances of $133 and $958, respectively, related to future lease payments.
 
In connection with the Barnes Precision Valve acquisition and a plan to streamline its global operations, the Company recorded certain exit costs in 2005 resulting from a plan to reorganize certain business facilities and involuntarily terminate employees. The Company recorded $716 of severance costs as assumed liabilities, which relate primarily to involuntary terminations of salaried and hourly personnel at a U.S. facility. Additional costs related to this action are expected to be up to $2,500 ($1,500 after-tax) and will be expensed as incurred. The reorganization is expected to be completed by the end of 2006.
 
8. Debt and Commitments
 
Long-term debt and notes payable at December 31 consisted of:

 	  	2005
	 	 	2004
	 	
 	  	Carrying
Amount
	 	 	Fair
Value
	 	 	Carrying
Amount
	 	 	Fair
Value
	 	
7.13% Notes, including interest swap adjustment	  	$	—  	 	 	$	—  	 	 	$	6,241	 	 	$	6,391	 	
7.66% Notes	  	 	24,500	 	 	 	25,233	 	 	 	24,500	 	 	 	26,367	 	
7.80% Notes	  	 	45,500	 	 	 	50,865	 	 	 	45,500	 	 	 	53,880	 	
9.34% Notes, including deferred gain	  	 	61,676	 	 	 	65,828	 	 	 	62,577	 	 	 	68,942	 	
2.15% Notes	  	 	18,910	 	 	 	18,885	 	 	 	23,245	 	 	 	23,139	 	
3.75% Convertible Notes	  	 	100,000	 	 	 	99,500	 	 	 	—  	 	 	 	—  	 	
Revolving credit agreement	  	 	24,000	 	 	 	24,000	 	 	 	98,000	 	 	 	98,000	 	
Industrial revenue bonds	  	 	7,000	 	 	 	7,000	 	 	 	7,000	 	 	 	7,000	 	
Borrowings under lines of credit	  	 	4,000	 	 	 	4,000	 	 	 	—  	 	 	 	—  	 	
Capital leases	  	 	439	 	 	 	439	 	 	 	982	 	 	 	982	 	
 	  				 				 				 				
 	  	 	286,025	 	 	 	295,750	 	 	 	268,045	 	 	 	284,701	 	
Less current maturities	  	 	(44,084	)	 	 	(44,084	)	 	 	(9,410	)	 	 	(9,410	)	
 	  				 				 				 				
Long-term debt	  	$	241,941	 	 	$	251,666	 	 	$	258,635	 	 	$	275,291	 	

The fair values of the Company’s Notes are determined using discounted cash flows based upon the Company’s estimated current interest cost for similar types of borrowings or current market value. The amounts do not include the fair value of the swap and the deferred gain on the terminated swap. The carrying values of other long-term debt and notes payable approximate their fair market values.
 
The final annual installment of $6,250 on the 7.13% Notes was paid on December 5, 2005. The 7.66% Notes are payable in 2007. The 7.80% Notes are payable in three equal annual installments beginning in 2008. The 9.34% Notes are payable in three equal annual installments beginning in 2006.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
In July 2001, the Company borrowed Yen 3,000 million, under a term loan facility with The Development Bank of Singapore Limited. The loan is payable in 10 semi-annual installments of Yen 87.3 million that began on December 28, 2001, with a balloon payment of Yen 2,214.3 million due June 30, 2006. The borrowing has a stated interest rate of 2.15%. In connection with the Yen borrowing, the Company entered into a series of forward currency exchange contracts, a form of derivative, that effectively convert the Yen principal payments to Singapore dollar payments. The forward contracts are cash flow hedges, and increase the effective interest rate of the borrowing to 5.16%. On December 30, 2002, the Company prepaid the next four consecutive semi-annual installments totaling Yen 349.2 million (U.S. equivalent $2,917) and also paid $475 in settlement of the corresponding forward contracts. The fair value of the remaining forward contracts at December 31, 2005 was a liability of approximately $3,227. Additionally, in January 2005, the Company entered into three additional forward currency exchange contracts which effectively convert the interest payments of Yen 25.8 million and Yen 25.2 million which were due and paid on June 30, 2005 and December 30, 2005, respectively, and one interest and principal payment of Yen 111.4 million due in June 2006 to Singapore dollar payments. These forward contracts are cash flow hedges. The fair value of these forward contracts, in the aggregate, at December 31, 2005 was a liability of $129.
 
On August 1, 2005, the Company sold $100,000 of 3.75% Senior Subordinated Convertible Notes due August 1, 2025 with interest payable semi-annually on February 1 and August 1 of each year commencing on February 1, 2006. The net proceeds from this offering were used to repay indebtedness outstanding under the Company’s revolving credit facility. The notes are general unsecured obligations of the Company and are subordinated in right of payment to all existing and future senior debt of the Company. The notes are subject to redemption at their par value at any time, at the option of the Company, on or after February 1, 2011. The notes may be converted, under certain circumstances, into a combination of cash and common stock of the Company at a conversion value equal to 23.7029 shares per note, equivalent to a conversion price of approximately $42.19 per share of common stock. The first $1 of the conversion value of each note would be paid in cash and the additional conversion value, if any, would be paid in cash or common stock, at the option of the Company.
 
At December 31, 2005, the Company had a $175,000 revolving credit agreement with 11 participating banks of which the Company had borrowed $24,000. Borrowings under this agreement bear interest at LIBOR plus a spread ranging from 0.8% to 1.4% depending on the Company’s debt ratio at the time of the borrowing. The interest rate on these borrowings was 5.31% and 3.41% on December 31, 2005 and 2004, respectively. In January 2006, the Company amended and restated the revolving credit agreement to extend the maturity date to January 2011, reduce the spreads on borrowings, and amend the financial covenants. Borrowings under the new agreement bear interest at LIBOR plus 0.65%, although the spreads can range from 0.55% to 1.35% depending on the Company’s debt ratio at the time of borrowing. The Company also pays a facility fee on the total commitment amount of the revolving credit at a rate of 0.23%, although the facility fee can range from 0.20% to 0.40%, depending on the Company’s debt ratio at the end of each calendar quarter (see Note 20).
 
In addition, the Company has available approximately $15,000 in uncommitted short-term bank credit lines, of which $4,000 was borrowed at December 31, 2005. There were no borrowings under these credit lines at December 31, 2004. The interest rate on the December 31, 2005 borrowings was 6.33%.
 
The Industrial Revenue Bonds, due in 2008, have variable interest rates. The interest rates on this borrowing were 3.60% and 2.05% at December 31, 2005 and 2004, respectively.
 
The Company’s long-term debt portfolio consists of fixed-rate and variable-rate instruments and is managed to reduce the overall cost of borrowing and to mitigate fluctuations in interest rates. Interest rate fluctuations result in changes in the market value of the Company’s fixed-rate debt. In August 2002, the Company entered into an interest rate swap agreement, a form of derivative, which effectively converted the 7.13% fixed-rate Senior Notes to variable-rate debt with an interest rate equal to LIBOR plus 425 basis points. The effective rate
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
of the borrowing was 6.90% on December 31, 2004. This interest rate contract was a fair value hedge, which was effective in offsetting fluctuations in the fair value of the debt instrument. The gains and losses on the interest rate contract were recorded to earnings and were offset by gains and losses recorded on the re-measurement of the underlying debt. The fair value of the swap was determined based upon current market prices and was a liability of approximately $9 at December 31, 2004. This agreement matured in December 2005.
 
The Company assumed $2,750 of debt related to capital leases with the acquisition of Spectrum Plastics Molding Resources, Inc. in April 2002 of which $413 remained at December 31, 2005. The weighted average interest rate on these borrowings was 8.38% and 7.93% at December 31, 2005 and 2004, respectively. This debt has an interest rate equalization prepayment penalty.
 
In August 2002, the Company terminated its $60,000 interest rate swap dated July 2001. This agreement had converted $60,000 of fixed-rate 9.34% debt to floating rate debt at LIBOR plus 276 basis points. The Company received a payment of $5,286 at termination. The payment represented $4,702 for the fair value of the swap plus $584 for accrued interest at the time of termination. The accumulated adjustment to the carrying value of the debt is being amortized in accordance with the terms of the underlying debt, which effectively reduces the fixed rate of the debt to 7.84%.
 
Long-term debt and notes payable, excluding the deferred gain on the terminated swap, is payable as follows: $43,234 in 2006, $44,615 in 2007, $42,167 in 2008, $15,167 in 2009, $15,166 in 2010 and $124,000 thereafter.
 
In addition, the Company had outstanding letters of credit totaling $13,884 at December 31, 2005.
 
The Company’s debt agreements contain financial covenants that require the maintenance of interest coverage and leverage ratios, and minimum levels of net worth. The agreements also place certain restrictions on indebtedness and investments by the Company and its subsidiaries.
 
The most restrictive borrowing capacity covenant in any agreement requires the Company to maintain a ratio of Total Debt to EBITDA, as defined in the new revolving credit agreement, of not more than 4.00 times at December 31, 2005. The actual ratio at December 31, 2005 was 2.31 times and would have allowed additional borrowings of at least $207,900. Under the most restrictive covenant, net worth must not be less than $316,000 plus 50% of Consolidated Net Income for the fourth fiscal quarter of 2005 and each fiscal year thereafter. As of December 31, 2005, the Company’s actual net worth, as defined by the debt agreements, of $407,473 exceeded the required minimum level of net worth by $85,649. As noted above, as part of the January, 2006 financial restructuring, the covenant ratios were amended (see Note 20).
 
Interest paid was $19,719, $15,082 and $15,028 in 2005, 2004 and 2003, respectively. The amount paid in 2005 includes $3,666 of capitalized debt issuance costs related to the convertible senior notes which is being amortized over 66 months. Interest capitalized was $241, $314 and $85 in 2005, 2004 and 2003, respectively, and is being depreciated over the lives of the related fixed assets.
 
9. Pension and Other Postretirement Benefits
 
The Company has defined contribution plans covering a majority of the employees of Barnes Aerospace, certain field sales employees of Barnes Distribution’s U.S. operation, employees of Spectrum, certain employees of Barnes Distribution Canada, union employees of Associated Spring, and employees in Sweden. Company contributions under these plans are based primarily on the performance of the business units and employee compensation. Contribution expense under these defined contribution plans was $3,014, $2,843 and $2,331 in 2005, 2004 and 2003, respectively. Most U.S. salaried and non-union hourly employees are eligible to participate in the Retirement Savings Plan. See Note 14 for further discussion of this plan.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
Defined benefit pension plans cover a majority of the Company’s worldwide employees at Associated Spring and the Company’s Corporate Office and a substantial portion of the employees at Barnes Distribution. Plan benefits for salaried and non-union hourly employees are based on years of service and average salary. Plans covering union hourly employees provide benefits based on years of service. The Company funds U.S. pension costs in accordance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Company acquired Barnes Precision Valve, formerly DE-STA-CO, in 2004. DE-STA-CO’s Troy Division pension plan is included in these disclosures. Certain DE-STA-CO pension assets were transferred and liabilities were assumed by the Company.
 
In accordance with SFAS No. 87, “Employers’ Accounting for Pensions,” the Corporation has recorded a non-cash minimum pension liability adjustment for underfunded plans of $41,125 at December 31, 2005, an increase from $35,169 at December 31, 2004, representing the excess of the accumulated benefit obligation over the fair value of plan assets.
 
Recognition of the minimum pension liability resulted in after-tax charges of $5,494 in 2005 and $8,902 in 2004 which are included in accumulated other non-owner changes to equity, which is part of stockholders’ equity. The principal cause of the accrual for a minimum pension liability adjustment was the decline in the value, in certain years prior to 2003, of equity securities held by the pension trusts, a significant decline in the discount rate and a change in the mortality table utilized.
 
The Company provides certain other medical, dental and life insurance postretirement benefits for a majority of its retired employees in the U.S. and Canada. It is the Company’s practice to fund these benefits as incurred.
 
The Company uses December 31 as the measurement date for the majority of its plans.
 
A reconciliation of the beginning benefit obligations to the ending benefit obligations follows:

 	  	Pensions
	 	 	Other
Postretirement Benefits
	 	
 	  	2005
	 	 	2004
	 	 	    2005    
	 	 	    2004    
	 	
Benefit obligation, January 1	  	$	360,494	 	 	$	331,266	 	 	$	82,244	 	 	$	87,845	 	
Service cost	  	 	11,205	 	 	 	10,265	 	 	 	1,109	 	 	 	1,182	 	
Interest cost	  	 	20,006	 	 	 	19,577	 	 	 	4,313	 	 	 	4,806	 	
Amendments	  	 	173	 	 	 	330	 	 	 	—  	 	 	 	—  	 	
Actuarial loss (gain)	  	 	24,537	 	 	 	14,120	 	 	 	(2,503	)	 	 	(2,360	)	
Benefits paid	  	 	(20,872	)	 	 	(19,711	)	 	 	(9,245	)	 	 	(8,754	)	
Acquisitions	  	 	—  	 	 	 	2,731	 	 	 	—  	 	 	 	—  	 	
Curtailment gain	  	 	(722	)	 	 	(2,328	)	 	 	—  	 	 	 	(1,636	)	
Participant contributions	  	 	193	 	 	 	286	 	 	 	1,024	 	 	 	997	 	
Special termination benefits	  	 	—  	 	 	 	370	 	 	 	—  	 	 	 	—  	 	
Foreign exchange rate changes	  	 	(3,383	)	 	 	3,588	 	 	 	75	 	 	 	164	 	
 	  				 				 				 				
Benefit obligation, December 31	  	$	391,631	 	 	$	360,494	 	 	$	77,017	 	 	$	82,244	 	
 	  				 				 				 				
Projected benefit obligations related to plans with benefit obligations in excess of assets	  	$	367,408	 	 	$	159,652	 	 	 	 	 	 	 	 	 	
Accumulated benefit obligations related to plans with accumulated benefit obligations in excess of assets	  	$	164,594	 	 	$	153,297	 	 	 	 	 	 	 	 	 	
Accumulated benefit obligations of all plans	  	$	358,588	 	 	$	329,644	 	 	 	 	 	 	 	 	 	
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
A reconciliation of the beginning fair value of plan assets to the ending fair value of plan assets follows:

 	  	Pensions
	 	
 	  	2005
	 	  	2004
	 	
Fair value of plan assets, January 1	  	$	333,097	 	  	$	312,465	 	
Actual return on plan assets	  	 	29,330	 	  	 	30,116	 	
Acquisitions	  	 	—  	 	  	 	2,704	 	
Company contributions	  	 	2,469	 	  	 	4,583	 	
Plan participants’ contributions	  	 	193	 	  	 	286	 	
Benefits paid	  	 	(20,872	)	  	 	(19,711	)	
Foreign exchange rate changes	  	 	(1,853	)	  	 	2,654	 	
 	  				  				
Fair value of plan assets, December 31	  	$	342,364	 	  	$	333,097	 	
 	  				  				
Assets related to plans with projected benefit obligations in excess of plan assets	  	$	310,682	 	  	$	116,932	 	
Assets related to plans with accumulated benefit obligations in excess of plan assets	  	$	119,385	 	  	$	116,932	 	
 
A reconciliation of the funded status of the plans with the amounts recognized in the accompanying balance sheets is set forth below:

 	  	Pensions
	 	 	Other
Postretirement Benefits
	 	
 	  	2005
	 	 	2004
	 	 	    2005    
	 	 	    2004    
	 	
Funded status	  	$	(49,267	)	 	$	(27,397	)	 	$	(77,017	)	 	$	(82,244	)	
Adjustments for unrecognized:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net actuarial losses	  	 	79,833	 	 	 	56,293	 	 	 	18,744	 	 	 	21,977	 	
Prior service costs	  	 	4,630	 	 	 	5,633	 	 	 	2,431	 	 	 	2,914	 	
Net asset at transition	  	 	(1	)	 	 	(15	)	 	 	—  	 	 	 	—  	 	
 	  				 				 				 				
Prepaid (accrued) benefit cost	  	$	35,195	 	 	$	34,514	 	 	$	(55,842	)	 	$	(57,353	)	

Amounts recognized in the accompanying balance sheets consist of:

 	  	Pensions
	 	 	Other
Postretirement Benefits
	 	
 	  	2005
	 	 	2004
	 	 	2005
	 	 	2004
	 	
Other assets	  	$	39,279	 	 	$	37,107	 	 	$	—  	 	 	$	—  	 	
Other intangible assets	  	 	4,006	 	 	 	5,089	 	 	 	—  	 	 	 	—  	 	
Accrued liabilities	  	 	(5,571	)	 	 	(2,130	)	 	 	(8,955	)	 	 	(8,585	)	
Accrued retirement benefits	  	 	(39,638	)	 	 	(35,632	)	 	 	(46,887	)	 	 	(48,768	)	
Accumulated other non-owner changes to equity	  	 	37,119	 	 	 	30,080	 	 	 	—  	 	 	 	—  	 	
 	  				 				 				 				
Prepaid (accrued) benefit cost	  	$	35,195	 	 	$	34,514	 	 	$	(55,842	)	 	$	(57,353	)	

U.S. pension plan deferred gains and losses that fall outside of a 10% corridor are amortized over 8.7 years or the remaining average service life of active participants, whichever is shorter.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
Weighted-average assumptions used to determine benefit obligations at December 31,

 	  	2005
	 	 	2004
	 	
Discount rate	  	5.48	%	 	5.73	%	
Increase in compensation	  	4.34	%	 	4.40	%	
 
Prior to December 31, 2005 the Company utilized the 1983 Group Annuity Mortality table to determine benefit obligations for its U.S. pension plans. At December 31, 2005, the Company updated its mortality table assumptions to the 2000 Retired Pensioners Mortality Table projected to 2006 as it more accurately reflects current trends in mortality. The Company similarly updated the mortality tables assumptions for its non-U.S. pension plans.
 
The weighted-average asset allocations for all pension plan assets at December 31, 2005 and 2004 by asset category are as follows:

Asset Category
	  	Target
	 	 	2005
	 	 	2004
	 	
Equity securities	  	70	%	 	73	%	 	69	%	
Fixed income securities	  	20	%	 	21	%	 	21	%	
Real estate	  	5	%	 	4	%	 	5	%	
Other, including cash	  	5	%	 	2	%	 	5	%	
 	  			 			 			
Total	  	100	%	 	100	%	 	100	%	

The investment strategy of the plans is to generate a consistent total investment return sufficient to pay present and future plan benefits to retirees, while minimizing the long-term cost to the Company. Target allocations for asset categories are used to earn a reasonable rate of return, provide required liquidity and minimize the risk of large losses. Targets are adjusted, as necessary within certain guidelines, to reflect trends and developments within the overall investment environment.
 
Equity securities in the pension plans include Company stock in the amounts of $9,000 and $13,345 at December 31, 2005 and 2004, respectively. The decrease in 2005 over 2004 is primarily due to a decrease in the number of such shares owned by the plans.
 
The Company expects to contribute approximately $5,571 to the pension plans in 2006.
 
The following benefit payments, which reflect future service, are expected to be paid:

 	  	Pensions
	  	Other
Postretirement
Benefits
	
2006	  	$	21,117	  	$	6,912	
2007	  	 	21,573	  	 	6,841	
2008	  	 	21,978	  	 	6,603	
2009	  	 	22,494	  	 	6,459	
2010	  	 	23,374	  	 	6,325	
Years 2011-2015	  	 	134,124	  	 	28,840	
 	  			  			
Total	  	$	244,660	  	$	61,980	

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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
Pension and other postretirement benefit expenses consisted of the following:

 	  	Pensions
	 	 	Other
Postretirement Benefits
	 	
 	  	2005
	 	 	2004
	 	 	2003
	 	 	2005
	  	2004
	  	2003
	 	
Service cost	  	$	11,205	 	 	$	10,265	 	 	$	8,915	 	 	$	1,109	  	$	1,282	  	$	890	 	
Interest cost	  	 	20,006	 	 	 	19,577	 	 	 	19,647	 	 	 	4,313	  	 	4,806	  	 	5,463	 	
Expected return on plan assets	  	 	(31,158	)	 	 	(31,253	)	 	 	(29,862	)	 	 	—  	  	 	—  	  	 	—  	 	
Amortization of transition assets	  	 	(14	)	 	 	(13	)	 	 	(94	)	 	 	—  	  	 	—  	  	 	—  	 	
Recognized losses	  	 	1,308	 	 	 	708	 	 	 	358	 	 	 	756	  	 	877	  	 	1,153	 	
Curtailment (gain) loss	  	 	(722	)	 	 	176	 	 	 	58	 	 	 	—  	  	 	144	  	 	—  	 	
Prior service cost (benefits)	  	 	1,197	 	 	 	1,200	 	 	 	1,200	 	 	 	482	  	 	459	  	 	(406	)	
Special termination benefits	  	 	—  	 	 	 	370	 	 	 	—  	 	 	 	—  	  	 	—  	  	 	—  	 	
 	  				 				 				 			  			  				
Net periodic benefit cost	  	$	1,822	 	 	$	1,030	 	 	$	222	 	 	$	6,660	  	$	7,568	  	$	7,100	 	

Weighted-average assumptions used to determine net benefit expense for years ended December 31,

 	  	2005
	 	 	2004
	 	 	2003
	 	
Discount rate	  	5.73	%	 	6.21	%	 	6.69	%	
Long-term rate of return	  	9.14	%	 	9.41	%	 	9.42	%	
Increase in compensation	  	4.40	%	 	4.43	%	 	4.42	%	
 
The expected long-term rate of return is based on the actual historical rates of return of published indices that are used to measure the plans’ target asset allocation. The historical rates are then discounted to consider fluctuations in the historical rates as well as potential changes in the investment environment.
 
The Company’s accumulated postretirement benefit obligations, exclusive of pensions, take into account certain cost-sharing provisions. The annual rate of increase in the cost of covered benefits (i.e., health care cost trend rate) is assumed to be 10% and 11% at December 31, 2005 and 2004, respectively, decreasing gradually to a rate of 5% at December 31, 2013. A one percentage point change in the assumed health care cost trend rate would have the following effects:

 	  	One Percentage
Point Increase
	  	One Percentage
Point Decrease
	 	
Effect on postretirement benefit obligation	  	$	1,509	  	$	(1,349	)	
Effect on postretirement benefit cost	  	 	110	  	 	(97	)	
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
10. Income Taxes
 
The components of income before income taxes and the income tax provision follow:

 	  	2005
	 	 	2004
	 	 	2003
	 	
Income before income taxes:	  	 	 	 	 	 	 	 	 	 	 	 	
U.S.  	  	$	21,187	 	 	$	6,378	 	 	$	8,524	 	
International	  	 	57,274	 	 	 	36,649	 	 	 	29,678	 	
 	  				 				 				
Income before income taxes and cumulative effect of a change in accounting principle	  	$	78,461	 	 	$	43,027	 	 	$	38,202	 	
 	  				 				 				
Income tax provision:	  	 	 	 	 	 	 	 	 	 	 	 	
Current:	  	 	 	 	 	 	 	 	 	 	 	 	
U.S. – federal	  	$	1,173	 	 	$	2,743	 	 	$	(21	)	
U.S. – state	  	 	(238	)	 	 	1,094	 	 	 	746	 	
International	  	 	5,700	 	 	 	9,284	 	 	 	5,439	 	
 	  				 				 				
 	  	 	6,635	 	 	 	13,121	 	 	 	6,164	 	
 	  				 				 				
Deferred:	  	 	 	 	 	 	 	 	 	 	 	 	
U.S. – federal	  	 	7,210	 	 	 	(2,727	)	 	 	1,967	 	
U.S. – state	  	 	1,842	 	 	 	(748	)	 	 	(870	)	
International	  	 	1,866	 	 	 	(1,045	)	 	 	(1,972	)	
 	  				 				 				
 	  	 	10,918	 	 	 	(4,520	)	 	 	(875	)	
 	  				 				 				
Income tax provision	  	$	17,553	 	 	$	8,601	 	 	$	5,289	 	

Deferred income tax assets and liabilities at December 31 consisted of the tax effects of temporary differences related to the following:

 	  	Assets
	 	 	Liabilities
	 	
 	  	2005
	 	 	2004
	 	 	2005
	 	 	2004
	 	
Allowance for doubtful accounts	  	$	781	 	 	$	612	 	 	$	—  	 	 	$	—  	 	
Depreciation and amortization	  	 	(6,766	)	 	 	(9,493	)	 	 	4,728	 	 	 	4,210	 	
Inventory valuation	  	 	4,354	 	 	 	6,377	 	 	 	147	 	 	 	338	 	
Other postretirement/postemployment costs	  	 	20,861	 	 	 	21,933	 	 	 	(567	)	 	 	(472	)	
Tax loss carryforwards	  	 	28,029	 	 	 	29,295	 	 	 	—  	 	 	 	(163	)	
Pension	  	 	9,999	 	 	 	6,322	 	 	 	2,033	 	 	 	2,157	 	
Goodwill	  	 	(12,783	)	 	 	(8,776	)	 	 	424	 	 	 	365	 	
Swedish tax incentive	  	 	—  	 	 	 	3,830	 	 	 	5,626	 	 	 	7,039	 	
Other	  	 	7,235	 	 	 	4,067	 	 	 	(129	)	 	 	(276	)	
 	  				 				 				 				
 	  	 	51,710	 	 	 	54,167	 	 	 	12,262	 	 	 	13,198	 	
Valuation allowance	  	 	(10,621	)	 	 	(9,009	)	 	 	—  	 	 	 	—  	 	
 	  				 				 				 				
 	  	$	41,089	 	 	$	45,158	 	 	$	12,262	 	 	$	13,198	 	
 	  				 				 				 				
Current deferred income taxes	  	$	24,563	 	 	$	26,615	 	 	$	257	 	 	$	389	 	
Non-current deferred income taxes	  	 	16,526	 	 	 	18,543	 	 	 	12,005	 	 	 	12,809	 	
 	  				 				 				 				
 	  	$	41,089	 	 	$	45,158	 	 	$	12,262	 	 	$	13,198	 	

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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
SFAS No. 109, “Accounting for Income Taxes,” requires that deferred tax assets be reduced by a valuation allowance if, based on all available evidence, it is more likely than not that the deferred tax asset will not be realized. Available evidence includes the reversal of existing taxable temporary differences, future taxable income exclusive of temporary differences, taxable income in carryback years and tax planning strategies. The increase in the valuation allowance in 2005 of $1,612 primarily related to the uncertainty regarding the realization of foreign and state net operating losses due to the uncertainty regarding future profitability in foreign jurisdictions as well as brief carryforward periods. Management believes that sufficient income will be earned in the future to realize the remaining net deferred tax assets. The Company has tax loss carryforwards of $81,040: $33,677 which relates to U.S. tax loss carryforwards which have carryforward periods ranging from 16 to 19 years for federal purposes and one to 20 years for state purposes; $23,007 which relates to international tax loss carryforwards with unlimited carryforward periods; and $24,356 which relates to international tax loss carryforwards with carryforward periods ranging from five to 10 years. In addition, the Company has tax credit carryforwards of $4,238 with remaining carryforward periods ranging from one year to unlimited.
 
The Company has not recognized deferred income taxes on $226,743 of undistributed earnings of its international subsidiaries, since such earnings are considered to be reinvested indefinitely. If the earnings were distributed in the form of dividends, the Company would be subject, in certain cases, to both U.S. income taxes and foreign withholding taxes. Determination of the amount of this unrecognized deferred income tax liability is not practicable. Management has evaluated the one-time favorable foreign dividend provisions enacted as part of the American Jobs Creation Act of 2004 and has decided that no cash will be repatriated from its foreign entities under the provisions of this Act due to anticipated future international cash requirements.
 
A reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate follows:

 	  	2005
	 	 	2004
	 	 	2003
	 	
U.S. federal statutory income tax rate	  	35.0	%	 	35.0	%	 	35.0	%	
State taxes (net of federal benefit)	  	0.7	 	 	0.1	 	 	0.2	 	
Foreign losses without tax benefit	  	0.9	 	 	1.9	 	 	1.4	 	
Foreign operations taxed at lower rate	  	(14.9	)	 	(12.5	)	 	(13.1	)	
Sale of NASCO investment	  	1.7	 	 	—  	 	 	—  	 	
Singapore Pioneer tax status	  	(1.9	)	 	—  	 	 	—  	 	
NASCO equity income	  	—  	 	 	—  	 	 	(0.5	)	
Export sales benefit	  	(0.3	)	 	(1.1	)	 	(1.1	)	
ESOP dividend	  	(1.0	)	 	(1.8	)	 	(2.3	)	
Valuation allowance reversal	  	—  	 	 	—  	 	 	(3.0	)	
Resolution of Brazilian tax matter	  	—  	 	 	—  	 	 	(2.6	)	
Other	  	2.2	 	 	(1.6	)	 	(0.2	)	
 	  			 			 			
Consolidated effective income tax rate	  	22.4	%	 	20.0	%	 	13.8	%	

In August 2005, the Company was awarded multi-year Pioneer tax status by the Ministry of Trade and Industry in the Republic of Singapore retroactive to October, 2003 for the production of certain engine components by Barnes Aerospace. Tax benefits of approximately $4,066 were recorded during 2005, $1,473 of which related to periods prior to January 1, 2005.
 
Income taxes paid globally, net of refunds, were $9,108, $9,055 and $4,922 in 2005, 2004 and 2003, respectively.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
11. Comprehensive Income
 
Comprehensive income includes all changes in equity during a period except those resulting from investments by, and distributions to, stockholders. For the Company, comprehensive income includes net income and other non-owner changes to equity, net of taxes. The components of accumulated other non-owner changes to equity, net of taxes, follow:

 	  	Foreign
Currency
Translation
Adjustments
	 	 	Unrealized
Gains/(Losses)
On Hedging
Activities
	 	 	Minimum
Pension
Liability
Adjustments
	 	 	Total
	 	
Balance, January 1, 2003	  	$	(20,825	)	 	$	(1,164	)	 	$	(16,822	)	 	$	(38,811	)	
2003 Change	  	 	18,071	 	 	 	555	 	 	 	5,710	 	 	 	24,336	 	
 	  				 				 				 				
December 31, 2003	  	 	(2,754	)	 	 	(609	)	 	 	(11,112	)	 	 	(14,475	)	
2004 Change	  	 	9,637	 	 	 	31	 	 	 	(8,902	)	 	 	766	 	
 	  				 				 				 				
December 31, 2004	  	 	6,883	 	 	 	(578	)	 	 	(20,014	)	 	 	(13,709	)	
2005 Change	  	 	(7,353	)	 	 	579	 	 	 	(5,494	)	 	 	(12,268	)	
 	  				 				 				 				
December 31, 2005	  	$	(470	)	 	$	1	 	 	$	(25,508	)	 	$	(25,977	)	

12. Common Stock
 
In 2005, 2004 and 2003, 779,601 shares, 497,970 shares and 704,384 shares, respectively, of common stock were issued from treasury for the exercise of stock options, various other incentive awards, purchases by the Employee Stock Purchase Plan and matching contributions to the Retirement Savings Plan. Additionally, in 2003, 823,506 and 11,817 shares were issued from treasury in connection with the acquisition of Kar and for the payment of charitable contributions to Barnes Group Foundation, respectively. In 2005, 2004 and 2003, the Company acquired 4,562 shares, 136,912 shares and 9,995 shares, respectively, of the Company’s common stock at a cost of $149, $3,498 and $206, respectively. These amounts exclude shares issued and reacquired in connection with certain stock-for-stock exercises under the Company’s stock option plans. These reacquired shares were placed in treasury.
 
On May 21, 2003, the Company issued 2,381,925 shares of its common stock as a result of a follow-on public offering at $19.00 per share. Proceeds to the Company, net of expenses incurred, of $42,212 were used to pay down a portion of the indebtedness incurred in connection with the Kar acquisition. The offering also included 823,506 shares sold by an existing stockholder, GC-Sun Holdings II, L.P. The Company did not receive any of the proceeds from the sale of the shares owned by GC-Sun Holdings.
 
The Company has a shareholder rights plan under which each share of common stock contains one right (“Right”) that entitles the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock for $200. The Rights generally will not become exercisable unless and until, among other things, any person or group acquires beneficial ownership of 35% or more of the outstanding stock. The Rights are generally redeemable at $0.01 per Right at any time until 10 days following a public announcement that a 35% or greater position in the Company’s common stock has been acquired and will expire, unless earlier redeemed or exchanged, on December 23, 2006. If, following the acquisition of 35% or more of the outstanding shares of the Company’s common stock, the Company is acquired in a merger or other business combination, or 50% or more of the Company’s assets or earning power is sold or transferred, each outstanding Right becomes exercisable for common stock or other securities of the acquiring entity having a value of twice the exercise price of the Right.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
13. Preferred Stock
 
At December 31, 2005 and 2004, the Company had 3,000,000 shares of preferred stock authorized, none of which were outstanding.
 
14. Stock Plans
 
Most U.S. salaried and non-union hourly employees are eligible to participate in the Company’s 401(k) plan, the Retirement Savings Plan. The Retirement Savings Plan provides for the investment of employer and employee contributions in the Company’s common stock and also provides other investment alternatives for employee contributions. The Company discontinued providing a guaranteed minimum rate of return on employee contributions to the Retirement Savings Plan for investment in the Company’s common stock after March 31, 2001. However, the Company continued to guarantee a minimum rate of return on certain pre-April 1, 2001 assets of the plan. Effective October 10, 2003, the Plan was modified to reduce the vesting period and to provide that participants are no longer required to invest pre-April 1, 2001 employee contributions in the Barnes Group Stock Fund, one of the Plan’s investment options. In addition, the Plan was modified so that the Company match, after vesting, may also be invested in any of the Plan’s investment options. Since the participant is no longer restricted to investing in Company stock and has the flexibility of multiple investment options, the minimum guaranteed rate of return on the Barnes Group Stock Fund was eliminated effective with the October 10, 2003 plan modification. The Company contributes an amount equal to 50% of employee contributions up to 6% of eligible compensation, plus any guarantee payments prior to October 10, 2003. The Company expenses all contributions made to the Retirement Savings Plan. The Company recognized expense of $3,659, $3,166 and $2,954 in 2005, 2004 and 2003, respectively. As of December 31, 2005, the Retirement Savings Plan held 2,596,049 shares of the Company’s common stock.
 
The Company has an Employee Stock Purchase Plan (“ESPP”) under which eligible employees may elect to have up to the lesser of $21,250 or 10% of base compensation deducted from payroll for the purchase of the Company’s common stock at 85% of market value on the date of purchase. The maximum number of shares which may be purchased under the ESPP is 2,025,000. The number of shares purchased under the ESPP was 56,590, 64,808 and 57,993 in 2005, 2004 and 2003, respectively. As of December 31, 2005, 77,136 additional shares may be purchased. Effective January 1, 2006, the ESPP was amended whereby employees may purchase the Company’s common stock at 95% of market value on the date of purchase under this plan.
 
The 1991 Barnes Group Stock Incentive Plan (the “1991 Plan”) authorized the granting of incentives to executive officers, directors and key employees in the form of stock options, stock appreciation rights, incentive stock rights and performance unit awards. Options granted under the 1991 Plan that terminated without being exercised became available for future grants under the 1991 Plan. A maximum of 508,824 common shares are subject to issuance under this plan after December 31, 2005. As of December 31, 2003, there were 311,752 shares available for future grant under the 1991 Plan. Effective April 14, 2004, all shares available and not used under the 1991 Plan became available for future grants under the 2004 Plan.
 
The Barnes Group Inc. Employee Stock and Ownership Program (the “2000 Plan”) was approved on April 12, 2000, and subsequently amended on April 10, 2002 by the Company’s stockholders. The 2000 Plan permitted the granting of incentive stock options, nonqualified stock options, restricted stock awards, performance share or cash unit awards and stock appreciation rights, or any combination of the foregoing, to eligible employees to purchase up to 3,450,000 shares of the Company’s common stock. Such shares were authorized and reserved. Options granted under the 2000 Plan that terminated without being exercised became available for future grants under the 2000 Plan. A maximum of 1,146,151 common shares are subject to issuance under the 2000 Plan after December 31, 2005. As of December 31, 2003, there were 158,417 shares available for future grants under the 2000 Plan. Effective April 14, 2004, all shares available and not used under the 2000 Plan became available for future grants under the 2004 Plan.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
The Barnes Group Stock and Incentive Award Plan (the “2004 Plan”) was approved on April 14, 2004 by the Company’s stockholders. The 2004 Plan permits the issuance of incentive awards, stock option grants and stock appreciation rights to eligible participants to purchase up to 950,000 shares of common stock. Also available for grants under the Plan are the number of shares of common stock reserved for grants of awards under the 1991 and 2000 Plans but not used as of April 14, 2004 and the number of shares of common stock that become available under the terms of the 1991, 2000 and 2004 Plans, including shares subject to awards which are forfeited, settled for cash, expire or otherwise terminate without issuance of the shares. A maximum of 2,839,880 common shares are subject to issuance under the 2004 Plan after December 31, 2005. As of December 31, 2005 and 2004, there were 507,794 and 1,001,792 shares, respectively, available for future grants under the 2004 Plan.
 
In 1998, 60,000 incentive units and 75,000 stock options were granted under the Key Executive Stock Plan (“Key Plan”). There are no additional shares available for future grant. A maximum of 75,000 common shares are subject to issuance under the Key Plan after December 31, 2005.
 
Compensation cost related to these plans was $6,455, $3,659 and $3,448 in 2005, 2004 and 2003, respectively. The Company recorded, in additional paid-in capital, tax benefits related to stock options of $5,891, $3,569 and $2,486 in 2005, 2004 and 2003, respectively.
 
Data relating to options granted under these plans follow:

 	  	2005
	  	2004
	  	2003
	
 	  	Number
Of Shares
	 	 	Average
Exercise
Price
	  	Number
Of Shares
	 	 	Average
Exercise
Price
	  	Number
Of Shares
	 	 	Average
Exercise
Price
	
Outstanding, January 1	  	3,387,924	 	 	$	24.67	  	3,477,827	 	 	$	21.69	  	3,947,891	 	 	$	20.80	
Granted	  	2,055,185	 	 	 	30.87	  	1,496,049	 	 	 	27.24	  	1,062,546	 	 	 	21.95	
Exercised	  	(2,180,762	)	 	 	24.78	  	(1,513,534	)	 	 	20.39	  	(1,291,229	)	 	 	18.50	
Cancelled	  	(62,759	)	 	 	25.00	  	(72,418	)	 	 	24.07	  	(241,381	)	 	 	25.30	
 	  			 	 	 	  			 	 	 	  			 	 	 	
Outstanding, December 31	  	3,199,588	 	 	 	28.57	  	3,387,924	 	 	 	24.67	  	3,477,827	 	 	 	21.69	
 	  			 	 	 	  			 	 	 	  			 	 	 	
Exercisable, December 31	  	2,396,559	 	 	 	29.53	  	2,574,605	 	 	 	24.95	  	2,157,177	 	 	 	22.54	
 
The following table summarizes information about stock options outstanding at December 31, 2005:

 	  	Options Outstanding
	  	Options Exercisable
	
Range of
Exercise
Prices
	  	Number
Of Shares
	  	Average
Remaining
Life (Years)
	  	Average
Exercise
Price
	  	Number
Of Shares
	  	Average
Exercise
Price
	
$17 to $25	  	616,143	  	5.64	  	$	20.04	  	405,297	  	$	20.25	
$25 to $29	  	916,760	  	6.40	  	 	26.81	  	538,088	  	 	27.01	
$29 to $34	  	714,700	  	5.90	  	 	30.10	  	525,689	  	 	30.27	
$34 to $37	  	951,985	  	5.01	  	 	34.63	  	927,485	  	 	34.63	
 
Incentive stock rights under the 1991 Plan, restricted stock unit awards under the 2000 Plan, restricted stock unit awards under the 2004 Plan and incentive stock unit awards under the Key Plan (collectively, “Rights”) entitle the holder to receive, without payment, one share of the Company’s common stock after the expiration of the vesting period. Certain Rights are also subject to the satisfaction of established performance goals. Additionally, holders of Rights are credited with dividend equivalents, which are converted into additional Rights, and certain holders of restricted stock units are paid dividend equivalents in cash when dividends are paid to other stockholders. All Rights have up to a seven-year vesting period. In 2005, 260,050 Rights were granted;
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
3,329 Rights were credited to holders for dividend equivalents; 150,119 Rights, which include dividend equivalents, were converted to an equivalent number of shares of common stock; and 60,429 Rights were forfeited. In 2005, $472 of dividend equivalents were paid in cash. As of December 31, 2005, there were 862,473 Rights outstanding.
 
Under the Non-Employee Director Deferred Stock Plan, as further amended, each non-employee director who joined the Board of Directors prior to December 15, 2005 was granted the right to receive 6,000 shares of the Company’s common stock upon retirement. In 2005, $45 of dividend equivalents were paid in cash. Compensation cost related to this plan was $86 in each of the years 2005, 2004 and 2003. There are 54,000 shares reserved for issuance under this plan. Each non-employee director who joins the Board of Directors subsequent to December 15, 2005 will receive restricted stock units under the Barnes Group Inc. Stock and Incentive Award Plan having a value of $50 that vest three years after the date of grant. No awards to non-employee directors have been made under this plan as of December 31, 2005.
 
Total shares reserved for issuance under all stock plans aggregated 4,700,991 at December 31, 2005.
 
15. Average Shares Outstanding
 
Net income per common share is computed in accordance with SFAS No. 128, “Earnings per Share.” Basic net income per share is calculated using the weighted average number of common shares outstanding during the year. Diluted net income per share reflects the assumed exercise and conversion of all dilutive securities. Shares held by the Retirement Savings Plan are considered outstanding for both basic and diluted net income per share. There are no adjustments to net income for purposes of computing income available to common stockholders for the years ended December 31, 2005, 2004 and 2003. A reconciliation of the average number of common shares outstanding used in the basic and diluted EPS computation follows:

 	  	Average Common Shares Outstanding
	
 	  	2005
	  	2004
	  	2003
	
Basic	  	23,598,825	  	23,105,853	  	21,475,336	
Dilutive effect of:	  	 	  	 	  	 	
Stock options	  	367,989	  	361,438	  	323,315	
Stock incentive units	  	149,906	  	222,871	  	230,419	
Restricted stock units	  	253,308	  	117,969	  	48,953	
Non-Employee Director Stock Plan	  	31,609	  	28,332	  	23,537	
 	  		  		  		
Diluted	  	24,401,637	  	23,836,463	  	22,101,560	

As of December 31, 2005, there were 3,199,588 stock options outstanding, of which 2,242,883 were considered dilutive and 956,705 were anti-dilutive. As of December 31, 2004, there were 3,387,924 stock options outstanding, of which 2,551,671 were considered dilutive and 836,253 were anti-dilutive.
 
The Convertible Senior Subordinated Notes are convertible, under certain circumstances, into a combination of cash and common stock of the Company. The conversion price is approximately $42.19 per share of common stock. As of December 31, 2005, the Company’s market price per share had not exceeded the conversion price of the notes. Under the net share settlement method there were no potential shares issuable under the notes that were considered dilutive.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
16. Information on Business Segments
 
The Company’s reportable segments are strategic business groups that offer different products and services. Each segment is managed separately because each business requires different technology and marketing strategies. Specifically, the Company operates three reportable business segments, as follows:
 
Barnes Distribution is an international distributor of MROP supplies and offers an array of service options, built around a vendor-managed inventory business model, which are designed to improve the productivity of its customers while substantially reducing procurement and transaction costs. Additionally, it distributes die and nitrogen gas springs, mechanical struts and standard parts such as coil and flat springs, the majority of which are manufactured by Associated Spring. Barnes Distribution, formerly known as Bowman Distribution, was formed from the combination of the Curtis and Kar acquisitions and Bowman Distribution. Barnes Distribution operates and markets its products primarily in the U.S. and Canada. It also distributes products in 33 other countries through distribution/sales centers located in the United Kingdom, France, Spain, Mexico, Singapore, Brazil and China.
 
Associated Spring manufactures precision mechanical components and nitrogen gas products, manifold systems, retaining rings, reed valves, shock discs, injection-molded plastic components, and other close-tolerance engineered metal components that are used in a variety of industries, including electronics, medical devices, telecommunications, consumer goods and transportation markets. Associated Spring’s parts are sold in the U.S. and through its international subsidiaries. International manufacturing operations are located in Brazil, Canada, China, Germany, Mexico, Singapore, Sweden, Thailand and the United Kingdom.
 
Barnes Aerospace produces precision-machined and fabricated components and assemblies for commercial and military aircraft and industrial gas turbines. Additionally, it provides jet engine components overhaul and repair services for many of the world’s commercial airlines and the United States military. Barnes Aerospace participates in aftermarket RSPs with General Electric under which it receives the exclusive right to supply designated aftermarket parts for the life of the related aircraft engine program. Barnes Aerospace’s operations are primarily in the U.S., with additional locations in Europe and Singapore. Its markets are located primarily in the U.S., Europe and Asia.
 
The Company evaluates the performance of its reportable segments based on the operating profit of the respective businesses, which includes net sales, cost of sales, selling and administrative expenses and certain components of other income and other expenses, as well as the allocation of corporate overhead expenses. As of January 1, 2005, the Company prospectively adjusted its method of allocating corporate expenses to better reflect the allocation of Corporate resources to Barnes Aerospace in connection with the aftermarket RSPs. This resulted in the allocation of additional expenses to the Barnes Aerospace segment. Management believes this method provides a more reasonable allocation of costs.
 
The equity income from the Company’s investment in the NASCO joint venture was incorporated into the segment results of Associated Spring prior to its sale (see Note 18). Sales between the business segments and between the geographic areas in which the businesses operate are accounted for on the same basis as sales to unaffiliated customers. Additionally, revenues are attributed to countries based on the location of manufacturing or distribution facilities.
 
During the fourth quarter of 2004, the Company recorded pre-tax charges of $2,184 related to actions to offset higher raw material costs at Associated Spring. These charges related mainly to personnel reductions whereby the workforce at Associated Spring was to be reduced by approximately 4%. During 2005, the accrual was adjusted downward by $172 while $1,729 of the accrual was utilized for severance and benefit payments resulting in a balance of $283 as of December 31, 2005 to be paid in accordance with the severance terms.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
During the fourth quarter of 2004, the Company recorded pre-tax charges of $1,298 to enable the realization of benefits from the Kar integration and improved customer service levels at Barnes Distribution. These charges related mainly to personnel reductions whereby the workforce at Barnes Distribution was to be reduced by approximately 3%. As of January 1, 2005, the accrual balance was $1,183. During 2005, $909 of severance and benefit payments were made and the accrual was adjusted downward by $213 resulting in a balance of $61 as of December 31, 2005 to be paid in accordance with the severance terms.
 
As part of management’s ongoing internal control assessment, during 2005, the Company identified and recorded an adjustment to accounts payable and cost of sales at Barnes Distribution. The Company determined that cost of sales was overstated in prior periods due to inaccuracies in recording inventory receipts from 2000 through 2005. This overstatement was corrected in 2005 as a reduction to cost of sales of $1,814. Management concluded that such corrections were immaterial, both quantitatively and qualitatively, to the 2005 financial statements and immaterial to the previously reported results of prior periods to which they relate.
 
The following tables (dollars shown in millions) set forth information about the Company’s operations by its three reportable business segments and  by geographic area.
 
Operations by Reportable Business Segment

 	  	Barnes
Distribution
	  	Associated
Spring
	  	Barnes
Aerospace
	  	Other
	 	 	Total
Company
	
Revenues	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	
2005	  	$	453.8	  	$	422.4	  	$	235.4	  	$	(9.4	)	 	$	1,102.2	
2004	  	 	424.8	  	 	373.5	  	 	205.9	  	 	(9.5	)	 	 	994.7	
2003	  	 	400.7	  	 	333.1	  	 	165.7	  	 	(8.7	)	 	 	890.8	
						
Operating profit	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	
2005	  	$	26.4	  	$	32.1	  	$	28.4	  	$	—  	 	 	$	86.9	
2004	  	 	13.8	  	 	23.4	  	 	21.4	  	 	—  	 	 	 	58.6	
2003	  	 	16.5	  	 	26.7	  	 	10.6	  	 	—  	 	 	 	53.8	
						
Assets	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	
2005	  	$	323.4	  	$	292.2	  	$	288.6	  	$	95.7	 	 	$	999.9	
2004	  	 	298.8	  	 	308.9	  	 	229.5	  	 	99.8	 	 	 	937.0	
2003	  	 	283.2	  	 	298.7	  	 	157.4	  	 	99.1	 	 	 	838.4	
						
Depreciation and amortization	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	
2005	  	$	11.2	  	$	14.9	  	$	7.7	  	$	1.1	 	 	$	34.9	
2004	  	 	10.6	  	 	15.0	  	 	7.4	  	 	1.2	 	 	 	34.2	
2003	  	 	10.5	  	 	15.2	  	 	8.2	  	 	0.7	 	 	 	34.6	
						
Capital expenditures	  	 	 	  	 	 	  	 	 	  	 	 	 	 	 	 	
2005	  	$	6.4	  	$	10.8	  	$	8.1	  	$	0.8	 	 	$	26.1	
2004	  	 	13.0	  	 	10.0	  	 	3.4	  	 	2.1	 	 	 	28.5	
2003	  	 	8.8	  	 	7.2	  	 	2.2	  	 	0.2	 	 	 	18.4	

Notes:
One customer accounted for 14%, 12% and 10% of the Company’s total revenue in 2005, 2004 and 2003, respectively.
“Other” revenues represent the elimination of intersegment sales, the majority of which are sales by Associated Spring to Barnes Distribution.
The operating profit of Associated Spring includes income (loss) from its equity investment in NASCO. See Note 1 for disclosure of such amounts.
The assets of Associated Spring included the NASCO investment of $10.0 million and $10.4 million in 2004 and 2003, respectively.
“Other” assets include corporate controlled assets, the majority of which are cash and deferred tax assets.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
A reconciliation of the total reportable segments’ operating profit to income before income taxes and the cumulative effect of a change in accounting principle follows:

 	  	2005
	 	 	2004
	 	 	2003
	 	
Operating profit	  	$	86.9	 	 	$	58.6	 	 	$	53.8	 	
Interest income	  	 	1.2	 	 	 	1.1	 	 	 	1.4	 	
Interest expense	  	 	(17.6	)	 	 	(15.4	)	 	 	(15.8	)	
Other (expense) income	  	 	8.0	 	 	 	(1.3	)	 	 	(1.2	)	
 	  				 				 				
Income before income taxes and cumulative effect of a change in accounting principle	  	$	78.5	 	 	$	43.0	 	 	$	38.2	 	

Operations by Geographic Area

 	  	Domestic
	  	International
	  	Other
	 	 	Total
Company
	
Revenues	  	 	 	  	 	 	  	 	 	 	 	 	 	
2005	  	$	799.3	  	$	344.3	  	$	(41.4	)	 	$	1,102.2	
2004	  	 	748.6	  	 	286.7	  	 	(40.6	)	 	 	994.7	
2003	  	 	676.8	  	 	246.9	  	 	(32.9	)	 	 	890.8	
					
Long-lived assets	  	 	 	  	 	 	  	 	 	 	 	 	 	
2005	  	$	322.4	  	$	282.3	  	$	—  	 	 	$	604.7	
2004	  	 	319.9	  	 	247.4	  	 	—  	 	 	 	567.3	
2003	  	 	327.0	  	 	168.9	  	 	—  	 	 	 	495.9	

Notes:
International sales derived from any one country did not exceed 10% of the Company’s total revenues.
“Other” revenues represent the elimination of intercompany sales between geographic locations, of which approximately 54% were sales from international locations to domestic locations.
Long-lived assets located in any one country that exceeded 10% of the Company’s total long-lived assets as of December 31, 2005 were $132.0 million of intangible assets related to the RSPs recorded in Singapore.
 
17. Commitments and Contingencies
 
Leases
 
The Company has various noncancellable operating leases for buildings, office space and equipment. As discussed in Note 8, the Company assumed certain debt related to capital leases with the acquisition of Spectrum of which $413 remained at December 31, 2005. Rent expense was $13,538, $13,273 and $12,579 for 2005, 2004 and 2003, respectively. Minimum rental commitments under noncancellable leases in years 2006 through 2010 are $10,032, $7,422, $4,916, $4,327 and $3,763, respectively, and $9,630 thereafter.
 
Product Warranties
 
The Company provides product warranties in connection with the sale of products. From time to time, the Company is subject to customer claims with respect to product warranties. A customer of Associated Spring has asserted that the Company is responsible for product warranty liabilities currently approximating $1,600, which amount includes the value of replacement parts and consequential damages. The Company’s stated warranty is limited to replacement parts, the cost of which is not deemed significant. Management cannot predict the final outcome of this claim at this time.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
Contingent Payments
 
See Note 2 for contingent payments related to acquisitions.
 
Income Taxes
 
In the normal course of business, the Company and its subsidiaries are examined by various tax authorities, including the IRS. The IRS recently completed its review of the Company for the tax years 2000 through 2002. The IRS is proposing changes to these tax years which could result in a tax cost of approximately $16,500, plus a potential penalty of 20% of the tax assessment plus interest. The Company and its advisors believe the Company’s tax position on the issues raised by the IRS is correct and, therefore, the Company will vigorously defend its position. The Company and its advisors believe the Company will prevail on this issue. Any additional impact on the Company’s liability for income taxes cannot presently be determined, but the Company believes the outcome will not have a material impact on its results of operations, financial position or cash flows.
 
18. Business Divestiture
 
During 2005, the Company sold its 45% investment in NASCO, a joint venture formed in 1986 between the Company and NHK Spring Co., Ltd. of Japan, to NHK for $18,600 resulting in an after-tax gain of $4,030. The pre-tax gain and related tax expense are reflected in Other income and Income taxes, respectively, in the accompanying Consolidated Statements of Income.
 
19. Accounting Changes
 
As of January 1, 2005, the Company changed the method of determining the cost of certain U.S. inventories which previously utilized the LIFO method to the FIFO method. The change was made as the FIFO method more accurately reflects the replacement cost of inventory. The Company has operated in a low inflationary environment, and frequently a deflationary environment, for a number of years, thus reducing any potential advantages of the LIFO method in matching current revenues with current costs. Additionally, the change enhances the comparability of the Company’s financial statements with its peers’ as FIFO is the predominant method utilized in its industry. As a result, all inventories are now valued at the lower of cost, determined on a FIFO basis, or market. All previously reported results have been restated to reflect the retroactive application of the accounting change as required by APB Opinion No. 20, “Accounting Changes.”
 
In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations.” This Interpretation clarifies the term “conditional asset retirement obligation” as used in SFAS No. 143, “Accounting for Asset Retirement Obligations.” This Interpretation requires that the fair value of a liability for a conditional asset retirement obligation be recognized in the period in which it occurred if a reasonable estimate can be made. The Company has determined that legal obligations exist for certain of its owned and leased facilities related primarily to building material and equipment removal. The Company adopted the provisions of this Interpretation on December 31, 2005 and recorded a non-cash transition charge of $391 which is reported as a cumulative effect of a change in accounting principle, net of taxes, in the Consolidated Statements of Income. Upon adoption, the Company also recorded a liability for conditional asset retirement obligations of approximately $850, property, plant and equipment of $269 and deferred taxes of $190. The impact of adoption would not have been material to the results of operations or financial position of the Company for the years 2004 and 2003 had the Company adopted this Interpretation in those years.
 
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BARNES GROUP INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
20. Subsequent Events
 
On January 11, 2006, the Company entered into an amended and restated revolving credit agreement with 11 participating banks which extended the maturity date to January 11, 2011, added Barnes Group Switzerland GmbH, a wholly owned subsidiary of the Company, as a borrower, decreased the interest rate to LIBOR plus a spread ranging from 0.55% to 1.35% depending on the Company’s debt ratio at the time of the borrowing, and amended various financial and restrictive covenants. Borrowings of Barnes Group Switzerland GmbH are guaranteed by the Company. Pursuant to the agreement, the Company pays a facility fee, calculated on the full amount of the borrowing facility, at a rate ranging from 0.20% to 0.40%, depending on the Company’s debt ratio at the end of each calendar quarter. A new covenant was added to the agreement that requires the Company to maintain a ratio of consolidated senior debt to EBITDA, as defined in the amended and restated revolving credit agreement, of not more than 3.25 times at the end of each fiscal quarter ending on or before September 30, 2007, after which the ratio will decrease to 3.00 times. In addition, the agreement requires the Company to maintain a ratio of Total Debt to EBITDA, as defined in the amended and restated credit revolving agreement, of not more than 4.00 times for each quarter ending on or before September 30, 2007, and thereafter of not more than 3.75 times at the end of any fiscal quarter.
 
Additionally, on January 11, 2006, the Company amended its 7.66% Senior Notes due November 12, 2007, its 7.80% Senior Notes due November 12, 2010 and its 9.34% Senior Notes due November 21, 2008 (the “Notes”). The amendments conform the restrictive covenants of the Notes with those in the amended and restated revolving credit agreement with respect to permitted acquisitions, restriction on liens, permitted indebtedness, permitted investments and consolidated leverage ratio requirements.
 
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Report of Independent Registered Public Accounting Firm
 
To the Board of Directors and Stockholders
of Barnes Group Inc.:
 
We have completed integrated audits of Barnes Group Inc.’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
 
Consolidated financial statements and financial statement schedule
 
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of changes in stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of Barnes Group Inc. and its subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule of valuation and qualifying accounts presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
As discussed in Note 19 to the consolidated financial statements, the Company changed its method for accounting for inventory effective January 1, 2005.
 
As discussed in Note 19 to the consolidated financial statements, the Company adopted FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations effective December 31, 2005.
 
Internal control over financial reporting
 
Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s
 
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assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Toolcom Supplies Ltd. (Toolcom) and Service Plus Distributors, Inc. (Service Plus) from its assessment of internal control over financial reporting as of December 31, 2005 because they were acquired by the Company in purchase business combinations during 2005. We have also excluded Toolcom and Service Plus from our audit of internal control over financial reporting. Toolcom and Service Plus’s total assets and net sales represent 1.6% and 0.7%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2005.
 
/ S /    P RICEWATERHOUSE C OOPERS LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
February 24, 2006
 
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QUARTERLY DATA (UNAUDITED)
 
(Dollars in millions, except per share data)

 	  	First
Quarter
	  	Second
Quarter  (2)
	  	Third
Quarter  (3)
	  	Fourth
Quarter  (4)
	  	Full
Year
	
2005	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Net sales	  	$	273.7	  	$	280.5	  	$	271.5	  	$	276.5	  	$	1,102.2	
Gross profit (1)	  	 	98.0	  	 	101.8	  	 	99.4	  	 	97.5	  	 	396.7	
Operating income	  	 	21.1	  	 	23.9	  	 	22.6	  	 	19.1	  	 	86.7	
Net income	  	 	12.8	  	 	18.7	  	 	17.4	  	 	11.6	  	 	60.5	
						
Per common share:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Net income:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Basic	  	$	.55	  	$	.80	  	$	.73	  	$	.49	  	$	2.56	
Diluted	  	 	.54	  	 	.77	  	 	.70	  	 	.47	  	 	2.48	
Dividends	  	 	.20	  	 	.20	  	 	.22	  	 	.22	  	 	.84	
Market prices (high - low)	  	$	28.96-23.72	  	$	34.70-25.30	  	$	37.20-32.82	  	$	36.55-31.95	  	$	37.20-23.72	
						
2004	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Net sales	  	$	247.2	  	$	252.0	  	$	243.9	  	$	251.6	  	$	994.7	
Gross profit (1)	  	 	85.1	  	 	87.7	  	 	84.5	  	 	84.5	  	 	341.8	
Operating income	  	 	15.7	  	 	17.8	  	 	15.4	  	 	8.7	  	 	57.6	
Net income	  	 	9.6	  	 	11.3	  	 	9.6	  	 	3.9	  	 	34.4	
						
Per common share:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Net income:	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 	
Basic	  	$	.42	  	$	.49	  	$	.41	  	$	.17	  	$	1.49	
Diluted	  	 	.40	  	 	.47	  	 	.40	  	 	.16	  	 	1.44	
Dividends	  	 	.20	  	 	.20	  	 	.20	  	 	.20	  	 	.80	
Market prices (high - low)	  	$	33.57-26.01	  	$	29.58-25.73	  	$	29.14-24.20	  	$	28.46-24.80	  	$	33.57-24.20	

(1)	Sales less cost of sales.	
(2)	The second quarter, 2005 results included approximately $4.0 million after taxes, or $0.17 per share, as a result of the Company’s sale of its investment in NASCO (see Note 18).	
(3)	The third quarter, 2005 results included approximately $1.5 million, or $0.06 per share, as a result of the Company being granted Pioneer tax status in Singapore (see Note 10) and $1.1 million after taxes, or $0.05 per share, related to an adjustment to cost of sales recorded at Barnes Distribution (see Note 16).	
(4)	The fourth quarter, 2005 results included approximately $0.4 million, or $0.02 per share, of charges related to the cumulative effect of a change in accounting principle, net of taxes. These charges resulted from the adoption of FIN No. 47, “Accounting for Conditional Asset Retirement Obligations,” in the fourth quarter of 2005 (see Note 19).	
    	The fourth quarter, 2004 results included approximately $2.8 million after taxes, or $0.12 per share, of discrete charges principally related to severance costs, and inventory and facilities charges. These charges were partially offset by $0.7 million of benefits related to the reduction of lease obligations on idle facilities.	
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
None.
 
 Item 9A. Controls and Procedures
 
Disclosure Controls and Procedures.
 
Management, including the Company’s President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon, and as of the date of, that evaluation, the President and Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Company files and submits under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, is (i) recorded, processed, summarized and reported as and when required and (ii) is accumulated and communicated to the Company’s management, including our President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
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Management’s Report on Internal Control Over Financial Reporting
 
Management is responsible for establishing and maintaining adequate control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, the Company conducted an assessment of the effectiveness of its internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The scope of such assessment did not include Toolcom Supplies Ltd., which was acquired on August 9, 2005, or Service Plus Distributors, Inc., the assets of which the Company acquired on September 30, 2005, each of which were accounted for as purchase business combinations. The total assets and net sales of Toolcom and Service Plus Distributors represent approximately 1.6% and 0.7%, respectively, of the accompanying Consolidated Financial Statement amounts as of and for the year ended December 31, 2005. Based on the assessment under the framework in Internal Control—Integrated Framework , management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2005.
 
PricewaterhouseCoopers LLP (“PwC”), the independent registered public accounting firm that audited the financial statements included in this Annual Report, has audited management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 as stated in their report which appears on page 59 of this Annual Report on Form 10-K.
 
 Item 9B. Other Information
 
None.
 
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 PART III
 
Item 10. Directors and Executive Officers of the Registrant
 
DIRECTORS
 
Information with respect to the Company’s directors and nominees may be found under the caption “Election of Three Directors For A Three-Year Term” of the Company’s proxy statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on April 20, 2006 (the “Proxy Statement”). Such information is incorporated herein by reference.
 
EXECUTIVE OFFICERS
 
The Company’s executive officers as of the date of this Annual Report are as follows:

Executive Officer
	  	Position
	  	Age as of
December 31, 2005
	
Edmund M. Carpenter	  	President and Chief Executive Officer	  	64	
			
John R. Arrington	  	Senior Vice President, Human Resources	  	59	
			
Francis C. Boyle, Jr.	  	Vice President, Controller	  	55	
			
Joseph D. DeForte	  	Vice President, Tax	  	63	
			
Patrick Dempsey	  	Vice President, Barnes Group Inc. and President, Barnes Aerospace	  	41	
			
William C. Denninger	  	Senior Vice President, Finance and Chief Financial Officer	  	55	
			
Thomas P. Fodell	  	Vice President, Barnes Group Inc. and President, Associated Spring Sales	  	55	
			
Signe S. Gates	  	Senior Vice President, General Counsel and Secretary	  	56	
			
Philip A. Goodrich	  	Senior Vice President, Corporate Development	  	49	
			
Gregory F. Milzcik	  	Executive Vice President and Chief Operating Officer and President, Associated Spring	  	46	
			
Lawrence W. O’Brien	  	Vice President, Treasurer	  	56	
			
Idelle K. Wolf	  	Vice President, Barnes Group Inc. and President, Barnes Distribution	  	53	
 
Each officer holds office until his or her successor is chosen and qualified or otherwise as provided in the Company’s By-Laws, except Mr. Carpenter who holds office pursuant to an employment agreement with the Company. No family relationships exist among the executive officers of the Company. Except for Mr. O’Brien, each of the Company’s executive officers has been employed by the Company or its subsidiaries in an executive or managerial capacity for at least the past five years.
 
Mr. Arrington joined the Company as Senior Vice President, Human Resources in April 1998.
 
Mr. Boyle joined the Company in April 1978. Mr. Boyle was appointed Vice President, Controller in 1997.
 
Mr. Carpenter joined the Company as President and Chief Executive Officer in December 1998.
 
Mr. DeForte joined the Company as Vice President, Tax in August 1999.
 
Mr. Dempsey joined the Company in October 2000. Mr. Dempsey has held a series of increasingly responsible roles since joining the Company and was promoted to Vice President, Barnes Group Inc. and President, Barnes Aerospace in November 2004.
 
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Mr. Denninger joined the Company as Senior Vice President, Finance and Chief Financial Officer in March 2000.
 
Mr. Fodell joined the Company in November 1979. Mr. Fodell has held a series of increasingly responsible positions in the sales, marketing and management functions of Associated Spring, and was appointed President, Associated Spring Sales in 2003.
 
Ms. Gates joined the Company as Senior Vice President, General Counsel and Secretary in June 1999.
 
Mr. Goodrich joined the Company as Vice President, Business Development in November 1999. He was promoted to Senior Vice President, Corporate Development in December 2000.
 
Mr. Milzcik joined the Company as Vice President, Barnes Group Inc. and President, Barnes Aerospace in June 1999. He was appointed President, Associated Spring in November 2004. Effective February 1, 2006, he was appointed Executive Vice President and Chief Operating Officer of the Company.
 
Mr. O’Brien joined the Company as Vice President, Treasurer in August 2001. From 1997 to 2001, Mr. O’Brien was Vice President and Treasurer of L-3 Communications Corporation.
 
Ms. Wolf joined the Company as Vice President, Barnes Group Inc. and Chief Operating Officer, Barnes Distribution in May 2000, upon the Company’s acquisition of Curtis. Ms. Wolf was appointed President, Barnes Distribution North America in December 2004. Ms. Wolf was appointed President, Barnes Distribution, effective January 1, 2006.
 
AUDIT COMMITTEE
 
Ms. Mangum and Messrs. Benanav, Bristow, Griffin and Grzelecki are the members of the Company’s audit committee which is a separately designated standing committee of the Board of Directors of the Company established in accordance with Section 3(a)(58)(A) of the Exchange Act.
 
The Company’s Board of Directors has determined that Ms. Mangum, who qualifies as an independent director under the New York Stock Exchange listing standards, is an audit committee financial expert.
 
PROCEDURE FOR STOCKHOLDER NOMINATION OF DIRECTORS
 
The Corporate Governance Committee of the Board of Directors adopted a policy with respect to the procedures to be followed by stockholders in recommending nominees to be elected to the Company’s Board of Directors. The policy specifies that recommendations are to be sent by mail to:

 	  	Chairperson, Corporate Governance Committee
c/o Signe S. Gates
Senior Vice President, General Counsel and Secretary
Barnes Group Inc.
123 Main Street
Bristol, CT 06010	
 
The policy provides that the recommendation letter must, at a minimum, provide the stockholder’s name, address, and number of shares owned (if the stockholder is not the registered holder of shares, a written statement from the record holder of shares (e.g., a broker or bank) verifying the stockholder’s beneficial ownership must be provided); the candidate’s biographical information, including name, residential and business addresses, telephone number, age, education, accomplishments, employment history (including positions held and current and former directorships); and the stockholder’s opinion as to whether the recommended candidate meets the definition of “independent” under the Company’s Corporate Governance Guidelines and is “financially literate”
 
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as contemplated by the New York Stock Exchange rules. The recommendation letter must also provide such other information, if any, that would be required to be disclosed with regard to a nominee for director in the solicitation of proxies for election of directors under federal securities laws. The stockholder must include the recommended candidate’s signed statement that he or she meets the qualifications of a director as described in the policy; is willing to complete the questionnaire required of all officers, directors and candidates for nomination to the Board; will provide such other information as the committee may reasonably request; and consents to serve on the Board if elected.
 
CODE OF ETHICS
 
The Company has adopted a Code of Ethics Applicable to the Senior Executives (the “Executive Code of Ethics”) which is applicable to its Chief Executive Officer, Chief Financial Officer and Controller. The Executive Code of Ethics is available on the Company’s website at www.barnesgroupinc.com. The Company will disclose any material amendments to or waivers of the Executive Code of Ethics on that website or in a report on Form 8-K.
 
 Item 11. Executive Compensation
 
The information in the Proxy Statement under the captions “Compensation of Directors,” “Compensation,” “Stock Options,” “Pension Plans,” “Employment Agreement,” and “Change-In-Control and Severance Arrangements” is incorporated herein by reference.
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
The information in the Proxy Statement under “Stock Ownership By Directors and Executive Officers”, “Beneficial Owners of More than 5% of Shares”, and “Securities Authorized for Issuance Under Equity Compensation Plans” is incorporated herein by reference.
 
 Item 13. Certain Relationships and Related Transactions
 
None.
 
 Item 14. Principal Accounting Fees and Services
 
The information in the Proxy Statement under “Principal Accounting Fees and Services” and “Pre-Approval Policy and Procedures” is incorporated herein by reference.
 
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PART IV
 
 Item 15. Exhibits, Financial Statement Schedules

(a)(1)	  	The Financial Statements of the Company are set forth under Item 8 of this Annual Report.	
		
(a)(2)	  	See Financial Statement Schedule under Item 15(c).	
		
(a)(3)	  	See Item 15(b) below.	
		
(b)	  	The Exhibits required by Item 601 of Regulation S-K are filed as Exhibits to this Annual Report and indexed at pages 70 through 73 of this Annual Report.	
		
(c)	  	Financial Statement Schedules.	
 
Schedule II—Valuation and Qualifying Accounts
Years Ended December 31, 2005, 2004, and 2003
(In thousands)

Allowances for Doubtful Accounts:	  	 	 	 	
		
Balance December 31, 2002	  	$	2,891	 	
Provision charged to income (1)	  	 	1,116	 	
Doubtful accounts written off (net) (1)	  	 	(1,805	)	
Other adjustments (2)	  	 	986	 	
 	  				
Balance December 31, 2003	  	 	3,188	 	
Provision charged to income (3)	  	 	903	 	
Doubtful accounts written off (net) (3)	  	 	(1,369	)	
Other adjustments (2)	  	 	5	 	
 	  				
Balance December 31, 2004	  	 	2,727	 	
Provision charged to income (4)	  	 	1,530	 	
Doubtful accounts written off (net) (4)	  	 	(1,412	)	
Other adjustments (2)	  	 	218	 	
 	  				
Balance December 31, 2005	  	$	3,063	 	

(1)	The 2003 increase in the provision charged to income and the write-off of doubtful accounts were primarily due to certain collection issues at Barnes Distribution. Contributing to the increase at Barnes Distribution is the higher accounts receivable activity from the then newly acquired business, Kar.	
(2)	Opening balances of acquired businesses.	
(3)	The 2004 decreases in the provision charged to income and write-off of doubtful accounts were due primarily to the resolution by Barnes Distribution of the 2003 collection issues, including the Kar receivables.	
(4)	The 2005 increase in the provision charged to income relates primarily to Associated Spring increasing the allowance for a bankrupt customer and writing off a receivable for another customer.	
 
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Schedule II—Valuation and Qualifying Accounts—(Continued)
Years Ended December 31, 2005, 2004, and 2003
(In thousands)

Valuation Allowance on Deferred Tax Assets:	  	 	 	 	
		
Balance December 31, 2002	  	$	8,025	 	
Current year provision charged to income tax expense	  	 	989	 	
Other adjustments (1)	  	 	(2,730	)	
 	  				
Balance December 31, 2003	  	 	6,284	 	
Current year provision charged to income tax expense	  	 	3,531	 	
Other adjustments (2)	  	 	(806	)	
 	  				
Balance December 31, 2004	  	 	9,009	 	
Current year provision charged to income tax expense	  	 	729	 	
Current year provision charged to other comprehensive income (3)	  	 	1,648	 	
Other adjustments (4)	  	 	(765	)	
 	  				
Balance December 31, 2005	  	$	10,621	 	

(1)	The 2003 adjustment to the valuation allowance is primarily due to the realization of the deferred tax asset in the Company’s Mexican operation, as well as management’s belief that certain credit carryforwards in Mexico and capital allowances in the United Kingdom would be utilized based on projected future earnings.	
(2)	The 2004 adjustment to the valuation allowance is primarily due to the realization of the net operating loss deferred tax asset in the Company’s United Kingdom operations.	
(3)	The 2005 provision charged to other comprehensive income relates to the tax provision on the minimum pension liability charged to other comprehensive income.	
(4)	The 2005 adjustment to the valuation allowance is primarily due to the realization of the net operating loss deferred tax asset in the Company’s operations in Canada and the United Kingdom.	
 
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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  February 27, 2006	
	
BARNES GROUP INC.	
		
By	 	/s/ E DMUND M. C ARPENTER        	
 	 	Edmund M. Carpenter	
 	 	President and Chief Executive Officer	
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below as of the above date by the following persons on behalf of the Company in the capacities indicated.

/s/ E DMUND M. C ARPENTER        	
Edmund M. Carpenter	
President and Chief Executive Officer	
(Principal Executive Officer), and Director	
	
/s/ W ILLIAM C. D ENNINGER        	
William C. Denninger	
Senior Vice President, Finance	
Chief Financial Officer	
(Principal Financial Officer), and Director	
	
/s/ F RANCIS C. B OYLE , J R .        	
Francis C. Boyle, Jr.	
Vice President, Controller	
(Principal Accounting Officer)	
	
/s/ T HOMAS O. B ARNES        	
Thomas O. Barnes	
Director	
	
/s/ J OHN W. A LDEN        	
John W. Alden	
Director	
	
/s/ G ARY G. B ENANAV        	
Gary G. Benanav	
Director	
	
/s/ W ILLIAM S. B RISTOW , J R .        	
William S. Bristow, Jr.	
Director	
	
/s/ G EORGE T. C ARPENTER        	
George T. Carpenter	
Director	
 
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/s/ D ONALD W. G RIFFIN        	
Donald W. Griffin	
Director	
	
/s/ F RANK E. G RZELECKI        	
Frank E. Grzelecki	
Director	
	
/s/ M YLLE H. M ANGUM        	
Mylle H. Mangum	
Director	
	
/s/ G REGORY F. M ILZCIK        	
Gregory F. Milzcik	
Executive Vice President and Chief Operating Officer
and President, Associated Spring, and Director	
	
/s/ G. J ACKSON R ATCLIFFE        	
G. Jackson Ratcliffe	
Director	
 
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EXHIBIT INDEX
 
Barnes Group Inc.
 
Annual Report on Form 10-K
for the Year ended December 31, 2005

Exhibit No.
	  	Description
	  	Reference
	
3.1	  	Restated Certificate of Incorporation.	  	Incorporated by reference to Exhibit 3.1 to the Company’s report on Form 10-K for the year ended December 31, 1997.	
			
3.2	  	Amended and Restated By-Laws.	  	Incorporated by reference to Exhibit 3.2 to the Company’s report on Form 10-K for the year ended December 31, 1998.	
			
4.1	  	(i) Second Amended and Restated Credit Agreement, dated as of January 11, 2006, among the Company and several commercial banks.	  	Filed with this report.	
			
 	  	(ii) Guaranty of the Company, dated as of January 11, 2006.	  	Filed with this report.	
			
 	  	(iii) Sharing Agreement, dated as of January 11, 2006.	  	Filed with this report.	
			
4.2	  	(i) Rights Agreement dated as of December 10, 1996, between the Company and ChaseMellon Shareholder Services, L.L.C.	  	Incorporated by reference to Exhibit 1 to the Company’s report on Form 8-A filed on December 20, 1996.	
			
 	  	(ii) Amendment No. 1 to Rights Agreement, dated as of February 19, 1999, between the Company and ChaseMellon Shareholder Services, L.L.C.	  	Incorporated by reference to Exhibit 1 to the Company’s report on Form 8-A/A filed on March 18, 1999.	
			
4.3	  	(i) Note Agreement dated as of November 12, 1999, between 3031786 Nova Scotia Company, a wholly owned subsidiary of the Company, and several insurance companies.	  	Incorporated by reference to Exhibit 4.6 to the Company’s report on Form 10-K for the year ended December 31, 1999.	
			
 	  	(ii) Amendment No. 1 to Note Agreement, dated as of February 5, 2003.	  	Incorporated by reference to Exhibit 4.4(ii) to the Company’s report on Form 10-K for the year ended December 31, 2002.	
			
 	  	(iii) Assumption and Amendment Agreement.	  	Filed with this report.	
			
 	  	(iv) Amendment No. 3 to Note Agreement, dated as of January 11, 2006.	  	Filed with this report.	
			
4.4	  	(i) Note Agreement dated as of November 21, 2000, between Barnes Group Inc. and several insurance companies.	  	Incorporated by reference to Exhibit 4.7 to the Company’s report on Form 10-K for the year ended December 31, 2000.	
			
 	  	(ii) Amendment No. 1 to Note Agreement dated as of February 21, 2002.	  	Incorporated by reference to Exhibit 4.5(ii) to the Company’s report on Form 10-K for the year ended December 31, 2002.	
			
 	  	(iii) Amendment No. 2 to Note Agreement dated as of February 5, 2003.	  	Incorporated by reference to Exhibit 4.5(iii) to the Company’s report on Form 10-K for the year ended December 31, 2002.	
 
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Exhibit No.
	  	Description
	  	Reference

 	  	(iv) Amendment No. 3 to Note Agreement, dated as of January 11, 2006.	  	Filed with this report.	
			
   4.5	  	(i) Term Loan Facility Agreement between Associated Spring-Asia Pte. Ltd. and The Development Bank of Singapore Limited, dated June 19, 2001.	  	Incorporated by reference to Exhibit 10.1 to the Company’s report on Form 10-Q for the quarter ended June 30, 2001.	
			
 	  	(ii) Guarantee of Term Loan Facility Agreement, between Barnes Group Inc. and The Development Bank of Singapore Limited, dated June 19, 2001.	  	Incorporated by reference to Exhibit 10.2 to the Company’s report on Form 10-Q for the quarter ended June 30, 2001.	
			
 	  	(iii) Currency Swap and Interest Rate Hedging Master Agreement, between Associated Spring-Asia Pte. Ltd. and The Development Bank of Singapore Limited, dated June 19, 2001.	  	Incorporated by reference to Exhibit 10.3 to the Company’s report on Form 10-Q for the quarter ended June 30, 2001.	
			
 	  	(iv) Guarantee of Currency Swap and Interest Rate Hedging Master Agreement, between Barnes Group Inc. and The Development Bank of Singapore Limited, dated June 19, 2001.	  	Incorporated by reference to Exhibit 10.4 to the Company’s report on Form 10-Q for the quarter ended June 30, 2001.	
			
   4.6	  	Purchase Agreement among the Company and several initial purchasers named therein, dated July 26, 2005.	  	Incorporated by reference to Exhibit 4.1 to Form 8-K, filed by the Company on August 2, 2005.	
			
   4.7	  	Indenture between the Company and the Bank of New York Trust Company, N.A., as Trustee under the Indenture, dated August 1, 2005.	  	Incorporated by reference to Exhibit 4.3 to Form 8-K, filed by the Company on August 2, 2005.	
			
   4.8	  	Resale Registration Rights Agreement between the Company and Banc of America Securities LLC, as Representative of the Initial Purchasers, dated August 1, 2005.	  	Incorporated by reference to Exhibit 4.4 to Form 8-K, filed by the Company on August 2, 2005.	
			
10.1*	  	The Company’s Management Incentive Compensation Plan, as amended and restated January 1, 2000.	  	Incorporated by reference to Exhibit 10.1 to the Company’s report on Form 10-K for the year ended December 31, 2000.	
			
10.2*	  	The Company’s 1996 Long-Term Incentive Plan.	  	Incorporated by reference to Exhibit 10.2 to the Company’s report on Form 10-K for the year ended December 31, 1995.	
			
10.3*	  	The Company’s Retirement Benefit Equalization Plan.	  	Incorporated by reference to Exhibit 10.3 to the Company’s report on Form 10-K for the year ended December 31, 2002.	
			
10.4*	  	The Company’s Supplemental Executive Retirement Plan.	  	Incorporated by reference to Exhibit 10.4 to the Company’s report on Form 10-K for the year ended December 31, 2002.	
			
10.5*	  	The Company’s 1991 Stock Incentive Plan, as amended and restated May 15, 1998.	  	Incorporated by reference to Exhibit 10.5 to the Company’s report on Form 10-K for the year ended December 31, 1998.	
			
10.6*	  	The Company’s Non-Employee Director Deferred Stock Plan, as further amended.	  	Filed with this report.	
 
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Exhibit No.
	  	Description
	  	Reference

   10.7*	  	The Company’s Amended and Restated Directors’ Deferred Compensation Plan.	  	Incorporated by reference to Exhibit 10.8 to the Company’s report on Form 10-K for the year ended December 31, 1996.	
			
   10.8*	  	The Company’s Senior Executive Enhanced Life Insurance Program, as amended and restated May 16, 1997.	  	Incorporated by reference to Exhibit 10.8 to the Company’s report on Form 10-K for the year ended December 31, 1998.	
			
   10.9*	  	The Company’s Enhanced Life Insurance Program.	  	Incorporated by reference to Exhibit 10.12 to the Company’s report on Form 10-K for the year ended December 31, 1993.	
			
10.10*	  	The Company’s Supplemental Senior Officer Retirement Plan.	  	Incorporated by reference to Exhibit 10.13 to the Company’s report on Form 10-K for the year ended December 31, 1996.	
			
10.11*	  	The Company’s Executive Officer Change-In-Control Severance Agreement.	  	Incorporated by reference to Exhibit 10.14 to the Company’s report on Form 10-K for the year ended December 31, 1997.	
			
10.12*	  	(i) Employment Agreement dated as of December 8, 1998 between the Company and Edmund M. Carpenter.	  	Incorporated by reference to Exhibit 10.14 to the Company’s report on Form 10-K for the year ended December 31, 1998.	
			
 	  	(ii) Amendment 1 to Employment Agreement between the Company and Edmund M. Carpenter.	  	Incorporated by reference to Exhibit 10.1 to the Company’s report on Form 10-Q for the quarter ended June 30, 2003.	
			
10.13*	  	The Company’s Key Executive Stock Plan, effective December 8, 1998.	  	Incorporated by reference to the Company’s report on Form 10-Q for the quarter ended June 30, 2002.	
			
10.14*	  	The Company’s Amended Employee Stock and Ownership Program as further amended.	  	Incorporated by reference to the Company’s report on Form 10-Q for the quarter ended March 31, 2003.	
			
10.15*	  	Barnes Group Inc. Executive Deferred Compensation Plan.	  	Incorporated by reference to Exhibit 10.1 to the Company’s report on Form 10-Q for the quarter ended September 30, 2001.	
			
10.16*	  	Barnes Group Inc. Executive Separation Pay Plan.	  	Incorporated by reference to Exhibit 10.17 to the Company’s report on Form 10-K for the year ended December 31, 2002.	
			
10.17*	  	The Company’s Performance Linked Bonus Plan for Selected Executive Officers.	  	Incorporated by reference to Annex I to the Company’s Proxy Statement dated March 15, 2001 for the Annual Meeting of Stockholders held April 12, 2001 that was filed on March 13, 2001.	
			
10.18*	  	Barnes Group Inc. Stock and Incentive Award Plan.	  	Incorporated by reference to Annex 2 to the Company’s Proxy Statement dated March 16, 2004 for the Annual Meeting of Stockholders held April 14, 2004 that was filed on March 10, 2004.	
			
10.19*	  	Executive Compensation	  	Incorporated by reference to Item 1.01 on Form 8-K, filed by the Company on March 11, 2005.	
			
10.20*	  	Executive Compensation	  	Incorporated by reference to Item 1.01 on Form 8-K/A, filed by the Company on April 1, 2005.	
 
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Exhibit No.
	  	Description
	  	Reference

10.21*	  	Executive Compensation	  	Incorporated by reference to Item 1.01 on Form 8-K, filed by the Company on July 25, 2005.	
			
10.22*	  	Directors’ Compensation	  	Incorporated by reference to Item 1.01 on Form 8-K, filed by the Company on July 26, 2005.	
			
10.23*	  	Form of Restricted Stock Unit Award Agreement for the President and Chief Executive Officer (“CEO”).	  	Incorporated by reference to Item 10.3 on Form 10-Q for the quarter ended June 30, 2005.	
			
10.24*	  	Form of Restricted Stock Unit Award Agreement for Named Executive Officers other than the CEO.	  	Incorporated by reference to Item 10.3 on Form 10-Q for the quarter ended June 30, 2005.	
			
10.25*	  	Form of Non-Qualified Stock Option Agreement for the CEO.	  	Incorporated by reference to Item 10.3 on Form 10-Q for the quarter ended June 30, 2005.	
			
10.26*	  	Form of Non-Qualified Stock Option Agreement for Named Executive Officers other than the CEO.	  	Incorporated by reference to Item 10.3 on Form 10-Q for the quarter ended June 30, 2005.	
			
10.27*	  	Form of Performance Share Award Agreement for the CEO.	  	Incorporated by reference to Item 10.3 on Form 10-Q for the quarter ended June 30, 2005.	
			
10.28*	  	Form of Performance Share Award Agreement for Named Executive Officers other than the CEO.	  	Incorporated by reference to Item 10.3 on Form 10-Q for the quarter ended June 30, 2005.	
			
10.29*	  	Form of Contingent Dividend Equivalent Rights Agreement for the CEO.	  	Incorporated by reference to Item 10.3 on Form 10-Q for the quarter ended June 30, 2005.	
			
10.30*	  	Form of Contingent Dividend Equivalent Rights Agreement for Named Executive Officers other than the CEO.	  	Incorporated by reference to Item 10.3 on Form 10-Q for the quarter ended June 30, 2005.	
			
21   	  	List of Subsidiaries.	  	Filed with this report.	
			
23   	  	Consent of Independent Registered Public Accounting Firm.	  	Filed with this report.	
			
31.1	  	Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	  	Filed with this report.	
			
31.2	  	Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	  	Filed with this report.	
			
32   	  	Certificate pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	  	Furnished with this report.	

*	Management contract or compensatory plan or arrangement.	
 
The Company agrees to furnish to the Commission, upon request, a copy of each instrument with respect to which there are outstanding issues of unregistered long-term debt of the Company and its subsidiaries, the authorized principal amount of which does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis.
 
Except for Exhibits 21 and 23, which will be furnished free of charge, copies of exhibits referred to above will be furnished at a cost of twenty-five cents per page to stockholders who make a written request to the Secretary, Barnes Group Inc., 123 Main Street, P.O. Box 489, Bristol, Connecticut 06011-0489.
 
73
 
Exhibit 4.1(i)

Published CUSIP Number: [                      ]
 
SECOND AMENDED AND RESTATED
$175,000,000
SENIOR UNSECURED
REVOLVING CREDIT
AGREEMENT
 
Dated as of January 11, 2006
 
among
 
BANK OF AMERICA, N.A.,
successor by merger to Fleet National Bank,
as Administrative Agent
 
THE LENDERS LISTED ON SCHEDULE I HERETO
 
and
 
BARNES GROUP INC.
and
BARNES GROUP SWITZERLAND GmbH, Nevis Branch
as Borrowers
 
with
 
BANC OF AMERICA SECURITIES LLC, as Arranger
 
KEYBANK NATIONAL ASSOCIATION, as Syndication Agent
 
and HSBC BANK USA NATIONAL ASSOCIATION
and WEBSTER BANK, NATIONAL ASSOCIATION,
as Co-Documentation Agents

TABLE OF CONTENTS

 	  	 	  	 	  	 	  	Page

1.	  	DEFINITIONS AND RULES OF INTERPRETATION	  	1	
				
 	  	1.1.	  	Definitions	  	1	
 	  	1.2.	  	Rules of Interpretation	  	17	
 	  	1.3.	  	Letter of Credit Amounts	  	18	
			
2.	  	THE REVOLVING CREDIT FACILITY	  	18	
				
 	  	2.1.	  	Commitment to Lend	  	18	
 	  	2.2.	  	Facility Fee	  	18	
 	  	2.3.	  	Reduction of Total Commitment	  	19	
 	  	 	  	2.3.1.	  	Increase of Total Commitment	  	19	
 	  	2.4.	  	The Revolving Credit Notes	  	19	
 	  	2.5.	  	Interest on Loans	  	19	
 	  	2.6.	  	Requests for Loans	  	20	
 	  	 	  	2.6.1.	  	General	  	20	
 	  	 	  	2.6.2.	  	Swing Line	  	20	
 	  	2.7.	  	Conversion Options	  	20	
 	  	 	  	2.7.1.	  	Conversion to Different Type of Loan	  	21	
 	  	 	  	2.7.2.	  	Continuation of Type of Loan	  	21	
 	  	 	  	2.7.3.	  	LIBOR Rate Loans	  	21	
 	  	2.8.	  	Funds for Loan	  	21	
 	  	 	  	2.8.1.	  	Funding Procedures	  	21	
 	  	 	  	2.8.2.	  	Advances by Administrative Agent	  	22	
 	  	2.9.	  	Settlements	  	22	
 	  	 	  	2.9.1.	  	General	  	22	
 	  	 	  	2.9.2.	  	Failure to Make Funds Available	  	23	
 	  	 	  	2.9.3.	  	No Effect on Other Lenders	  	23	
			
3.	  	REPAYMENT OF THE LOANS	  	23	
				
 	  	3.1.	  	Maturity	  	23	
 	  	3.2.	  	Mandatory Repayments of Loans	  	23	
 	  	3.3.	  	Optional Repayments of Loans	  	24	
			
4.	  	LETTERS OF CREDIT	  	24	
				
 	  	4.1.	  	Letter of Credit Commitments	  	24	
 	  	4.2.	  	Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit	  	25	
 	  	4.3.	  	Drawings and Reimbursements; Funding of Participations	  	27	
 	  	4.4.	  	Repayment of Participations	  	28	
 	  	4.5.	  	Obligations Absolute	  	28	
 	  	4.6.	  	Role of Issuing Bank	  	29	
 	  	4.7.	  	Cash Collateral	  	30	
 	  	4.8.	  	Applicability of ISP	  	30	
 	  	4.9.	  	Letter of Credit Amounts	  	30	
 	  	4.10.	  	Letter of Credit Fee	  	30	
 
i

TABLE OF CONTENTS
 
(continued)

 	  	 	  	 	  	 	  	Page
	
5.	  	CERTAIN GENERAL PROVISIONS	  	31	
				
 	  	5.1.	  	Administrative Agent’s Fee	  	31	
 	  	5.2.	  	Funds for Payments	  	31	
 	  	 	  	5.2.1.	  	Payments to Administrative Agent	  	31	
 	  	 	  	5.2.2.	  	No Offset, etc.	  	31	
 	  	 	  	5.2.3.	  	Non-U.S. Lenders	  	31	
 	  	5.3.	  	Computations	  	32	
 	  	5.4.	  	Inability to Determine LIBOR Rate	  	32	
 	  	5.5.	  	Illegality	  	33	
 	  	5.6.	  	Additional Costs, etc.	  	33	
 	  	5.7.	  	Capital Adequacy	  	34	
 	  	5.8.	  	Certificate	  	34	
 	  	5.9.	  	Indemnity for LIBOR Rate Loans	  	35	
 	  	5.10.	  	Interest After Default	  	35	
 	  	 	  	5.10.1.	  	Overdue Amounts	  	35	
 	  	 	  	5.10.2.	  	Amounts Not Overdue	  	35	
 	  	5.11.	  	Replacement of Lenders	  	35	
			
6.	  	GUARANTORS	  	36	
				
 	  	6.1.	  	Guaranty by Subsidiaries	  	36	
 	  	6.2.	  	Guaranty by BGI	  	36	
			
7.	  	REPRESENTATIONS AND WARRANTIES	  	36	
				
 	  	7.1.	  	Corporate Authority	  	36	
 	  	 	  	7.1.1.	  	Incorporation; Good Standing	  	37	
 	  	 	  	7.1.2.	  	Authorization	  	37	
 	  	 	  	7.1.3.	  	Enforceability	  	37	
 	  	7.2.	  	Governmental Approvals	  	37	
 	  	7.3.	  	Title to Properties	  	37	
 	  	7.4.	  	Financial Statements	  	37	
 	  	 	  	7.4.1.	  	Fiscal Year	  	37	
 	  	 	  	7.4.2.	  	Financial Statements	  	37	
 	  	7.5.	  	No Material Adverse Changes, etc.	  	38	
 	  	7.6.	  	Franchises, Patents, Copyrights, etc.	  	38	
 	  	7.7.	  	Litigation	  	38	
 	  	7.8.	  	Compliance with Other Instruments, Laws, etc.	  	38	
 	  	7.9.	  	Tax Status	  	38	
 	  	7.10.	  	No Event of Default	  	38	
 	  	7.11.	  	Holding Company and Investment Company Acts	  	38	
 	  	7.12.	  	Certain Transactions	  	38	
 	  	7.13.	  	Employee Benefit Plans	  	39	
 	  	 	  	7.13.1.	  	Relationship of Benefits to Pension Plan Assets	  	39	
 	  	 	  	7.13.2.	  	Prohibited Transactions	  	39	
 	  	 	  	7.13.3.	  	Guaranteed Pension Plans	  	39	
 	  	 	  	7.13.4.	  	Multiemployer Plans	  	39	
 	  	7.14.	  	Use of Proceeds	  	39	
 
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 	 	 	 	 	  	 	  	Page
	
 	 	 	 	7.14.1.	  	General	  	40	
 	 	 	 	7.14.2.	  	Regulations U and X	  	40	
 	 	7.15.	 	Environmental Compliance	  	40	
 	 	7.16.	 	Subsidiaries, etc.	  	41	
 	 	7.17.	 	Disclosure	  	41	
 	 	7.18.	 	Foreign Asset Control Regulations, Etc.	  	41	
			
8.	 	AFFIRMATIVE COVENANTS	  	41	
				
 	 	8.1.	 	Punctual Payment	  	41	
 	 	8.2.	 	Maintenance of Office	  	42	
 	 	8.3.	 	Records and Accounts	  	42	
 	 	8.4.	 	Financial Statements, Certificates and Information	  	42	
 	 	8.5.	 	Notices	  	43	
 	 	 	 	8.5.1.	  	Defaults	  	43	
 	 	 	 	8.5.2.	  	Notice of Litigation and Judgments	  	43	
 	 	8.6.	 	Legal Existence; Maintenance of Properties	  	44	
 	 	8.7.	 	Insurance	  	44	
 	 	8.8.	 	Taxes	  	44	
 	 	8.9.	 	Inspection of Properties and Books, etc.	  	45	
 	 	 	 	8.9.1.	  	General	  	45	
 	 	 	 	8.9.2.	  	Communications with Accountants	  	45	
 	 	8.10.	 	Compliance with Laws, Contracts, Licenses, and Permits	  	45	
 	 	8.11.	 	Employee Benefit Plans	  	45	
 	 	8.12.	 	Use of Proceeds	  	45	
 	 	8.13.	 	Further Assurances	  	45	
			
9.	 	CERTAIN NEGATIVE COVENANTS	  	46	
				
 	 	9.1.	 	Restrictions on Indebtedness	  	46	
 	 	9.2.	 	Restrictions on Liens	  	47	
 	 	 	 	9.2.1.	  	Permitted Liens	  	47	
 	 	 	 	9.2.2.	  	Restrictions on Negative Pledges and Upstream Limitations	  	48	
 	 	9.3.	 	Restrictions on Investments	  	49	
 	 	9.4.	 	Restricted Payments	  	50	
 	 	9.5.	 	Merger, Consolidation and Disposition of Assets	  	50	
 	 	 	 	9.5.1.	  	Mergers and Acquisitions	  	50	
 	 	 	 	9.5.2.	  	Disposition of Assets	  	51	
 	 	9.6.	 	Sale and Leaseback	  	51	
 	 	9.7.	 	Compliance with Environmental Laws	  	51	
 	 	9.8.	 	Employee Benefit Plans	  	51	
 	 	9.9.	 	Business Activities	  	52	
 	 	9.10.	 	Fiscal Year	  	52	
 	 	9.11.	 	Transactions with Affiliates	  	52	
			
10.	 	FINANCIAL COVENANTS	  	52	
				
 	 	10.1.	 	Interest Coverage	  	52	
 	 	10.2.	 	Leverage Ratio	  	53	
 
iii

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(continued)

 	 	 	 	 	  	 	  	Page
	
 	 	10.3.	 	Senior Leverage Ratio	  	53	
 	 	10.4.	 	Consolidated Net Worth	  	53	
			
11.	 	CLOSING CONDITIONS	  	53	
				
 	 	11.1.	 	Loan Documents etc.	  	53	
 	 	11.2.	 	Certified Copies of Governing Documents	  	53	
 	 	11.3.	 	Corporate or Other Action	  	53	
 	 	11.4.	 	Incumbency Certificate	  	54	
 	 	11.5.	 	Solvency Certificate	  	54	
 	 	11.6.	 	Opinions of Counsel	  	54	
 	 	11.7.	 	Payment of Fees	  	54	
 	 	11.8.	 	Financial Statements	  	54	
 	 	11.9.	 	Intercreditor Arrangements	  	54	
			
12.	 	CONDITIONS TO ALL BORROWINGS	  	54	
				
 	 	12.1.	 	Representations True; No Default or Event of Default	  	54	
 	 	12.2.	 	No Legal Impediment	  	55	
 	 	12.3.	 	Proceedings and Documents	  	55	
 	 	12.4.	 	No Material Adverse Change	  	55	
			
13.	 	EVENTS OF DEFAULT; ACCELERATION; ETC.	  	55	
				
 	 	13.1.	 	Events of Default and Acceleration	  	55	
 	 	13.2.	 	Termination of Commitments	  	57	
 	 	13.3.	 	Remedies	  	58	
			
14.	 	THE ADMINISTRATIVE AGENT	  	58	
				
 	 	14.1.	 	Authorization	  	58	
 	 	14.2.	 	Employees and Administrative Agents	  	59	
 	 	14.3.	 	No Liability	  	59	
 	 	14.4.	 	No Representations	  	60	
 	 	 	 	14.4.1.	  	General	  	60	
 	 	 	 	14.4.2.	  	Closing Documentation, etc.	  	60	
 	 	14.5.	 	Payments	  	60	
 	 	 	 	14.5.1.	  	Payments to Administrative Agent	  	60	
 	 	 	 	14.5.2.	  	Distribution by Administrative Agent	  	61	
 	 	 	 	14.5.3.	  	Delinquent Lenders	  	61	
 	 	14.6.	 	Holders of Notes	  	61	
 	 	14.7.	 	Indemnity	  	61	
 	 	14.8.	 	Administrative Agent as Lender; Etc.	  	62	
 	 	14.9.	 	Resignation	  	62	
 	 	14.10.	 	Notification of Defaults and Events of Default	  	62	
 	 	14.11.	 	Administrative Agent May File Proofs of Claim	  	62	
			
15.	 	ASSIGNMENT AND PARTICIPATION	  	63	
				
 	 	15.1.	 	General Conditions and Conditions to Assignment	  	63	
 
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 	 	 	 	 	  	 	  	Page
	
 	 	15.2.	 	Certain Representations and Warranties; Limitations; Covenants	  	65	
 	 	15.3.	 	Register	  	66	
 	 	15.4.	 	Participations	  	66	
 	 	15.5.	 	Limitation upon Participant Rights	  	66	
 	 	15.6.	 	Assignee or Participant Affiliated with the Borrowers	  	67	
 	 	15.7.	 	Miscellaneous Assignment Provisions	  	67	
 	 	15.8.	 	Resignation After Assignment	  	67	
			
16.	 	PROVISIONS OF GENERAL APPLICATIONS	  	67	
				
 	 	16.1.	 	Setoff	  	68	
 	 	16.2.	 	Expenses	  	68	
 	 	16.3.	 	Indemnification	  	69	
 	 	16.4.	 	Treatment of Certain Confidential Information	  	70	
 	 	 	 	16.4.1.	  	Confidentiality	  	70	
 	 	 	 	16.4.2.	  	Prior Notification	  	70	
 	 	 	 	16.4.3.	  	Other	  	71	
 	 	16.5.	 	Survival of Covenants, Etc.	  	71	
 	 	16.6.	 	Notices, Etc.	  	71	
 	 	 	 	16.6.1.	  	Notices Generally	  	71	
 	 	 	 	16.6.2.	  	Electronic Communications	  	72	
 	 	16.7.	 	GOVERNING LAW; SUBMISSION TO JURISDICTION	  	73	
 	 	16.8.	 	Headings	  	73	
 	 	16.9.	 	Counterparts	  	73	
 	 	16.10.	 	Entire Agreement, Etc.	  	73	
 	 	16.11.	 	WAIVER OF JURY TRIAL	  	73	
 	 	16.12.	 	Consents, Amendments, Waivers, Etc.	  	74	
 	 	16.13.	 	Severability	  	75	
 	 	16.14.	 	USA Patriot Act Notice	  	75	
 	 	16.15.	 	Liability for the Obligations	  	75	
			
17.	 	TRANSITIONAL ARRANGEMENTS	  	75	
				
 	 	17.1.	 	Existing Credit Agreement Superseded	  	75	
 	 	17.2.	 	Return and Cancellation of Notes	  	75	
 	 	17.3.	 	Interest and Fees Under Superseded Agreement	  	75	
 
v

			
Exhibits	
		
Exhibit A	  	Form of Note	
Exhibit B	  	Form of Loan Request	
Exhibit C	  	Form of Compliance Certificate	
Exhibit D	  	Assignment and Assumption	
Exhibit E	  	Guaranty	
Exhibit F	  	BGI Guaranty	
	
Schedules	
		
Schedule 1	  	Lenders and Commitments	
Schedule 7.4.1	  	Fiscal Year Not Ending on December 31	
Schedule 7.5	  	Restricted Payments	
Schedule 7.7	  	Litigation	
Schedule 7.15	  	Environmental Compliance	
Schedule 7.16	  	Subsidiaries Etc.	
Schedule 9.1	  	Existing Senior Debt	
Schedule 9.2	  	Existing Liens	
Schedule 9.3	  	Existing Investments	
Schedule 16.6.1	  	Addresses for Notices	

SECOND AMENDED AND RESTATED
REVOLVING CREDIT
AGREEMENT
 
This SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this “ Credit Agreement ”) is made as of January 11, 2006, by and among Barnes Group Inc. (“ BGI ”), a Delaware corporation having its principal place of business at 123 Main Street, P.O. Box 489, Bristol, Connecticut 06011, Barnes Group Switzerland GmbH, Nevis Branch, a limited liability company organized under the laws of Switzerland and an indirect, wholly-owned Subsidiary of BGI having its registered office at Four Seasons Estates, Villa 1426, Palm Grove Villas, Nevis & Saint Kitts, West Indies (“ Barnes Switzerland ”, and together with BGI, the “ Borrowers ”, and each individually, a “ Borrower ”) and Bank of America, N.A., successor by merger to Fleet National Bank (“ Bank of America ”), a national banking association, and the other lending institutions listed on Schedule   1 (the “ Lenders ”) and Bank of America, as administrative agent for itself and such other lending institutions (the “ Administrative Agent ”) with Banc of America Securities LLC, as Arranger (the “ Arranger ”), KeyBank National Association, as Syndication Agent (the “ Syndication Agent ”) and HSBC Bank USA National Association and Webster Bank, National Association, as Co-Documentation Agents (the “ Documentation Agents ”).
 
WHEREAS , pursuant to that certain Amended and Restated Revolving Credit Agreement, dated as of June 2, 2004 (as amended and in effect from time to time, the “ Existing Credit Agreement ”), by and among BGI, certain of the Lenders, the Administrative Agent, and certain other parties thereto, such Lenders have made available certain financing to BGI upon the terms and conditions contained therein; and
 
WHEREAS, BGI has requested, among other things, to amend and restate the Existing Credit Agreement and the Lenders are willing to amend and restate the Existing Credit Agreement on the terms and conditions set forth herein;
 
NOW THEREFORE , in consideration of the foregoing premises and the mutual covenants contained herein, BGI, the Lenders and the Administrative Agent agree that as of the date hereof, the Existing Credit Agreement shall be amended and restated in its entirety as set forth herein:
 
1. DEFINITIONS AND RULES OF INTERPRETATION.
 
1.1. Definitions . The following terms shall have the meanings set forth in this §1 or elsewhere in the provisions of this Credit Agreement referred to below:
 
Accountants . PricewaterhouseCoopers LLP or any other nationally recognized independent auditors selected by BGI and reasonably satisfactory to the Administrative Agent.
 
Acquired Business . A company or business acquired by BGI or any of its Subsidiaries (through asset purchase or otherwise) in compliance with §9.5; provided that the company or business acquired will not be considered an Acquired Business until (a) BGI has delivered to the Administrative Agent historical financial statements of such company or business prepared in accordance with GAAP, an officer’s certificate pursuant to §9.5.1(a) and such other financial information reasonably requested by the Administrative Agent and (b) the Administrative Agent has consented in writing to the designation of such acquired company or business as an Acquired Business, such consent not to be unreasonably withheld or delayed.
 
Adjustment Date . The first day of the month immediately following the month in which a Compliance Certificate is to be delivered by the Borrowers pursuant to §8.4(c).

Administrative Agent . Bank of America, N.A., acting as agent for the Lenders and each other Person appointed as the successor Administrative Agent in accordance with §14.9.
 
Administrative Agent’s Office . The Administrative Agent’s office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Administrative Agent may designate from time to time.
 
Administrative Agent’s Special Counsel . Bingham McCutchen LLP, or such other counsel as may be approved by the Administrative Agent.
 
Administrative Questionnaire . An Administrative Questionnaire in a form supplied by the Administrative Agent.
 
Affiliate . (a) When used generally, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified, and (b) when used with respect to the Borrowers, any Person that would be considered to be an affiliate of BGI under Rule 144(a) of the Rules and Regulations of the Securities and Exchange Commission, as in effect on the date hereof, if BGI were issuing securities.
 
Amendment Fee . See §11.7.
 
Applicable Margin . For each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a “ Rate Adjustment Period ”), the Applicable Margin shall be the applicable margin set forth below with respect to the Leverage Ratio, as determined for the four (4) consecutive fiscal quarters then ending of BGI and its Subsidiaries ending on the last day of the fiscal quarter ended immediately prior to the applicable Rate Adjustment Period.

Level
	  	Leverage Ratio
	  	LIBOR Rate Loans
	 	Letter of Credit
	 	Facility Fee
	
I	  	Less than 2.25:1	  	0.55%	 	0.55%	 	0.20%	
II	  	Less than 2.50:1 but greater than or equal to 2.25:1	  	0.65%	 	0.65%	 	0.23%	
III	  	Less than 2.75:1 but greater than or equal to 2.50:1	  	0.75%	 	0.75%	 	0.25%	
IV	  	Less than 3.00:1 but greater than or equal to 2.75:1	  	0.95%	 	0.95%	 	0.30%	
V	  	Less than 3.25:1 but greater than or equal to 3.00:1	  	1.15%	 	1.15%	 	0.35%	
VI	  	Greater than or equal to 3.25:1	  	1.35%	 	1.35%	 	0.40%	
 
If the Borrowers fail to deliver any Compliance Certificate pursuant to §8.4(c) hereof, then for the period commencing on the next Adjustment Date to occur subsequent to such failure through the date immediately following the date on which such Compliance Certificate is delivered, the Applicable Margin shall be the highest Applicable Margin set forth above.
 
Applicable Pension Legislation . At any time, any pension or retirement benefits legislation (be it national, federal, provincial, territorial or otherwise) then applicable to any Borrower or any of its Subsidiaries.
 
Approved Fund . Any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
 
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Arranger . Banc of America Securities LLC.
 
Assignment and Assumption . See §15.1.
 
Attributable Debt . In respect of a sale and leaseback transaction, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended).
 
Auto-Extension Letter of Credit . See §4.2.
 
Balance Sheet Date . December 31, 2004.
 
Bank of America . Bank of America, N.A., a national banking association, in its individual capacity.
 
Barnes Switzerland . Barnes Group Switzerland GmbH, a corporation organized under the laws of Switzerland and an indirect, wholly-owned Subsidiary of BGI.
 
Barnes Switzerland Loans . Revolving Credit Loans made or to be made by the Lenders to Barnes Switzerland pursuant to §2.
 
Barnes Switzerland Obligations . All Obligations of Barnes Switzerland with respect to the Barnes Switzerland Loans.
 
Barnes Switzerland Sublimit . Fifty percent (50%) of the Total Commitment as in effect from time to time, or such other percentage of the Total Commitment as requested in writing by the Borrowers, consented to in writing by the Administrative Agent in its sole discretion, and communicated to the Lenders.
 
Base Rate . The higher of (a) the variable annual rate of interest so designated from time to time by Bank of America at its office in Charlotte, North Carolina, as its “prime rate”, such rate being a reference rate and not necessarily representing the lowest or best rate being charged to any customer, and (b) one-half of one percent (1/2%) above the Federal Funds Effective Rate. For the purposes of this definition, “ Federal Funds Effective Rate ” shall mean for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published on the Business Day next succeeding such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any Business Day, the Federal Funds Effective Rate for any such day shall be the average rate per annum (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent. Changes in the Base Rate resulting from any changes in Bank of America’s “ prime rate ” shall take place immediately without notice or demand of any kind.
 
Base Rate Loans . Loans bearing interest calculated by reference to the Base Rate.
 
BGI . Barnes Group Inc., a Delaware corporation.
 
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BGI Guaranty . The guaranty dated as of the date hereof executed pursuant to §6.2 in favor of the Administrative Agent and the Lenders, of the payment and performance of the Barnes Switzerland Obligations in the form of Exhibit F attached hereto.
 
BGI Loans . Revolving Credit Loans other than the Barnes Switzerland Loans.
 
Borrower(s) . As defined in the preamble hereto.
 
Borrower Materials . See §8.4.
 
Business Day . Any day on which banking institutions in New York, New York are open for the transaction of banking business and, in the case of LIBOR Rate Loans, also a day which is a LIBOR Business Day.
 
Capitalized Leases . Leases under which BGI or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP.
 
Capital Stock . Any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.
 
Change of Control . If (a) any Person or group of Persons (as used in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) shall have become the beneficial owner (as defined in Rules 13d-3 and 13d-5 promulgated by the Securities and Exchange Commission under said Act) of thirty percent (30%) or more of BGI’s outstanding Voting Stock; provided , however, that members of the Barnes family, Bank of America and any of its Affiliates (to the extent that it owns stock in which a member of the Barnes family has an interest), the Barnes Group Inc. Retirement Savings Plan and Fidelity Management Trust Company, in its capacity as trustee under such plan, and employees of BGI (except employees of BGI who became beneficial owners of more than ten percent (10%) of BGI’s Voting Stock prior to becoming employees of BGI) shall not be counted as a Person for purposes hereof, or (b) a “change of control” occurs under the other Existing Senior Debt, or any future Indebtedness, or (c) BGI fails to own 100% of the stock of Barnes Switzerland except for any nominal interest (5% or less) required to be held by a third party.
 
Closing Date . The first date on which the conditions set forth in §11 have been satisfied, and all “ Loans ” under and as defined in the Existing Credit Agreement are converted into Loans hereunder.
 
Code . The Internal Revenue Code of 1986, as amended.
 
Commitment . With respect to each Lender, the amount set forth on Schedule   1 hereto as the amount of such Lender’s commitment to make Loans to, and to participate in the issuance, extension and renewal of Letters of Credit for the account of, the Borrowers or either of them, as the same may be reduced from time to time; or if such commitment is terminated pursuant to the provisions hereof, zero.
 
Commitment Percentage . With respect to each Lender, the percentage set forth on Schedule   1 hereto as such Lender’s percentage of the aggregate Commitments of all of the Lenders.
 
Compliance Certificate . See §8.4(c).
 
-4-

Consolidated or consolidated . With reference to any term defined herein, shall mean that term as applied to the accounts of BGI and its Subsidiaries, consolidated in accordance with GAAP.
 
Consolidated Cash Interest Expense . As of the last day of any fiscal quarter, the amount of interest expense, paid or payable in cash, of the Borrowers, their Subsidiaries, and Acquired Businesses (to the extent that such Acquired Business is included in the calculation of Consolidated EBITDA for such period), for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. Except to the extent approved by the Administrative Agent, all Indebtedness assumed to have been incurred by the Acquired Businesses shall be deemed to have borne interest at a rate no less than the sum of (a) the arithmetic mean of (x) the LIBOR Rate for LIBOR Rate Loans having an Interest Period of one month in effect on the first day of the four (4) consecutive fiscal quarters then ending and (y) the LIBOR Rate for LIBOR Rate Loans having an Interest Period of one month in effect on the last day of the four (4) consecutive fiscal quarters then ending plus (b) the Applicable Margin for Loans then in effect (after giving effect to such acquisition on a pro forma basis).
 
Consolidated EBITDA . For any period, Consolidated Net Income of the Borrowers, their Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (a) extraordinary gains and losses in accordance with GAAP, (b) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses, and (c) gains or losses on discontinued operations) for the four fiscal quarters ended on such date, plus (i) Consolidated Cash Interest Expense of the Borrowers, their Subsidiaries and, without duplication, the Acquired Businesses for such period, plus (ii) to the extent deducted in computing such Consolidated Net Income of the Borrowers, their Subsidiaries and, without duplication, the Acquired Businesses, the sum of income taxes, depreciation and amortization for such period. The financial results of any Acquired Businesses acquired at any time during the period tested shall be included as if such Acquired Business had been acquired as of the first day of the period tested.
 
Consolidated Net Income . The consolidated net income (or deficit) of BGI and its Subsidiaries, after deduction of all expenses, taxes, and other proper charges, determined in accordance with GAAP (excluding any losses attributable to the use of a fair value methodology for recognition and measurement of impairment of goodwill identified in accordance with Financial Accounting Standards Board Statement No. 142).
 
Consolidated Net Worth . The excess of Consolidated Total Assets over Consolidated Total Liabilities (excluding any non-cash other comprehensive income adjustments made in accordance with Financial Accounting Standards Board Statements No. 52 and No. 87).
 
Consolidated Senior Debt . Consolidated Total Debt less the outstanding amount of any Subordinated Debt.
 
Consolidated Tangible Assets . Consolidated Total Assets at any time less, (a) patents, copyrights, trademarks, trade names, service marks, brand names, franchises, goodwill, experimental expenses and other similar intangibles, (b) unamortized debt discount and expense; and (c) all other property which would be classified as intangible under GAAP.
 
Consolidated Total Assets . All assets of BGI and its Subsidiaries determined on a consolidated basis in accordance with GAAP.
 
Consolidated Total Debt . With respect to BGI and its Subsidiaries, the sum, without duplication, of (a) the aggregate amount of Indebtedness of BGI and its Subsidiaries, on a consolidated basis, outstanding on such date for borrowed money or the deferred purchase price of property including,
 
-5-

without limitation, in respect of any Synthetic Leases or any Capitalized Leases, plus (b) Indebtedness of the type referred to in clause (a) of another Person (not including BGI or its Subsidiaries) guaranteed by BGI or its Subsidiaries.
 
Consolidated Total Liabilities . All liabilities of BGI and its Subsidiaries determined on a consolidated basis in accordance with GAAP and classified as such on the consolidated balance sheet of BGI and its Subsidiaries.
 
Control . The possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.
 
Conversion Request . A notice given by a Borrower to the Administrative Agent of the Borrower’s election to convert or continue a Loan in accordance with §2.7.
 
Credit Agreement . This Second Amended and Restated Revolving Credit Agreement, including the Schedules and Exhibits hereto.
 
Debtor Relief Laws . The Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
 
Default . See §13.1.
 
Delinquent Lender . See §14.5.3.
 
Distribution . The declaration or payment of any dividend on or in respect of any shares of any class of Capital Stock of a Person, other than dividends payable solely in shares of common stock of such Person; the purchase, redemption, defeasance, retirement or other acquisition of any shares of any class of Capital Stock of a Person, directly or indirectly through a Subsidiary of such Person or otherwise (including the setting apart of assets for a sinking or other analogous fund to be used for such purpose); the return of capital by a Person to its shareholders as such; or any other distribution on or in respect of any shares of any class of Capital Stock of such Person.
 
Dollars or $ . Dollars in lawful currency of the United States of America.
 
Domestic Lending Office . Initially, the office of each Lender designated as such in Schedule   1 hereto; thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Base Rate Loans.
 
Drawdown Date . The date on which any Loan is made or is to be made, and the date on which any Loan is converted or continued in accordance with §2.7.
 
Eligible Assignee . Any of (a) a Lender; (b) an Affiliate of a Lender; and (c) any other Person (other than a natural person) approved by (i) the Administrative Agent, the Issuing Bank and Swing Line Lender, and (ii) unless an Event of Default has occurred and is continuing, BGI (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrowers or any of the Borrowers’ Affiliates.
 
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Employee Benefit Plan . Any employee benefit plan within the meaning of §3(3) of ERISA maintained or contributed to by any Borrower or any ERISA Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
 
Environmental Laws . Any and all Federal, provincial, state, local and foreign statutes, law, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to health, safety or the environment, including but not limited to, the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Clean Water Act, the Federal Clean Air Act and the Toxic Substances Control Act.
 
ERISA . The Employee Retirement Income Security Act of 1974, as amended.
 
ERISA Affiliate . Any Person which is treated as a single employer with any of the Borrowers under §414 of the Code.
 
ERISA Reportable Event . A reportable event with respect to a Guaranteed Pension Plan within the meaning of §4043 of ERISA and the regulations promulgated thereunder.
 
Eurocurrency Reserve Rate . For any day with respect to a LIBOR Rate Loan, the maximum rate (expressed as a decimal) at which any bank subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against “ Eurocurrency Liabilities ” (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate.
 
Event of Default . See §13.1.
 
Existing Credit Agreement . As defined in the preamble hereto.
 
Existing Letters of Credit . See §17.1.
 
Existing Senior Debt . Indebtedness of BGI and its Subsidiaries in existence as of the Closing Date and listed on Schedule 9.1 hereof.
 
Existing Senior Notes . The senior notes included in Existing Senior Debt and listed as items 1 through 3 on Schedule 9.1 hereof.
 
Facility Fee . See §2.2.
 
Fee Letter . The fee letter dated December 16, 2005 among the Borrowers, the Administrative Agent and the Arranger.
 
Fees . Collectively, the Facility Fee, the Letter of Credit Fees, the Administrative Agent’s Fee, the Amendment Fee and the closing fees paid to the Lenders to obtain their commitments hereunder.
 
Financial Affiliate . A Subsidiary of the bank holding company controlling any Lender, which Subsidiary is engaging in any of the activities permitted by §4(e) of the Bank Holding Company Act of 1956 (12 U.S.C. §1843).
 
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GAAP or generally accepted accounting principles . (a) When used in §10, whether directly or indirectly through reference to a capitalized term used therein, means (i) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect on the Closing Date, and (ii) to the extent consistent with such principles, the accounting practice of BGI, and (b) when used in general, other than as provided above, means principles that are (i) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (ii) consistently applied with past financial statements of BGI applying the same principles.
 
Gibraltar Subsidiary . Barnes Group Gibraltar Limited, a corporation organized under the Laws of Gibraltar and an indirect, wholly-owned Subsidiary of BGI.
 
Governing Documents . With respect to any Person, its certificate or articles of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its Capital Stock.
 
Governmental Authority . Any foreign, federal, state, regional, local, municipal or other government, or any department, commission, board, bureau, agency, public authority or instrumentality thereof, or any court or arbitrator.
 
Guaranteed Pension Plan . Any employee pension benefit plan within the meaning of §3(2) of ERISA maintained or contributed to by any Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan.
 
Guarantor . Collectively, all of, and individually, any of (a) as set forth in the BGI Guaranty, BGI, and (b) each Subsidiary or Acquired Business that enters into a Guaranty in favor of the Lenders and the Administrative Agent.
 
Guaranty . The guaranty dated as of the date required by §6.1 from each Person required to become a Guarantor pursuant to §6.1 in favor of the Administrative Agent and the Lenders, in each case of the payment and performance of the Obligations in the form of Exhibit E attached hereto.
 
Hazardous Substances . See §7.15(b).
 
Honor Date . See §4.3.
 
Indebtedness . As to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication:
 
(a) all indebtedness arising from borrowed money and similar monetary obligations, whether direct or indirect;
 
(b) all indebtedness of others secured by any mortgage, pledge, security interest, lien, charge, or other encumbrance existing on property owned by such Person or any of its Subsidiaries or acquired by such Person or any of its Subsidiaries subject thereto, whether or not the Indebtedness secured thereby shall have been assumed;
 
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(c) all indebtedness for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices and accrued expenses incurred in the ordinary course of business);
 
(d) all Attributable Debt of such Person with respect to sale and leaseback transactions of such Person;
 
(e) all guarantees, endorsements and other contingent obligations, in respect of Indebtedness of others, including (i) any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase Indebtedness, or to insure the owner of Indebtedness against loss, through an agreement to purchase goods, supplies or services for the purpose of enabling the debtor to make payment of the Indebtedness held by such owner or otherwise, (ii) any obligation of any partnership in which such Person or any of its Subsidiaries is a general partner and (iii) any obligation to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation;
 
(f) the obligations to reimburse the issuer in respect of any letters of credit;
 
(g) every obligation of such Person under any Capitalized Lease;
 
(h) every obligation of such Person under any Synthetic Lease;
 
(i) all sales by such Person, other than the sale or discounting of receivables in the ordinary course of business in connection with the collection thereof, of (i) accounts for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables (collectively “ receivables ”) and;
 
(j) every obligation of such Person under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the settlement value of which is dependent upon interest rates, currency exchange rates, commodities or other indices (a “ Derivative Contract ”).
 
The “ amount ” or “ principal amount ” of any Indebtedness at any time of determination represented by (t) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with GAAP, (u) any Capitalized Lease shall be the principal component of the aggregate of the rental obligations under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (v) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than BGI or any of BGI’s wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or interest earned on such investment, (w) any Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amount, (x) any derivative contract shall be the maximum amount of any termination or loss payment required to be paid by such Person if such derivative contract were, at the time of determination, to be terminated by reason of any event of default or early termination event thereunder, whether or not such event of default or early termination event has in fact occurred, (y) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price and (z) any guaranty or other contingent liability referred to in clause (i) shall be an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty or other contingent obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in
 
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respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.
 
Indemnified Party . See §14.7.
 
Indemnitee . See §16.3.
 
Ineligible Securities . Securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. §24, Seventh), as amended.
 
Intercreditor Agreement . That certain Sharing Agreement, dated as of the Closing Date, executed and delivered by the Administrative Agent, the Lenders party thereto, other lenders to foreign Subsidiaries party from time to time thereto, the holders of Existing Senior Notes, and the Borrowers.
 
Interest Payment Date . (a) As to any Base Rate Loan, the last day of the calendar quarter with respect to interest accrued during such calendar quarter, including, without limitation, the calendar quarter which includes the Drawdown Date of such Base Rate Loan; and (b) as to any LIBOR Rate Loan in respect of which the Interest Period is (i) 3 months or less, the last day of such Interest Period and (ii) more than 3 months, the date that is 3 months from the first day of such Interest Period and, in addition, the last day of such Interest Period.
 
Interest Period . With respect to each Loan, (a) initially, the period commencing on the Drawdown Date of such Loan and ending on the last day of one of the periods set forth below, as selected by a Borrower in a Loan Request or as otherwise required by the terms of this Credit Agreement (i) for any Base Rate Loan, the last day of the calendar quarter; and (ii) for any LIBOR Rate Loan, 1, 2, 3, or 6 months; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by a Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:
 
(A) if any Interest Period with respect to a LIBOR Rate Loan would otherwise end on a day that is not a LIBOR Business Day, that Interest Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding LIBOR Business Day;
 
(B) if any Interest Period with respect to a Base Rate Loan would end on a day that is not a Business Day, that Interest Period shall end on the next succeeding Business Day;
 
(C) if a Borrower shall fail to give notice as provided in §2.7, such Borrower shall be deemed to have requested a conversion of the affected LIBOR Rate Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base Rate Loans on the last day of the then current Interest Period with respect thereto;
 
(D) any Interest Period relating to any LIBOR Rate Loan that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last LIBOR Business Day of a calendar month; and
 
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(E) any Interest Period that would otherwise extend beyond the Loan Maturity Date shall end on the Loan Maturity Date.
 
Investments . All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (b) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (c) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise; and (d) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof.
 
ISP . With respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).
 
Issuer Documents . With respect to a Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the Letter of Credit Issuer and any of the Borrowers (or any of their Subsidiaries) or in favor of the Letter of Credit Issuer and relating to such Letter of Credit.
 
Issuing Bank . Bank of America. The Issuing Bank may arrange, with the consent of the Borrowers, for one or more Letters of Credit to be issued by the Issuing Bank’s Affiliates, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. Nothing herein shall be deemed to restrict the right of the Issuing Bank to issue letters of credit outside of this Credit Agreement.
 
Laws . Collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
 
Lender Affiliate . (a) With respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, limited liability company, trust or legal entity) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by such Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other entity (whether a corporation, partnership, limited liability company, trust or other legal entity) that is a fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.
 
Lenders . Bank of America and the other lending institutions listed on Schedule   1 hereto and any other Person who becomes an assignee of any rights and obligations of a Lender pursuant to §15.
 
Letter of Credit . Standby and documentary letters of credit issued hereunder.
 
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Letter of Credit Advance . With respect to each Lender, such Lender’s funding of its participation in any Letter of Credit Borrowing in accordance with its Commitment Percentage.
 
Letter of Credit Application . An application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the Issuing Bank.
 
Letter of Credit Borrowing . An extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Revolving Credit Loan.
 
Letter of Credit Credit Extension . With respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.
 
Letter of Credit Expiration Date . With respect to Letters of Credit, an expiry date no later than the date which is the earlier of (i) one-year after the issuance thereof (provided that such Letter of Credit may contain customary “evergreen” provisions) and (ii) fourteen (14) days (or, if the Letter of Credit is confirmed by a confirmer or otherwise provides for one or more nominated persons, forty-five (45) days) prior to the Loan Maturity Date.
 
Letter of Credit Fee . See §4.10.
 
Letter of Credit Obligations . As at any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit plus the aggregate of all Unpaid Reimbursement Obligations, including all Letter of Credit Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with §1.3. For all purposes of this Credit Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
 
Letter of Credit Participation . See §4.1.5.
 
Leverage Ratio . See §10.2.
 
LIBOR Business Day . Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London or such other eurodollar interbank market as may be selected by the Administrative Agent in its sole discretion acting in good faith.
 
LIBOR Lending Office . Initially, the office of each Lender designated as such in Schedule   1 hereto; thereafter, such other office of such Lender, if any, that shall be making or maintaining LIBOR Rate Loans.
 
LIBOR Rate . For any Interest Period with respect to a LIBOR Rate Loan, a rate per annum determined by the Administrative Agent pursuant to the following formula:

LIBOR Rate =	  	Eurodollar Base Rate
1.00 – Eurodollar Reserve Percentage	
Where,	  	 	
 
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“ Eurodollar Base Rate ” means, for such Interest Period (rounded upwards, as necessary, to the nearest 1/100 of 1%) the rate per annum equal to the British Bankers Association LIBOR Rate (“ BBA LIBOR ”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the “ Eurodollar Base Rate ” for such Interest Period (rounded upwards, as necessary, to the nearest 1/100 of 1%) shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.
 
“ Eurodollar Reserve Percentage ” means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Board of Governors of the Federal Reserve System of the United States for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency Liabilities”). The LIBOR Rate for each outstanding LIBOR Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.
 
LIBOR Rate Loans . Loans bearing interest calculated by reference to the LIBOR Rate.
 
Lien . Any mortgage, deed of trust, security interest, pledge, hypothecation, assignment, attachment, deposit arrangement, encumbrance, lien (statutory, judgment or otherwise), or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any Capitalized Lease, any Synthetic Lease, any financing lease involving substantially the same economic effect as any of the foregoing and the filing of any financing statement under the UCC or comparable law of any jurisdiction).
 
Loan(s) . The Revolving Credit Loan(s) made by the Lenders to the Borrowers pursuant to §2, including the Swing Line Loans advanced by the Swing Line Lender under §2.6.2.
 
Loan Documents . This Credit Agreement, the Notes, the Guaranties, the BGI Guaranty, the Letter of Credit Applications, and the Letters of Credit.
 
Loan Parties . Collectively, the Borrowers and each other Person (other than the Administrative Agent, the Issuing Bank, or any Lender) executing a Loan Document.
 
Loan Request . See §2.6.
 
Loan Maturity Date . January 11, 2011.
 
Luxembourg Subsidiaries . Barnes Group Luxembourg (No. 1) S.A. and Barnes Group Luxembourg (No. 2) S.A., each a corporation organized under the Laws of Luxembourg, and wholly-owned Subsidiaries of BGI.
 
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Material Adverse Effect . With respect to any event or occurrence of whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding):
 
(a) a material adverse effect on the business, properties, condition (financial or otherwise), assets, operations or income of any of BGI, individually, or BGI and its Subsidiaries, taken as a whole;
 
(b) an adverse effect on the ability of any of BGI or any other obligor, individually and taken as a whole, to perform any of their respective Obligations under any of the Loan Documents to which it is a party; or
 
(c) any material impairment of the validity, binding effect or enforceability of this Credit Agreement or any of the other Loan Documents, or any material impairment of the rights, remedies or benefits available to the Administrative Agent or any Lender under any Loan Document.
 
Maximum Drawing Amount . The maximum aggregate amount that the beneficiaries may at any time draw under outstanding Letters of Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit.
 
Non-Extension Notice Date . See §4.2.
 
Notes . The Revolving Credit Notes.
 
Note Record . A Record with respect to a Note.
 
Obligations . All indebtedness, obligations and liabilities of any of BGI, Barnes Switzerland, and any of their Subsidiaries, as the case may be, including, without limitation, the Barnes Switzerland Obligations, to any of the Lenders and the Administrative Agent, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Credit Agreement or any of the other Loan Documents or in respect of any of the Loans made or Reimbursement Obligations incurred or any of the Notes, Letter of Credit Application, Letter of Credit or other instruments at any time evidencing any thereof.
 
Operating Accounts . See §2.6.2.
 
Participant . See §15.4.
 
PBGC . The Pension Benefit Guaranty Corporation created by §4002 of ERISA and any successor entity or entities having similar responsibilities.
 
Performance Letter of Credit . Any Letter of Credit issued to support contractual obligations for supply, service or construction contracts, including, but not limited to, bid, performance, advance payment, warranty, retention, availability and defects liability obligations.
 
Permitted Liens . Liens permitted by §9.2.
 
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Person . Any individual, corporation, limited liability company partnership, limited liability partnership, trust, other unincorporated association, business, or other legal entity, and any Governmental Authority.
 
Platform . See §8.4.
 
Public Lender . See §8.4.
 
Real Estate . All real property at any time owned or leased (as lessee or sublessee) by BGI or any of its Subsidiaries.
 
Record . The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to any Loan referred to in such Note.
 
Register . See §15.3.
 
Reimbursement Obligation . BGI’s and/or Barnes Switzerland’s obligation, as applicable, to reimburse the Administrative Agent and the Lenders on account of any drawing under any Letter of Credit as provided in §4.2.
 
Related Parties . With respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.
 
Required Lenders . As of any date, the Lenders holding more than fifty percent (50%) of the outstanding principal amount of the Notes on such date; and if no such principal is outstanding, the Lenders whose aggregate Commitments constitute more than fifty percent (50%) of the Total Commitment.
 
Responsible Officer . The president, chief executive officer, chief financial officer, vice president-controller, vice president-treasurer, treasurer or assistant treasurer of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
 
Restricted Payment . In relation to the Borrowers and their Subsidiaries, any (a) Distribution, (b) payment or prepayment by the Borrowers or their Subsidiaries to any of the Borrower’s or any Subsidiary’s shareholders (or other equity holders), in each case, other than to the Borrowers, or to any Affiliate of any of the Borrowers or any Subsidiary of any Affiliate of any of the Borrowers or such Subsidiary’s shareholders (or other equity holders), or (c) derivatives or other transactions with any financial institution, commodities or stock exchange or clearinghouse (a “ Derivatives Counterparty ”) obligating any of the Borrowers or any Subsidiary to make payments to such Derivatives Counterparty as a result of any change in market value of any Capital Stock of any of the Borrowers or such Subsidiary.
 
Revolving Credit Loans . Revolving credit loans (including, without limitation, the BGI Loans and the Barnes Switzerland Loans) made or to be made by the Lenders to BGI and Barnes Switzerland pursuant to §2.
 
Revolving Credit Notes . See §2.4.
 
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Sale Leaseback Transaction . Any arrangement, directly or indirectly, whereby BGI or any domestic Subsidiary of BGI sells or transfers any property owned by it in order then or thereafter to lease such property or lease other property that BGI or such domestic Subsidiary of BGI intends to use for substantially the same purpose as the property being sold or transferred.
 
Settlement . The making or receiving of payments, in immediately available funds, by the Lenders, to the extent necessary to cause each Lender’s actual share of the outstanding amount of Loans (after giving effect to any Loan Request) to be equal to such Lender’s Commitment Percentage of the outstanding amount of such Loans (after giving effect to any Loan Request), in any case where, prior to such event or action, the actual share is not so equal.
 
Settlement Amount . See §2.9.1.
 
Settlement Date . (a) The Drawdown Date relating to any Loan Request, (b) Friday of each week, or if a Friday is not a Business Day, the Business Day immediately following such Friday, (c) at the option of the Administrative Agent, on any Business Day following a day on which the account officers of the Administrative Agent active upon the Borrowers’ account become aware of the existence of an Event of Default, (d) any Business Day on which the amount of Loans outstanding from Bank of America plus Bank of America’s Commitment Percentage of the sum of the Maximum Drawing Amount and any Unpaid Reimbursement Obligations is equal to or greater than Bank of America’s Commitment Percentage of the Total Commitment, (e) any day on which any conversion of a Base Rate Loan to a LIBOR Rate Loan occurs, or (f) any Business Day on which (i) the amount of outstanding Loans decreases and (ii) the amount of the Administrative Agent’s Loans outstanding equals zero Dollars ($0).
 
Senior Leverage Ratio . See §10.3.
 
Settling Lender . See §2.9.1.
 
Significant Subsidiary . Each Subsidiary of BGI which in the most recent fiscal year of the Borrowers accounted for more than ten percent (10%) of the Consolidated Total Assets for each of the most recent three fiscal years of the Borrowers; provided, however, that with respect to Subsidiaries created or acquired after the date hereof, if thereafter such entity, in a fiscal year, accounts for more than ten percent (10%) of the Consolidated Total Assets in such fiscal year, it shall be deemed to be a Significant Subsidiary for such fiscal year.
 
Subordinated Debt . Indebtedness of BGI or any of its Subsidiaries that is expressly subordinated and made junior to the payment and performance in full of the Obligations, and evidenced as such by a written instrument containing subordination provisions in form and substance approved by the Administrative Agent after consultation with the Required Lenders.
 
Subsidiary . Any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock.
 
Swing Line Lender . Bank of America in its capacity as lender of Swing Line Loans hereunder.
 
Swing Line Loan(s) . See §2.6.2.
 
Synthetic Lease . Any lease of goods or other property, whether real or personal, which is treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes.
 
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Total Commitment . The sum of the Commitments of the Lenders, as in effect from time to time, which amount, as of the Closing Date shall not exceed $175,000,000, which amount may be increased or decreased from time to time in accordance with this Credit Agreement.
 
Type . As to any Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan.
 
Unpaid Reimbursement Obligation . Any Reimbursement Obligation for which the applicable Borrower does not reimburse the Administrative Agent and the Lenders on the date specified in, and in accordance with, §4.2.
 
Voting Stock . Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency.
 
1.2. Rules of Interpretation .
 
(a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement.
 
(b) The singular includes the plural and the plural includes the singular.
 
(c) A reference to any law includes any amendment or modification to such law.
 
(d) A reference to any Person includes its permitted successors and permitted assigns.
 
(e) Accounting terms not otherwise defined herein have the meanings assigned to them by GAAP applied on a consistent basis by the accounting entity to which they refer.
 
(f) The words “include”, “includes” and “including” are not limiting.
 
(g) All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the meanings assigned to them therein, with the term “ instrument ” being that defined under Article 9 of the Uniform Commercial Code.
 
(h) Reference to a particular “§” refers to that section of this Credit Agreement unless otherwise indicated.
 
(i) The words “herein”, “hereof”, “hereunder” and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement.
 
(j) Unless otherwise expressly indicated, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including,” the words “to” and “until” each mean “to but excluding,” and the word “through” means “to and including.”
 
(k) This Credit Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations,
 
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tests and measurements are, however, cumulative and are to be performed in accordance with the terms thereof.
 
(l) This Credit Agreement and the other Loan Documents are the result of negotiation among, and have been reviewed by counsel to, among others, the Administrative Agent and the Borrowers and are the product of discussions and negotiations among all parties. Accordingly, this Credit Agreement and the other Loan Documents are not intended to be construed against the Administrative Agent or any of the Lenders merely on account of the Administrative Agent’s or any Lender’s involvement in the preparation of such documents.
 
1.3. Letter of Credit Amounts .
 
Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided , however , that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
 
2. THE REVOLVING CREDIT FACILITY.
 
2.1. Commitment to Lend . Subject to the terms and conditions set forth in this Credit Agreement, each of the Lenders severally agrees to lend to BGI and/or Barnes Switzerland, and BGI and/or Barnes Switzerland may borrow, repay, and reborrow from time to time from the Closing Date up to but not including the Loan Maturity Date upon notice by BGI and/or Barnes Switzerland, as the case may be, to the Administrative Agent given in accordance with §2.6, such sums, in Dollars, as are requested by such Borrower up to a maximum aggregate amount outstanding (after giving effect to all amounts requested) at any one time equal to such Lender’s Commitment minus such Lender’s Commitment Percentage of the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations, provided that the sum of the outstanding amount of the Loans (after giving effect to all amounts requested) plus the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not at any time exceed the Total Commitment at such time; and provided , further , that (in the case of any such requested Revolving Credit Loan that is a Barnes Switzerland Loan) the outstanding principal amount of the Barnes Switzerland Loans (after giving effect to all amounts requested) shall not exceed the Barnes Switzerland Sublimit. The Loans shall be made pro rata in accordance with each Lender’s Commitment Percentage. Each request for a Loan hereunder shall constitute a representation and warranty by BGI or Barnes Switzerland, as the case may be, that the conditions set forth in §11 and §12, in the case of the initial Loans to be made on the Closing Date, and §12, in the case of all other Loans, have been satisfied on the date of such request. Each Base Rate Loan shall be denominated in Dollars. Each LIBOR Rate Loan shall be denominated in Dollars.
 
2.2. Facility Fee . BGI agrees to pay to the Administrative Agent for the accounts of the Lenders in accordance with the Lenders’ respective Commitment Percentages a facility fee (the “ Facility Fee ”) calculated at the rate per annum related to the then current Applicable Margin, as set forth in the definition “Applicable Margin” in §1.1 hereof, on the Total Commitment in effect from time to time from the Closing Date to the Loan Maturity Date. The Facility Fee shall be payable quarterly in arrears on the last day of each calendar quarter for the immediately preceding calendar quarter commencing on the first such date following the date hereof, with a final payment on the Loan Maturity Date or any earlier date on which the Commitments shall terminate.
 
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2.3. Reduction of Total Commitment . BGI shall have the right at any time and from time to time upon five (5) Business Days prior written notice to the Administrative Agent to reduce by $5,000,000 or a whole multiple of $1,000,000 in excess thereof or to terminate entirely the Total Commitment, whereupon the Commitments of the Lenders shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated. Promptly after receiving any notice of BGI delivered pursuant to this §2.3, the Administrative Agent will notify the Lenders of the substance thereof. Upon the effective date of any such reduction or termination, BGI shall pay to the Administrative Agent for the respective accounts of the Lenders the full amount of any Facility Fee then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated.
 
2.3.1. Increase of Total Commitment . Unless a Default or Event of Default has occurred and is continuing, BGI may request, with prior written notice to the Administrative Agent, and subject to the approval of the Administrative Agent if with respect to a new lender, that the Total Commitment be increased, provided that the Total Commitment shall not, except with the consent of the Required Lenders, in any event exceed $250,000,000 hereunder, and provided , further , that (i) any Lender which is a party to this Revolving Credit Agreement prior to such increase shall have the first option to increase its Commitment hereunder, but no Lender shall have any obligation to do so, (ii) in the event that it becomes necessary to include a new Lender to provide additional funding under this §2.3.1, such new Lender must be reasonably acceptable to the Administrative Agent and BGI, and (iii) the Lenders’ Commitment Percentages shall be correspondingly adjusted, as necessary, to reflect any increase in the Total Commitment and Schedule 1 shall be amended to reflect such adjustments.
 
2.4. The Revolving Credit Notes . The Loans (other than those Swing Line Loans advanced by the Swing Line Lender under §2.6.2) shall be evidenced by separate promissory notes of BGI and/or Barnes Switzerland, as the case may be, in substantially the form of Exhibit   A hereto (each a “ Note ”), dated as of the Closing Date (or such other date on which a Lender may become a party hereto in accordance with §15 hereof) and completed with appropriate insertions. One Note shall be payable to the order of each Lender in a principal amount equal to such Lender’s Commitment or, if less, the outstanding amount of all Loans made by such Lender, plus interest accrued thereon, as set forth below. BGI and/or Barnes Switzerland, as the case may be, irrevocably authorizes each Lender to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal on such Lender’s Note, an appropriate notation on such Lender’s Note Record reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on such Lender’s Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender’s Note Record shall not limit or otherwise affect the obligations of BGI and/or Barnes Switzerland, as the case may be, hereunder or under any Note to make payments of principal of or interest on any Note when due.
 
2.5. Interest on Loans . Except as otherwise provided in §5.10,
 
(a) Each Loan which is a Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate per annum equal to the Base Rate.
 
(b) Each Loan which is a LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate per annum equal to the LIBOR Rate determined for such Interest
 
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Period plus the Applicable Margin with respect to LIBOR Rate Loans as in effect from time to time.
 
BGI promises to pay or, solely in the case of the Barnes Switzerland Loans, Barnes Switzerland promises to pay, interest on the Loans, as applicable, on each Interest Payment Date with respect thereto.
 
2.6. Requests for Loans .
 
2.6.1. General . BGI and/or Barnes Switzerland, as the case may be, shall give to the Administrative Agent written notice in the form of Exhibit   B hereto (or telephonic notice confirmed in a writing in the form of Exhibit   B hereto) of each Loan requested hereunder (a “Loan Request”) no less than (a) one (1) Business Day prior to the proposed Drawdown Date of any Base Rate Loan and (b) three (3) LIBOR Business Days prior to the proposed Drawdown Date of any LIBOR Rate Loan. Each such notice shall specify (i) the principal amount of the Loan requested, in Dollars, (ii) the proposed Drawdown Date of such Loan, (iii) the Interest Period for such Loan and (iv) the Type of such Loan. Promptly upon receipt of any such notice, the Administrative Agent shall notify each of the Lenders thereof. Each Loan Request shall be irrevocable and binding on BGI and/or Barnes Switzerland, as the case may be, and shall obligate such Borrower to accept the Loan requested from the Lenders on the proposed Drawdown Date. Each Loan Request shall be in a minimum aggregate amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof.
 
2.6.2. Swing Line . Notwithstanding the notice and minimum amount requirements set forth in §2.6.1 but otherwise in accordance with the terms and conditions of this Credit Agreement, the Swing Line Lender may, in its sole discretion and without conferring with the Lenders, make Loans to BGI and/or Barnes Switzerland, as the case may be, on a same day basis in a minimum aggregate amount of $100,000 and in an aggregate amount not exceeding $15,000,000 (a) by entry of credits to the applicable operating account of BGI and/or Barnes Switzerland, as the case may be (the “ Operating Accounts ”) with the Administrative Agent or such other account which BGI and/or Barnes Switzerland, as the case may be, has designated as such to the Administrative Agent by not less than three (3) Business Days notice, to cover checks or other charges which BGI and/or Barnes Switzerland, as the case may be, has drawn or made against such account or (b) in an amount as otherwise requested by BGI and/or Barnes Switzerland, as the case may be (such Loans made pursuant to this §2.6.2, “ Swing Line Loans ”). Each of the Borrowers hereby requests and authorizes the Swing Line Lender to make from time to time such Swing Line Loans by means of appropriate entries of such credits sufficient to cover checks and other charges then presented for payment from the appropriate Operating Account or as otherwise so requested. Each of the Borrowers acknowledges and agrees that the making of such Swing Line Loans shall, in each case, be subject in all respects to the provisions of this Credit Agreement as if they were Loans covered by a Loan Request including, without limitation, the limitations set forth in §2.1 and the requirements that the applicable provisions of §11 (in the case of Loans made on the Closing Date) and §12 be satisfied. All actions taken by the Swing Line Lender pursuant to the provisions of this §2.6.2 shall be conclusive and binding on BGI and/or Barnes Switzerland, as the case may be, and the Lenders absent the Swing Line Lender’s gross negligence or willful misconduct. Swing Line Loans made pursuant to this §2.6.2 shall be Base Rate Loans until converted in accordance with the provisions of the Credit Agreement and, prior to a Settlement, such interest shall be for the account of the Swing Line Lender.
 
2.7. Conversion Options .
 
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2.7.1. Conversion to Different Type of Loan . The applicable Borrower may elect from time to time to convert any outstanding Loan to a Loan of another Type, provided that (a) with respect to any such conversion of a LIBOR Rate Loan to a Base Rate Loan, the applicable Borrower shall give the Administrative Agent at least one (1) Business Day prior written notice of such election; (b) with respect to any such conversion of a Base Rate Loan to a LIBOR Rate Loan, the applicable Borrower shall give the Administrative Agent at least three (3) LIBOR Business Days prior written notice of such election; (c) with respect to any such conversion of a LIBOR Rate Loan into a Base Rate Loan, such conversion shall only be made on the last day of the Interest Period with respect thereto and (d) no Loan may be converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing. On the date on which such conversion is being made each Lender shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its LIBOR Lending Office, as the case may be. All or any part of outstanding Loans of any Type may be converted into a Loan of another Type as provided herein, provided that any partial conversion shall be in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each Conversion Request relating to the conversion of a Loan to a LIBOR Rate Loan shall be irrevocable by the Borrowers.
 
2.7.2. Continuation of Type of Loan . Any Loan of any Type may be continued as a Loan of the same Type upon the expiration of an Interest Period with respect thereto by compliance by the applicable Borrower with the notice provisions contained in §2.7.1; provided that no LIBOR Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Default or Event of Default of which officers of the Administrative Agent active upon the Borrowers’ account have actual knowledge. In the event that the applicable Borrower fails to provide any such notice with respect to the continuation of any LIBOR Rate Loan as such, then such LIBOR Rate Loan shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto. The Administrative Agent shall notify the Lenders promptly when any such automatic conversion contemplated by this §2.7 is scheduled to occur.
 
2.7.3. LIBOR Rate Loans . Any conversion to or from LIBOR Rate Loans shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all LIBOR Rate Loans having the same Interest Period shall not be less than $5,000,000 or a whole multiple of $1,000,000 in excess thereof.
 
2.8. Funds for Loan .
 
2.8.1. Funding Procedures . Not later than 11:00 a.m. (Boston time) on the proposed Drawdown Date of any Loans, each of the Lenders will make available to the Administrative Agent, at the Administrative Agent’s Office, in immediately available funds, the amount of such Lender’s Commitment Percentage of the amount of the requested Loans. Upon receipt from each Lender of such amount, and upon receipt of the documents required by §§11 and 12 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Administrative Agent will make available to BGI and/or Barnes Switzerland, as the case may be, the aggregate amount of such Loans made available to the Administrative Agent by the Lenders. The failure or refusal of any Lender to make available to the Administrative Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Lender from its several obligation hereunder to make available to the Administrative Agent the amount of such other Lender’s Commitment Percentage of any requested Loans.
 
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2.8.2. Advances by Administrative Agent . The Administrative Agent may, unless notified to the contrary by any Lender prior to a Drawdown Date, assume that such Lender has made available to the Administrative Agent on such Drawdown Date the amount of such Lender’s Commitment Percentage of the Loans to be made on such Drawdown Date, and the Administrative Agent may (but it shall not be required to), in reliance upon such assumption, make available to BGI and/or Barnes Switzerland, as the case may be, a corresponding amount. If any Lender makes available to the Administrative Agent such amount on a date after such Drawdown Date, such Lender shall pay to the Administrative Agent on demand an amount equal to the product of (a) the average computed for the period referred to in clause (c) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (b) the amount of such Lender’s Commitment Percentage of such Loans, times (c) a fraction, the numerator of which is the number of days that elapse from and including such Drawdown Date to the date on which the amount of such Lender’s Commitment Percentage of such Loans shall become immediately available to the Administrative Agent, and the denominator of which is 360. A statement of the Administrative Agent submitted to such Lender with respect to any amounts owing under this paragraph shall be prima facie evidence of the amount due and owing to the Administrative Agent by such Lender. If the amount of such Lender’s Commitment Percentage of such Loans is not made available to the Administrative Agent by such Lender within three (3) Business Days following such Drawdown Date, the Administrative Agent shall be entitled to recover such amount from the applicable Borrower on demand, with interest thereon at the rate per annum applicable to the Loans made on such Drawdown Date.
 
2.9. Settlements .
 
2.9.1. General . On each Settlement Date, the Administrative Agent shall, not later than 11:00 a.m. (Boston time), give telephonic or facsimile notice (a) to (i) the Lenders and (ii) BGI and/or Barnes Switzerland, as the case may be, of the respective outstanding amount of Loans made by the Administrative Agent on behalf of the Lenders from the immediately preceding Settlement Date through the close of business on the prior day and the amount of any LIBOR Rate Loans to be made (following the giving of notice pursuant to §2.6.1(b)) on such date pursuant to a Loan Request and (b) to the Lenders of the amount (a “ Settlement Amount ”) that each Lender (a “ Settling Lender ”) shall pay to effect a Settlement of any Loan. A statement of the Administrative Agent submitted to the Lenders and BGI and/or Barnes Switzerland, as the case may be, or to the Lenders with respect to any amounts owing under this §2.9, shall be prima facie evidence of the amount due and owing. Each Settling Lender shall, not later than 3:00 p.m. (Boston time) on such Settlement Date, effect a wire transfer of immediately available funds to the Administrative Agent in the amount of the Settlement Amount for such Settling Lender. All funds advanced by any Lender as a Settling Lender pursuant to this §2.9 shall for all purposes be treated as a Loan made by such Settling Lender to BGI and/or Barnes Switzerland, as the case may be, and all funds received by any Lender pursuant to this §2.9 shall for all purposes be treated as repayment of amounts owed with respect to Loans made by such Lender. In the event that any bankruptcy, reorganization, liquidation, receivership or similar cases or proceedings in which any of the Borrowers is a debtor prevent a Settling Lender from making any Loan to effect a Settlement as contemplated hereby, such Settling Lender will make such dispositions and arrangements with the other Lenders with respect to such Loans, either by way of purchase of participations, distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender’s share of the outstanding Loans being equal, as nearly as may be, to such Lender’s Commitment Percentage of the outstanding amount of the Loans.
 
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2.9.2. Failure to Make Funds Available . The Administrative Agent may, unless notified to the contrary by any Settling Lender prior to a Settlement Date, assume that such Settling Lender has made or will make available to the Administrative Agent on such Settlement Date the amount of such Settling Lender’s Settlement Amount, and the Administrative Agent may (but it shall not be required to), in reliance upon such assumption, make available to BGI and/or Barnes Switzerland, as the case may be, a corresponding amount. If any Settling Lender makes available to the Administrative Agent such amount on a date after such Settlement Date, such Settling Lender shall pay to the Administrative Agent on demand an amount equal to the product of (a) the average computed for the period referred to in clause (c) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (b) the amount of such Settlement Amount, times (c) a fraction, the numerator of which is the number of days that elapse from and including such Settlement Date to the date on which the amount of such Settlement Amount shall become immediately available to the Administrative Agent, and the denominator of which is 360. A statement of the Administrative Agent submitted to such Settling Lender with respect to any amounts owing under this §2.9.2 shall be prima facie evidence of the amount due and owing to the Administrative Agent by such Settling Lender. If such Settling Lender’s Settlement Amount is not made available to the Administrative Agent by such Settling Lender within three (3) Business Days following such Settlement Date, the Administrative Agent shall be entitled to recover such amount from BGI and/or Barnes Switzerland, as the case may be, on demand, with interest thereon at the rate per annum applicable to the Loans as of such Settlement Date.
 
2.9.3. No Effect on Other Lenders . The failure or refusal of any Settling Lender to make available to the Administrative Agent at the aforesaid time and place on any Settlement Date the amount of such Settling Lender’s Settlement Amount shall not (a) relieve any other Settling Lender from its several obligations hereunder to make available to the Administrative Agent the amount of such other Settling Lender’s Settlement Amount or (b) impose upon any Lender, other than the Settling Lender so failing or refusing, any liability with respect to such failure or refusal or otherwise increase the Commitment of such other Lender.
 
3. REPAYMENT OF THE LOANS.
 
3.1. Maturity . BGI promises to pay and, solely in the case of the Barnes Switzerland Loans, Barnes Switzerland promises to pay, on the Loan Maturity Date, and there shall become absolutely due and payable on the Loan Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon.
 
3.2. Mandatory Repayments of Loans . If at any time the sum of the outstanding amount of the Loans, the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the Total Commitment at such time, then BGI shall immediately pay or (solely in the case of the Barnes Switzerland Loans) shall cause Barnes Switzerland to pay the amount of such excess to the Administrative Agent for the respective accounts of the Lenders for application: first, to any Unpaid Reimbursement Obligations; second, to the Loans; and third, to provide to the Administrative Agent cash collateral for Reimbursement Obligations as contemplated by §4.2(b) and (c). Each payment of any Unpaid Reimbursement Obligations or prepayment of Loans shall be allocated among the Lenders, in proportion, as nearly as practicable, to each Reimbursement Obligation or (as the case may be) the respective unpaid principal amount of each Lender’s Note, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion. For the avoidance of doubt, any payments by Barnes Switzerland shall be applied solely to the Barnes Switzerland Loans or Unpaid
 
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Reimbursement Obligations or Reimbursement Obligations in respect of Letters of Credit issued for the account of Barnes Switzerland.
 
3.3. Optional Repayments of Loans . BGI shall have the right, at its election, to repay the outstanding amount of the Loans, as a whole or in part, and Barnes Switzerland shall have the right, at its election, to repay the outstanding amount of the Barnes Switzerland Loans, as a whole or in part, in each case at any time without penalty or premium, provided that, subject to compliance with §5.9, any full or partial prepayment of the outstanding amount of any LIBOR Rate Loans pursuant to this §3.3 may be made on a day other than the last day of the Interest Period relating thereto. The applicable Borrower shall give the Administrative Agent, no later than 10:00 a.m., Boston time, at least one (1) Business Day prior written notice of any proposed prepayment pursuant to this §3.3 of Base Rate Loans, and three (3) LIBOR Business Days notice of any proposed prepayment pursuant to this §3.3 of LIBOR Rate Loans, in each case specifying the proposed date of prepayment of Loans and the principal amount to be prepaid. Each such partial prepayment of the Loans shall be in an integral multiple of $1,000,000, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of prepayment and shall be applied, in the absence of instruction by the applicable Borrower, first to the principal of Base Rate Loans and then to the principal of LIBOR Rate Loans. Each partial prepayment shall be allocated among the Lenders, in proportion, as nearly as practicable, to the respective unpaid principal amount of each Lender’s Note, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion.
 
4. LETTERS OF CREDIT.
 
4.1. Letter of Credit Commitments .
 
(a) Subject to the terms and conditions hereof and the execution and delivery by the applicable Borrower of a letter of credit application on the Administrative Agent’s customary form (a “ Letter of Credit Application ”), the Issuing Bank on behalf of the Lenders and in reliance upon the agreement of the Lenders set forth in §4.1.4 and upon the representations and warranties of the applicable Borrower contained herein, agrees, in its individual capacity, to issue, extend and renew for the account of the applicable Borrower one or more standby or documentary letters of credit (individually, a “ Letter of Credit ”), in such form as may be requested from time to time by the applicable Borrower and agreed to by the Issuing Bank and the Administrative Agent; provided , however , that, after giving effect to such request, (a) the sum of the aggregate Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not exceed $50,000,000 at any one time and (b) (i) in the case of BGI, the sum of (I) the Maximum Drawing Amount on all Letters of Credit, (II) all Unpaid Reimbursement Obligations, and (III) the amount of all Loans outstanding shall not exceed the Total Commitment at such time, and (ii) in the case of Barnes Switzerland, the sum of (I) the Maximum Drawing Amount on all Letters of Credit, (II) all Unpaid Reimbursement Obligations, (III) the amount of all Loans outstanding shall not exceed the Total Commitment at such time, and (IV) the amount of all Barnes Switzerland Loans outstanding shall not exceed the Barnes Switzerland Sublimit at such time.
 
(b) The Issuing Bank shall not issue any Letter of Credit, if:
 
(i) Subject to §4.1(c), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last extension; or
 
(ii) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date.
 
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(c) The Issuing Bank shall not be under any obligation to issue any Letter of Credit if:
 
(i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any Law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the date hereof and which the Issuing Bank in good faith deems material to it;
 
(ii) the issuance of such Letter of Credit would violate (A) any Laws or (B) one or more policies of the Issuing Bank, provided that such policies have been disclosed to the Borrowers prior to the request for the issuance of such Letter of Credit;
 
(iii) except as otherwise agreed by the Administrative Agent and the Issuing Bank, such Letter of Credit is in an initial face amount less than $100,000;
 
(iv) such Letter of Credit is to be denominated in a currency other than Dollars;
 
(v) such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder; or
 
(vi) a default of any Lender’s obligations to fund under §4.3 exists or any Lender which has a Revolving Credit Commitment has failed to fund any portion of any participations in Letter of Credit Obligations required to be funded by it hereunder, unless the Issuing Bank has entered into satisfactory arrangements with the applicable Borrower or such Lender to eliminate the Issuing Bank’s risk with respect to such Lender.
 
4.2. Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit .
 
(a) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the applicable Borrower delivered to the Issuing Bank (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the applicable Borrower. Such Letter of Credit Application must be received by the Issuing Bank and the Administrative Agent not later than 11:00 a.m. at least two Business Days (or such later date and time as the Administrative Agent and the Issuing Bank may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Issuing Bank: (i) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (ii) the amount thereof; (iii) the expiry date thereof; (iv) the name and address of the beneficiary thereof; (v) the documents to be presented by such beneficiary in case of any drawing thereunder; (vi) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (vii) such other matters as the Issuing Bank may require. In the
 
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case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Issuing Bank (w) the Letter of Credit to be amended; (x) the proposed date of amendment thereof (which shall be a Business Day); (y) the nature of the proposed amendment; and (z) such other matters as the Issuing Bank may require. Additionally, the applicable Borrower shall furnish to the Issuing Bank and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the Issuing Bank or the Administrative Agent may require.
 
(b) Promptly after receipt of any Letter of Credit Application at the address set forth in §16.6 for receiving Letter of Credit Applications and related correspondence, the Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the applicable Borrower and, if not, the Issuing Bank will provide the Administrative Agent with a copy thereof. Unless the Issuing Bank has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions in §11 or §12 shall not then be satisfied, then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of the applicable Borrower (or the applicable Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with the Issuing Bank’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Revolving Credit Commitment Percentage times the amount of such Letter of Credit.
 
(c) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the Issuing Bank will also deliver to the applicable Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.
 
(d) If any Borrower so requests in any applicable Letter of Credit Application, the Issuing Bank may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “ Auto-Extension Letter of Credit ”); provided that any such Auto-Extension Letter of Credit must permit the Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “ Non-Extension Notice Date ”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the Issuing Bank, no Borrower shall be required to make a specific request to the Issuing Bank for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the Issuing Bank to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the Issuing Bank shall not permit any such extension if (A) the Issuing Bank has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (b) or (c) of §4.1 or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Majority Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the applicable Borrower that one or more of the
 
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applicable conditions specified in §11 or §12 is not then satisfied, and in each such case directing the Issuing Bank not to permit such extension.
 
(e) The Administrative Agent will notify the Lenders, on a quarterly basis, of all Letters of Credit outstanding.
 
4.3. Drawings and Reimbursements; Funding of Participations .
 
(a) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the Issuing Bank shall notify the applicable Borrower and the Administrative Agent thereof. Not later than 11:00 a.m. on the date of any payment by the Issuing Bank under a Letter of Credit (each such date, an “ Honor Date ”), the applicable Borrower shall reimburse the Issuing Bank through the Administrative Agent in an amount equal to the amount of such drawing. If the applicable Borrower fails to so reimburse the Issuing Bank by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the Unpaid Reimbursement Obligation, and the amount of such Lender’s Commitment Percentage thereof. In such event, the applicable Borrower shall be deemed to have requested a Revolving Credit Loan which is a Base Rate Loan to be disbursed on the Honor Date in an amount equal to the Unpaid Reimbursement Obligation, without regard to the minimum and multiples specified in §2.6 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Total Commitment and the conditions set forth in §11 and §12 (other than the delivery of a Loan Request). Any notice given by the Issuing Bank or the Administrative Agent pursuant to this §4.3(a) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
 
(b) Each Lender shall upon any notice pursuant to §4.3(a) make funds available to the Administrative Agent for the account of the Issuing Bank at the Administrative Agent’s Office in an amount equal to its Commitment Percentage of the Unpaid Reimbursement Obligation not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of 4.3(c), each Lender that so makes funds available shall be deemed to have made a Revolving Credit Loan which is a Base Rate Loan to the applicable Borrower in such amount. The Administrative Agent shall remit the funds so received to the Issuing Bank.
 
(c) With respect to any Unpaid Reimbursement Obligation that is not fully refinanced by a Revolving Credit Loan which is a Base Rate Loan because the conditions set forth in §11 and §12 cannot be satisfied or for any other reason, the applicable Borrower shall be deemed to have incurred from the Issuing Bank a Letter of Credit Borrowing in the amount of the Unpaid Reimbursement Obligation that is not so refinanced, which Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate set forth for Base Rate Loans in §6.11. In such event, each Lender’s payment to the Administrative Agent for the account of the Issuing Bank pursuant to §4.3(b) shall be deemed payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a Letter of Credit Advance from such Lender in satisfaction of its participation obligation under this §4.3.
 
(d) Until each Lender funds its Revolving Credit Loan which is a Base Rate Loan or Letter of Credit Advance pursuant to this §4.3 to reimburse the Issuing Bank for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Commitment Percentage of such amount shall be solely for the account of the Issuing Bank.
 
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(e) Each Lender’s obligation to make a Revolving Credit Loan which is a Base Rate Loan or Letter of Credit Advances to reimburse the Issuing Bank for amounts drawn under Letters of Credit, as contemplated by this §4.3, shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Issuing Bank, the applicable Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default, or (iii) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided , however , that each Lender’s obligation to make a Revolving Credit Loan which is a Base Rate Loan pursuant to this §4.3 is subject to the conditions set forth in §11 and §12 (other than delivery by the applicable Borrower of a Loan Request). No such making of a Letter of Credit Advance shall relieve or otherwise impair the obligation of the applicable Borrower to reimburse the Issuing Bank for the amount of any payment made by the Issuing Bank under any Letter of Credit, together with interest as provided herein.
 
(f) If any Lender fails to make available to the Administrative Agent for the account of the Issuing Bank any amount required to be paid by such Lender pursuant to the foregoing provisions of this §4.3 by the time specified in Section §4.3(b), the Issuing Bank shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Issuing Bank at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Issuing Bank in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Issuing Bank in connection with the foregoing. A certificate of the Issuing Bank submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.
 
4.4. Repayment of Participations .
 
(a) At any time after the Issuing Bank has made a payment under any Letter of Credit and has received from any Lender such Lender’s Letter of Credit Advance in respect of such payment in accordance with §4.3, if the Administrative Agent receives for the account of the Issuing Bank any payment in respect of the related Unpaid Reimbursement Obligation or interest thereon (whether directly from the applicable Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Commitment Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s Letter of Credit Advance was outstanding) in the same funds as those received by the Administrative Agent.
 
(b) If any payment received by the Administrative Agent for the account of the Issuing Bank pursuant to §4.3(a) is required to be returned in connection with any proceeding under any Debtor Relief Law (including pursuant to any settlement entered into by the Issuing Bank in its discretion), each Lender shall pay to the Administrative Agent for the account of the Issuing Bank its Commitment Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Credit Agreement.
 
4.5. Obligations Absolute .
 
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The obligation of the applicable Borrower to reimburse the Issuing Bank for each drawing under each Letter of Credit and to repay each Letter of Credit Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Credit Agreement under all circumstances, including the following:
 
(a) any lack of validity or enforceability of such Letter of Credit, this Credit Agreement, or any other Loan Document;
 
(b) the existence of any claim, counterclaim, setoff, defense or other right that any Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the Issuing Bank or any other Person, whether in connection with this Credit Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;
 
(c) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
 
(d) any payment by the Issuing Bank under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the Issuing Bank under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or
 
(e) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Borrower or any Subsidiary.
 
The applicable Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the applicable Borrower’s instructions or other irregularity, the applicable Borrower will immediately notify the Issuing Bank. The applicable Borrower shall be conclusively deemed to have waived any such claim against the Issuing Bank and its correspondents unless such notice is given as aforesaid.
 
4.6. Role of Issuing Bank .
 
Each Lender and each of the Borrowers agree that, in paying any drawing under a Letter of Credit, the Issuing Bank shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the Issuing Bank, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the Issuing Bank shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of Lenders or the Majority Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document. Each Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit;
 
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provided , however , that this assumption is not intended to, and shall not, preclude such Borrower from pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the Issuing Bank, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the Issuing Bank, shall be liable or responsible for any of the matters described in clauses (a) through (e) of §4.5; provided , however , that anything in such clauses to the contrary notwithstanding, the applicable Borrower may have a claim against the Issuing Bank, and the Issuing Bank may be liable to the applicable Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by such Borrower which such Borrower proves were caused by the Issuing Bank’s willful misconduct or gross negligence or the Issuing Bank’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
 
4.7. Cash Collateral .
 
Upon the request of the Administrative Agent, (i) if the Issuing Bank has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in a Letter of Credit Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any Letter of Credit Obligation for any reason remains outstanding, the applicable Borrower shall, in each case, immediately cash collateralize the then outstanding amount of all Letter of Credit Obligations.
 
4.8. Applicability of ISP .
 
Unless otherwise expressly agreed by the Issuing Bank and the applicable Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), the rules of the ISP shall apply to each standby Letter of Credit.
 
4.9. Letter of Credit Amounts .
 
Unless otherwise specified herein the amount of a Letter of Credit at any time shall be deemed to be the Maximum Drawing Amount of such Letter of Credit in effect at such time; provided , however , that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the Maximum Drawing Amount thereof, the Maximum Drawing Amount of such Letter of Credit shall be deemed to be the maximum drawing amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum drawing amount is in effect at such time.
 
4.10. Letter of Credit Fee . The applicable Borrower shall pay a fee (the “ Letter of Credit Fee ”) equal to the Applicable Letter of Credit Margin on the Maximum Drawing Amount of the Letters of Credit (other than Performance Letters of Credit) to the Administrative Agent for the account of the Lenders, to be shared pro rata by the Lenders in accordance with their respective Commitment Percentages. The applicable Borrower shall pay a fee equal to one-half of the Applicable Letter of Credit Margin on the Maximum Drawing Amount of the Performance Letters of Credit (the “ Performance Letter of Credit Fee ”, collectively with the Letter of Credit Fee, the “ Letter of Credit Fees ”) to the Administrative Agent for the account of the Lenders, to be shared pro rata by the Lenders in accordance with their respective Commitment Percentages. The Letter of Credit Fees shall be payable quarterly in
 
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arrears on the first day of each calendar quarter for the quarter just ended, with the first such payment commencing December 31, 2005, and on the Loan Maturity Date. In addition, an issuing fee (the “ Issuance Fee ”) equal to one eighth percent (1/8%) of the Maximum Drawing Amount with respect to each Letter of Credit shall be payable by the applicable Borrower to the Issuing Bank for its account and the applicable Borrower shall pay to the Issuing Bank any amendment, negotiation or document examination and other administrative fees charged by the Issuing Bank in connection with Letters of Credit as in effect from time to time.
 
5. CERTAIN GENERAL PROVISIONS.
 
5.1. Administrative Agent’s Fee . BGI shall pay to the Administrative Agent an Administrative Agent’s fee (the “ Administrative Agent’s Fee ”) as set forth in the Fee Letter.
 
5.2. Funds for Payments .
 
5.2.1. Payments to Administrative Agent . All payments of principal, interest, Reimbursement Obligations, Fees and any other amounts due hereunder or under any of the other Loan Documents shall be made on the due date thereof to the Administrative Agent in Dollars, for the respective accounts of the Lenders and the Administrative Agent, at the Administrative Agent’s Office or at such other place that the Administrative Agent may from time to time designate, in each case at or about 11:00 a.m. (Boston, Massachusetts, time or other local time at the place of payment) and in immediately available funds.
 
5.2.2. No Offset, etc. All payments by the Borrowers hereunder and under any of the other Loan Documents shall be made without recoupment, setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the applicable Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon a Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the applicable Borrower will pay to the Administrative Agent, for the account of the Lenders or (as the case may be) the Administrative Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Lenders or the Administrative Agent to receive the same net amount which the Lenders or the Administrative Agent would have received on such due date had no such obligation been imposed upon such Borrower. The Borrowers will deliver promptly to the Administrative Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by either Borrower hereunder or under such other Loan Document.
 
5.2.3. Non-U.S. Lenders. Each Lender and the Administrative Agent that is not a U.S. Person as defined in Section 7701(a)(30) of the Code for federal income tax purposes (a “ Non-U.S. Lender ”) hereby agrees that, if and to the extent it is legally able to do so, it shall, prior to the date of the first payment by the Borrowers hereunder to be made to such Lender or the Administrative Agent or for such Lender’s or the Administrative Agent’s account, deliver to the Borrowers and the Administrative Agent, as applicable, such certificates, documents or other evidence, as and when required by the Code or Treasury Regulations issued pursuant thereto, including (a) in the case of a Non-U.S. Lender that is a “bank” for purposes of Section 881(c)(3)(A) of the Code, two (2) duly completed copies of Internal Revenue Service Form W-8BEN or Form W-8ECI and any other certificate or statement of exemption required by Treasury Regulations, or any subsequent versions thereof or successors thereto, properly completed and
 
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duly executed by such Lender or the Administrative Agent establishing that with respect to payments of principal, interest or fees hereunder it is (i) not subject to United States federal withholding tax under the Code because such payment is effectively connected with the conduct by such Lender or Administrative Agent of a trade or business in the United States or (ii) totally exempt or partially exempt from United States federal withholding tax under a provision of an applicable tax treaty and (b) in the case of a Non-U.S. Lender that is not a “bank” for purposes of Section 881(c)(3)(A) of the Code, a certificate in form and substance reasonably satisfactory to the Administrative Agent and BGI and to the effect that (i) such Non-U.S. Lender is not a “bank” for purposes of Section 881(c)(3)(A) of the Code, is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any governmental authority, any application made to a rating agency or qualification for any exemption from any tax, securities law or other legal requirements, (ii) is not a ten (10) percent shareholder for purposes of Section 881(c)(3)(B) of the Code and (iii) is not a controlled foreign corporation receiving interest from a related person for purposes of Section 881(c)(3)(C) of the Code, together with a properly completed Internal Revenue Service Form W-8 or W-9, as applicable (or successor forms). Each Lender or the Administrative Agent agrees that it shall, promptly upon a change of its lending office or the selection of any additional lending office, to the extent the forms previously delivered by it pursuant to this section are no longer effective, and promptly upon BGI’s or the Administrative Agent’s reasonable request after the occurrence of any other event (including the passage of time) requiring the delivery of a Form W-8BEN, Form W-8ECI, Form W-8 or W-9 in addition to or in replacement of the forms previously delivered, deliver to BGI and the Administrative Agent, as applicable, if and to the extent it is properly entitled to do so, a properly completed and executed Form W-8BEN, Form W-8ECI, Form W-8 or W-9, as applicable (or any successor forms thereto). The Borrowers shall not be required to pay any additional amounts to any Non-U.S. Lender in respect of United States federal withholding tax pursuant to §5.2.2 above to the extent that the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender to comply with the provisions of this §5.2.3; provided , however , that the foregoing shall not relieve the Borrowers of their obligation to pay additional amounts pursuant to §5.2.2 in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in interpretation, administration or application thereof, a Non-US Lender that was previously entitled to receive all payments under this Credit Agreement and the Notes without deduction or withholding of any United States federal income taxes is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding.
 
5.3. Computations . Except as otherwise expressly provided herein, all computations of interest, and, the Facility Fee, the Letter of Credit Fees or other fees shall be based on a 360-day year and paid for the actual number of days elapsed, except that computations based on the Base Rate (except to the extent derived from the Federal Funds Rate) shall be based on a 365 or 366, as applicable, day year and paid for the actual number of days elapsed. Whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension; provided that for any Interest Period for any LIBOR Loan if such next succeeding Business Day falls in the next succeeding calendar month or after the Loan Maturity Date, it shall be deemed to end on the next preceding Business Day.
 
5.4. Inability to Determine LIBOR Rate . In the event, prior to the commencement of any Interest Period relating to any LIBOR Rate Loan, the Administrative Agent shall determine or be notified by the Required Lenders that (a) adequate and reasonable methods do not exist for ascertaining the LIBOR Rate that would otherwise determine the rate of interest to be applicable to any LIBOR Rate Loan
 
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during any Interest Period or (b) the LIBOR Rate determined or to be determined for such Interest Period will not, in the Administrative Agent’s reasonable opinion, adequately and fairly reflect the cost to the Lenders of making or maintaining their LIBOR Rate Loans during such period, the Administrative Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrowers and the Lenders) to the Borrowers and the Lenders. In such event (i) any Loan Request or Conversion Request with respect to LIBOR Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans, (ii) each LIBOR Rate Loan will automatically, on the last day of the then current Interest Period relating thereto, become a Base Rate Loan, and (iii) the obligations of the Lenders to make LIBOR Rate Loans shall be suspended until the Administrative Agent or the Required Lenders determine that the circumstances giving rise to such suspension no longer exist, whereupon the Administrative Agent or, as the case may be, the Administrative Agent upon the instruction of the Required Lenders, shall so notify the Borrowers and the Lenders.
 
5.5. Illegality . Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful for any Lender to make or maintain LIBOR Rate Loans, such Lender shall forthwith give notice of such circumstances to the Borrowers and the other Lenders and thereupon (a) the commitment of such Lender to make LIBOR Rate Loans or convert Base Rate Loans to LIBOR Rate Loans shall forthwith be suspended and (b) such Lender’s Loans then outstanding as LIBOR Rate Loans, if any, shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such LIBOR Rate Loans or within such earlier period as may be required by law. The Borrowers hereby agree promptly to pay the Administrative Agent for the account of such Lender, upon demand by such Lender, any additional amounts necessary to compensate such Lender for any costs incurred by such Lender in making any conversion in accordance with this §5.5, including any interest or fees payable by such Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans hereunder.
 
5.6. Additional Costs, etc . If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or the Administrative Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall:
 
(a) subject any Lender or the Administrative Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, such Lender’s Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Lender or the Administrative Agent), or
 
(b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender or the Administrative Agent under this Credit Agreement or any of the other Loan Documents, or
 
(c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of any Lender, or
 
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(d) impose on any Lender or the Administrative Agent any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, the Loans, such Lender’s Commitment, or any class of loans, letters of credit or commitments of which any of the Loans or such Lender’s Commitment forms a part, and the result of any of the foregoing is
 
(i) to increase the cost to any Lender of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Lender’s Commitment or any Letter of Credit, or
 
(ii) to reduce the amount of principal, interest, Reimbursement Obligation or other amount payable to such Lender or the Administrative Agent hereunder on account of such Lender’s Commitment, any Letter of Credit or any of the Loans, or
 
(iii) to require such Lender or the Administrative Agent to make any payment or to forego any interest or Reimbursement Obligation or other sum payable hereunder, the amount of which payment or foregone interest or Reimbursement Obligation or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or the Administrative Agent from either of the Borrowers hereunder,
 
then, and in each such case, BGI will, and, solely in the case of amounts arising from the Barnes Switzerland Loans, Barnes Switzerland will, upon demand made by such Lender or (as the case may be) the Administrative Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender or the Administrative Agent such additional amounts as will be sufficient to compensate such Lender or the Administrative Agent for such additional cost, reduction, payment or foregone interest or Reimbursement Obligation or other sum.
 
5.7. Capital Adequacy . If after the date hereof any Lender or the Administrative Agent determines that (a) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a Governmental Authority with appropriate jurisdiction, or (b) compliance by such Lender or the Administrative Agent or any corporation controlling such Lender or the Administrative Agent with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Lender’s or the Administrative Agent’s commitment with respect to any Loans to a level below that which such Lender or the Administrative Agent could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or the Administrative Agent’s then existing policies with respect to capital adequacy and assuming full utilization of such entity’s capital) by any amount deemed by such Lender or (as the case may be) the Administrative Agent to be material, then such Lender or the Administrative Agent may notify the Borrowers of such fact in writing. To the extent that the amount of such reduction in the return on capital is not reflected in the Base Rate, BGI agrees to pay or, solely in the case of the Barnes Switzerland Loans, Barnes Switzerland agrees to pay, such Lender or (as the case may be) the Administrative Agent for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by such Lender or (as the case may be) the Administrative Agent of a certificate in accordance with §5.8 hereof. Each Lender shall allocate such cost increases among its customers in good faith and on an equitable basis.
 
5.8. Certificate . A certificate setting forth any additional amounts payable pursuant to §§5.6 or 5.7 showing the calculation in reasonable detail, submitted by any Lender or the Administrative Agent
 
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to the Borrowers, shall be conclusive, absent manifest error, that such amounts are due and owing. The Lender or the Administrative Agent shall notify the applicable Borrower within 180 days after it becomes aware of the imposition of such additional amount or amounts; provided that if such Lender or the Administrative Agent fails to so notify such Borrower within such 180 day period, such Lender or the Administrative Agent shall not be entitled to claim any additional amount or amounts pursuant to this subsection for any period ending on a date which is prior to 180 days before such notification.
 
5.9. Indemnity for LIBOR Rate Loans . Each Borrower agrees to indemnify each Lender and to hold each Lender harmless from and against any loss, cost or expense that such Lender may sustain or incur as a consequence of (a) default by such Borrower in payment of the principal amount of or any interest on any LIBOR Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its LIBOR Rate Loans, (b) default by such Borrower in making a borrowing or conversion after such Borrower has given (or is deemed to have given) a Loan Request or a Conversion Request relating thereto in accordance with §2.6 or §2.7 or (c) the making of any payment of a LIBOR Rate Loan or the making of any conversion of any such Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto (but excluding loss of margin), including interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain any such Loans. If any Lender becomes entitled to claim any payment pursuant to this §5.9, it shall notify the applicable Borrower within 60 days of the event by reason of which it has become so entitled and shall provide such Borrower with a certificate as to any additional amounts payable pursuant to this section, showing the calculation thereof in reasonable detail. Such Borrower shall promptly pay all such amounts upon receipt of Lender’s certificate.
 
5.10. Interest After Default .
 
5.10.1. Overdue Amounts . Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest compounded monthly and payable on demand at a rate per annum equal to two percent (2%) above the rate of interest then applicable thereto (or, if no rate of interest is then applicable thereto, the Base Rate) until such amount shall be paid in full (after as well as before judgment).
 
5.10.2. Amounts Not Overdue . During the continuance of a Default or an Event of Default the principal of the Loans not overdue shall, until such Default or Event of Default has been cured or remedied or such Default or Event of Default has been waived by the Required Lenders pursuant to §16.12, bear interest compounded monthly and payable on demand at a rate per annum equal to two percent (2%) above the rate of interest then applicable thereto (or, if no rate of interest is then applicable thereto, the Base Rate).
 
5.11. Replacement of Lenders . If any Lender (an “ Affected Lender ”) (a) makes demand upon the Borrowers for (or if the Borrowers are otherwise required to pay) amounts pursuant to §§5.6 or 5.7, (b) is unable to make or maintain LIBOR Rate Loans as a result of a condition described in §5.5 or (c) defaults in its obligation to make Loans in accordance with the terms of this Credit Agreement or purchase any Letter of Credit Participation, the Borrowers may, so long as no Default or Event of Default has occurred and is then continuing, within ninety (90) days of receipt of such demand, notice (or the occurrence of such other event causing the Borrowers to be required to pay such compensation or causing §5.5 to be applicable), or default, as the case may be, by notice (a “ Replacement Notice ”) in writing to the Administrative Agent and such Affected Lender (i) request the Affected Lender to cooperate with the Borrowers in obtaining a replacement Lender satisfactory to the Administrative Agent and the Borrowers (the “ Replacement Lender ”); (ii) request the non-Affected Lenders to acquire and assume all of the
 
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Affected Lender’s Loans and Commitment as provided herein, but none of such Lenders shall be under an obligation to do so; or (iii) designate a Replacement Lender approved by the Administrative Agent, such approval not to be unreasonably withheld or delayed. If any satisfactory Replacement Lender shall be obtained, and/or if any one or more of the non-Affected Lenders shall agree to acquire and assume all of the Affected Lender’s Loans and Commitment, then such Affected Lender shall assign, in accordance with §15, all of its Commitment, Loans, Letter of Credit Participations, Notes and other rights and obligations under this Credit Agreement and all other Loan Documents to such Replacement Lender or non-Affected Lenders, as the case may be, in exchange for payment of the principal amount so assigned and all interest and fees accrued on the amount so assigned, plus all other Obligations then due and payable to the Affected Lender; provided , however , that (A) such assignment shall be without recourse, representation or warranty and shall be on terms and conditions reasonably satisfactory to such Affected Lender and such Replacement Lender and/or non-Affected Lenders, as the case may be, and (B) prior to any such assignment, the applicable Borrower shall have paid to such Affected Lender all amounts properly demanded and unreimbursed under §§5.6 and 5.7. Upon the effective date of such assignment, the Borrowers shall issue replacement Notes to such Replacement Lender and/or non-Affected Lenders, as the case may be, and such institution shall become a “Lender” for all purposes under this Credit Agreement and the other Loan Documents.
 
6. GUARANTORS.
 
6.1. Guaranty by Subsidiaries . (a) BGI shall cause each of the Significant Subsidiaries (excluding any foreign Subsidiaries) to execute and deliver to the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, (i) a Guaranty in the form of Exhibit E attached hereto, and (ii) any other instruments and documents as the Administrative Agent may reasonably require, together with legal opinions in form and substance reasonably satisfactory to the Administrative Agent to be delivered to the Administrative Agent and the Lenders opining as to authorization, validity and enforceability of such Guaranties.
 
(b) To the extent any of BGI’s Subsidiaries agrees to provide a guaranty to any of the lenders under the Existing Senior Debt or other Indebtedness permitted hereunder, BGI, if requested by the Administrative Agent with 60 days prior written notice, but in no event later than the grant of such other guaranty, will cause each Subsidiary (excluding any foreign Subsidiaries) that has agreed to guaranty such other Indebtedness to become a Guarantor in accordance with (a) above.
 
6.2. Guaranty by BGI .
 
On or prior to the Closing Date, BGI shall execute and deliver to the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, (i) the BGI Guaranty in the form of Exhibit F attached hereto, and (ii) any other instruments and documents as the Administrative Agent may reasonably require, together with a legal opinion in form and substance reasonably satisfactory to the Administrative Agent to be delivered to the Administrative Agent and the Lenders opining as to authorization, validity and enforceability of the BGI Guaranty.
 
7. REPRESENTATIONS AND WARRANTIES.
 
Each of the Borrowers represents and warrants to the Lenders and the Administrative Agent as follows:
 
7.1. Corporate Authority .
 
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7.1.1. Incorporation; Good Standing . Each of the Borrowers and each of their Subsidiaries (a) is a corporation (or similar business entity) duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, (b) has all requisite corporate (or the equivalent company) power to own its property and conduct its business as now conducted and as presently contemplated, and (c) is in good standing as a foreign corporation (or similar business entity) and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a Material Adverse Effect.
 
7.1.2. Authorization . The execution, delivery and performance of this Credit Agreement and the other Loan Documents to which any of the Borrowers or any of their Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby (a) are within the corporate (or the equivalent company) authority of such Person, (b) have been or will be (prior to becoming a party thereto) duly authorized by all necessary corporate (or the equivalent company) proceedings, (c) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which any of the Borrowers or any of their Subsidiaries is subject or any judgment, order, writ, injunction, license or permit applicable to any of the Borrowers or any of their Subsidiaries and (d) do not conflict with any provision of the Governing Documents of, or any agreement or other instrument binding upon, any of the Borrowers or any of their Subsidiaries.
 
7.1.3. Enforceability . The execution and delivery of this Credit Agreement and the other Loan Documents to which any of the Borrowers or any of their Subsidiaries is or is to become a party, upon execution and delivery hereof or thereof, will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.
 
7.2. Governmental Approvals . The execution, delivery and performance by any of the Borrowers and any of their Subsidiaries of this Credit Agreement and the other Loan Documents to which any of the Borrowers or any of their Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained.
 
7.3. Title to Properties . Except where the failure to do so would not have a Material Adverse Effect and would not violate this Credit Agreement, the Borrowers and their Subsidiaries own all of the assets reflected in the consolidated balance sheet of BGI and its Subsidiaries as at the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date), free from Liens other than Permitted Liens.
 
7.4. Financial Statements .
 
7.4.1. Fiscal Year . Except as set forth on Schedule 7.4.1, each of the Borrowers and each of their Subsidiaries has a fiscal year which is the twelve months ending on December 31 of each calendar year.
 
7.4.2. Financial Statements . There has been furnished to the Administrative Agent and each Lender a consolidated balance sheet of BGI and its Subsidiaries as at the Balance Sheet
 
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Date, and a consolidated statement of income of BGI and its Subsidiaries for the fiscal year then ended, certified by the Accountants. Such balance sheet and statement of income have been prepared in accordance with GAAP and fairly present the financial condition of BGI and its Subsidiaries as at the close of business on the date thereof and the results of operations for the fiscal year then ended. There are no contingent liabilities of any of the Borrowers or any of their Subsidiaries as of such date involving material amounts required to be disclosed under GAAP, known to the officers of BGI, which were not disclosed in such balance sheet and the notes related thereto.
 
7.5. No Material Adverse Changes, etc . Since the Balance Sheet Date there has been no change in the business, properties, assets or financial condition of the Borrowers and their Subsidiaries taken as a whole which is likely to have a Material Adverse Effect. Other than as set forth on Schedule 7.5 hereto, since the Balance Sheet Date the Borrowers have not made any Restricted Payment that would violate this Credit Agreement.
 
7.6. Franchises, Patents, Copyrights, etc . BGI and each of its Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others.
 
7.7. Litigation . Except as set forth in Schedule   7.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending or, to BGI’s knowledge, threatened against BGI or any of its Subsidiaries before any Governmental Authority, that, if adversely determined, so far as BGI can now reasonably foresee, might, individually or in the aggregate, have a Material Adverse Effect.
 
7.8. Compliance with Other Instruments, Laws, etc . Neither BGI nor any of its Subsidiaries is in violation of any provision of its Governing Documents, or any agreement or instrument to which it is a party or by which it or any of its properties may be bound or any decree, order, judgment, law, statute, license, rule or regulation, in any of the foregoing cases in a manner that could be reasonably foreseen to have a Material Adverse Effect.
 
7.9. Tax Status . Each of BGI and its Subsidiaries (a) has made or filed all federal, state and material foreign income and other material tax returns, reports and declarations required by any jurisdiction to which it is subject, (b) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and to BGI’s knowledge, no basis exists for any such claim.
 
7.10. No Event of Default . No Default or Event of Default has occurred and is continuing.
 
7.11. Holding Company and Investment Company Acts . None of the Borrowers nor any of their Subsidiaries is a “ holding company ”, or a “ subsidiary company ” of a “ holding company ”, or an “ affiliate ” of a “ holding company ”, as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an “ investment company ”, or an “ affiliated company ” or a “ principal underwriter ” of an “ investment company ”, as such terms are defined in the Investment Company Act of 1940.
 
7.12. Certain Transactions . Except for transactions permitted under §9.11 and arm’s length transactions pursuant to which BGI or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than BGI or such Subsidiary could obtain from third parties, none
 
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of the officers, directors, or employees of BGI or any of its Subsidiaries or Affiliates is presently a party to any transaction with BGI or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Borrowers, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
 
7.13. Employee Benefit Plans .
 
7.13.1. Relationship of Benefits to Pension Plan Assets . The aggregate present value of all benefit liabilities within the meaning of §4001 of ERISA under each Guaranteed Pension Plan did not, as of the last annual valuation date for such Plan, exceed the fair market value of the assets of such Plan allocable to such benefits by more than $500,000, all as determined in accordance with Statement of Financial Accounting Standards No. 87.
 
7.13.2. Prohibited Transactions . None of the Borrowers nor any ERISA Affiliate nor any Employee Benefit Plan nor any trust created thereunder, nor, to the Borrowers’ knowledge, any trustee or administrator thereof, has engaged in a “prohibited transaction,” as such term is defined in Section 4975 of the Code, or described in Section 406 of ERISA, which could subject the Borrowers, or any ERISA Affiliate, any of the Employee Benefit Plans, any such trust, or any trustee or administrator thereof, or any party dealing with the Employee Benefit Plans or any such trust to the tax or penalty on prohibited transactions imposed by said Section 4975 or by Section 502(i) of ERISA.
 
7.13.3. Guaranteed Pension Plans . Each contribution to a Guaranteed Pension Plan required to be made to avoid the incurrence of an accumulated funding deficiency and the notice or lien provisions of §302(f) of ERISA, has been timely made. No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan, and none of the Borrowers nor any ERISA Affiliate is obligated to or has posted security in connection with an amendment to a Guaranteed Pension Plan pursuant to §307 of ERISA or §401(a)(29) of the Code. No liability to the PBGC (other than required insurance premiums, all of which have been paid) has been incurred by any Borrower or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event (other than an ERISA Reportable Event as to which the requirement of 30 days notice has been waived), or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC.
 
7.13.4. Multiemployer Plans . None of the Borrowers nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under §4201 of ERISA or as a result of a sale of assets described in §4204 of ERISA. None of the Borrowers nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of §4241 or §4245 of ERISA or is at risk of entering reorganization or becoming insolvent, or that any Multiemployer Plan intends to terminate or has been terminated under §4041A of ERISA.
 
7.14. Use of Proceeds .
 
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7.14.1. General . The proceeds of the Loans shall be used to refinance the existing senior credit facilities, and for working capital and general corporate purposes including the acquisitions permitted under §9.5.
 
7.14.2. Regulations U and X . No portion of any Loan will be used, and no portion of any Letter of Credit will be obtained, for the purpose of purchasing or carrying any “ margin security ” or “ margin stock ” as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
 
7.15. Environmental Compliance . Except as could not reasonably be expected to have a Material Adverse Effect:
 
(a) none of the Borrowers, their Subsidiaries, nor to any Borrower’s nor to any of their Subsidiaries’ knowledge, any operator of the Real Estate or any operations thereon is in violation, nor, to the knowledge of any of the Borrowers or any of their Subsidiaries, is there any alleged violation, of any Environmental Laws which violation could reasonably be foreseen to have a Material Adverse Effect;
 
(b) none of the Borrowers nor any of their Subsidiaries has received notice from any third party including, without limitation, any Governmental Authority, (i) that any one of them has been identified by the United States Environmental Protection Agency (“ EPA ”) as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C. §6903(5), any hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws (“ Hazardous Substances ”) which any one of them has generated, transported or disposed of has been found at any site at which a Governmental Authority has conducted or has ordered that any of the Borrowers or any of their Subsidiaries conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party’s incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances;
 
(c) except as set forth on Schedule   7.15 attached hereto: (i) no portion of the Real Estate currently owned, leased or operated by any of the Borrowers or any of their Subsidiaries, or to the knowledge of any of the Borrowers or any of their Subsidiaries, formerly owned, leased or operated has been used for the handling, processing, storage or disposal of Hazardous Substances except in material compliance with applicable Environmental Laws; and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Estate currently owned, leased or operated by any of the Borrowers or any of their Subsidiaries, or to the knowledge of any of the Borrowers or any of their Subsidiaries, formerly owned, leased or operated; (ii) in the course of any activities conducted by any of the Borrowers or any of their Subsidiaries or, to the knowledge of any of the Borrowers or any of their Subsidiaries, by operators of the Real Property currently owned, leased or operated by any of the Borrowers or any of their Subsidiaries, no Hazardous Substances have been generated or are being used on the Real Estate except in material compliance with applicable Environmental Laws; (iii) there have been no releases (i.e. any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping) or threatened releases of Hazardous Substances on, upon, into or from the Real Property currently owned, leased or to the knowledge of any of the Borrowers or any of their Subsidiaries, operated
 
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by any of the Borrowers or any of their Subsidiaries, or, to the knowledge of any of the Borrowers or any of their Subsidiaries, formerly owned, leased or operated by any of the Borrowers or any of their Subsidiaries; (iv) to the knowledge of any of the Borrowers or any of their Subsidiaries there have been no releases on, upon, from or into any real property in the vicinity of any of the Real Estate which, through soil or groundwater contamination, may have come to be located on the Real Estate; and (v) in addition, any Hazardous Substances that have been generated on any of the Real Estate have been transported offsite only by carriers having an identification number issued by the EPA (or the equivalent thereof in any foreign jurisdiction), treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the knowledge of any of the Borrowers or any of their Subsidiaries, operating in compliance with such permits and applicable Environmental Laws; and
 
(d) none of the Borrowers nor any of their Subsidiaries, nor any of the Real Estate is subject to any applicable Environmental Law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any Governmental Authority or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or to the effectiveness of any other transactions contemplated hereby.
 
7.16. Subsidiaries, etc . The Subsidiaries of BGI (direct and indirect) are listed on Schedule 7.16 . Except as set forth on Schedule   7.16 hereto, neither BGI nor any Subsidiary of BGI is engaged in any joint venture or partnership with any other Person. The jurisdiction of incorporation/formation and principal place of business of each Subsidiary of BGI is listed on Schedule 7.16 hereto.
 
7.17. Disclosure . None of this Credit Agreement or any of the other Loan Documents contains any untrue statement of a material fact or omits to state a material fact (known to any of the Borrowers or any of their Subsidiaries in the case of any document or information not furnished by the Borrowers or any of their Subsidiaries) necessary in order to make the statements herein or therein not misleading in light of the circumstances under which they were made.
 
7.18. Foreign Asset Control Regulations, Etc . Neither any of the Borrowers nor any of their Subsidiaries or other Affiliates (a) is or will become a “blocked person” as described in the Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “ Executive Order ”), the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “ Trading With the Enemy Act ”), or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the “ Foreign Assets Control Regulations ”) or (b) knowingly engages or will knowingly engage in any unlicensed dealings or transactions, or be otherwise associated with, any such “blocked person”.
 
8. AFFIRMATIVE COVENANTS .
 
Each of the Borrowers covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any obligation to make any Loans or the Administrative Agent has any obligation to issue, extend or renew any Letters of Credit:
 
8.1. Punctual Payment . Each of the Borrowers, as applicable, will duly and punctually pay or cause to be paid the principal and interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees, the Facility Fee, the Administrative Agent’s Fee and all other amounts provided for in this
 
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Credit Agreement and the other Loan Documents to which BGI or any of its Subsidiaries is a party, all in accordance with the terms of this Credit Agreement and such other Loan Documents.
 
8.2. Maintenance of Office . BGI will maintain its chief executive office in Bristol, Connecticut, or at such other place in the United States of America as BGI shall designate upon written notice to the Administrative Agent, where notices, presentations and demands to or upon BGI in respect of the Loan Documents to which BGI is a party may be given or made. Barnes Switzerland will maintain its chief executive office in Teufen, Switzerland and a branch office in Nevis, West Indies, or at such other place as Barnes Switzerland shall designate upon written notice to the Administrative Agent, where notices, presentations and demands to or upon Barnes Switzerland in respect of the Loan Documents to which Barnes Switzerland is a party may be given or made; provided that such notices, presentations and demands to or upon Barnes Switzerland simultaneously may be given or made via BGI.
 
8.3. Records and Accounts . Each of the Borrowers will (a) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with GAAP, (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves, and (c) at all times engage the Accountants and will not permit more than thirty (30) days to elapse between the cessation of such firm’s (or any successor firm’s) engagement as the independent certified public accountants of the Borrowers and their Subsidiaries and the appointment in such capacity of a successor firm as shall be satisfactory to the Administrative Agent.
 
8.4. Financial Statements, Certificates and Information . BGI will deliver to the Administrative Agent, with a copy for each Lender:
 
(a) as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of the Borrowers, the consolidated balance sheet of BGI and its Subsidiaries as at the last day of such fiscal year, and the related consolidated statement of income and consolidated statement of cash flow for such fiscal year, each setting forth in comparative form the figures for the previous fiscal year and all such consolidated statements to be in reasonable detail, prepared in accordance with GAAP (except as required by a change in GAAP or as concurred to by the Accountants), and certified, without qualification and without an expression of uncertainty as to the ability of BGI or any of its Subsidiaries to continue as going concerns, by the Accountants, together with a written statement from the Accountants to the effect that they have read a copy of this Credit Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; provided that such accountants shall not be liable to the Lenders for failure to obtain knowledge of any Default or Event of Default;
 
(b) as soon as practicable, but in any event not later than sixty (60) days after the end of each of the fiscal quarters of the Borrowers, copies of the unaudited consolidated balance sheet of BGI and its Subsidiaries as at the last day of such quarter, and the related consolidated statement of income and consolidated statement of cash flow for the portion of the Borrowers’ fiscal year then elapsed, all in reasonable detail and prepared in accordance with GAAP, together with a certification by the principal financial or accounting officer of BGI that the information contained in such financial statements fairly presents the financial position of BGI and its Subsidiaries on the date thereof (subject to year-end adjustments);
 
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(c) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial or accounting officer of BGI in substantially the form of Exhibit   C hereto (a “ Compliance Certificate ”) and setting forth in reasonable detail computations evidencing compliance with the covenants contained in §10 and (if applicable) reconciliations to reflect changes in GAAP since the Balance Sheet Date;
 
(d) contemporaneously with the filing or mailing thereof, copies of all material of a financial nature filed with the Securities and Exchange Commission or sent to the stockholders of any of the Borrowers;
 
(e) upon request of the Administrative Agent, BGI’s annual business plan; and
 
(f) from time to time such other financial data and information (including accountants’ management letters) as the Administrative Agent may reasonably request.
 
The Administrative Agent will promptly deliver to each Lender via Intralinks or another similar electronic system (the “ Platform ”) (or other method of delivery permitted thereunder) copies of all information received by it pursuant to this §8.4.
 
The Borrowers hereby acknowledge that (i) the Administrative Agent will make available to Lenders and the Issuing Bank materials and/or information provided by or on behalf of Borrowers hereunder (collectively, “ Borrower Materials ”) by posting Borrower Materials on Intralinks or the Platform and (ii) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrowers or their securities) (each, a “ Public Lender ”). The Borrowers hereby agree that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrowers shall be deemed to have authorized the Administrative Agent, the Issuing Bank and the Lenders to treat such Borrower Materials as either publicly available information or not material information (although it may be sensitive and proprietary) with respect to the Borrowers or their securities for purposes of United States Federal and state securities laws; (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (z) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.
 
8.5. Notices .
 
8.5.1. Defaults . Promptly upon becoming aware of any such event, each of the Borrowers will notify the Administrative Agent, with a copy for each of the Lenders, in writing of the occurrence of any Default or Event of Default, together with a reasonably detailed description thereof, and the actions the Borrowers propose to take with respect thereto. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Credit Agreement or any other note, evidence of indebtedness, indenture or other obligation to which or with respect to which BGI or any of its Subsidiaries is a party or obligor, whether as principal, guarantor, surety or otherwise, the Borrowers shall forthwith give written notice thereof to the Administrative Agent, with a copy for each of the Lenders, describing the notice or action and the nature of the claimed default.
 
8.5.2. Notice of Litigation and Judgments . Each of the Borrowers will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent, with a copy for each of
 
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the Lenders, in writing within fifteen (15) days of becoming aware of (i) any litigation or proceedings threatened in writing or any pending litigation and proceedings likely to have a Material Adverse Effect, or (ii) any violation of any Environmental Law that any of the Borrowers or any of their Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any Governmental Authority affecting any of the Borrowers or any of their Subsidiaries, or (iii) any event in which any of the Borrowers or any of their Subsidiaries is or becomes a party involving an uninsured claim against any of the Borrowers or any of their Subsidiaries that in the case of any matter referred to in clauses (i), (ii), or (iii) above, could reasonably be expected to have a Material Adverse Effect on any of the Borrowers or any of their Subsidiaries and stating the nature and status of such litigation, proceedings, violation or event. Each of the Borrowers will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent, with a copy for each of the Lenders, in writing, in form and detail satisfactory to the Administrative Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against any of the Borrowers or any of their Subsidiaries in an amount in excess of $5,000,000.
 
The Administrative Agent will promptly deliver to each Lender copies of all notices and other information received pursuant to this §8.5.
 
8.6. Legal Existence; Maintenance of Properties . Each of the Borrowers will do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence, rights and franchises and those of its Subsidiaries. Each of the Borrowers (i) will cause all of its properties and those of its Subsidiaries necessary for the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of such Borrower may be necessary so that such property will be able to serve the functions for which they are currently being used, and (iii) will, and will cause each of its Subsidiaries to, continue to engage primarily in the businesses now conducted by them and in similar or related businesses; provided that nothing in this §8.6 shall prevent any of the Borrowers from discontinuing the operation and maintenance of any of its properties or any of those of its Subsidiaries if such discontinuance is, in the judgment of such Borrower, desirable in the conduct of its or their business and will not in the aggregate have a Material Adverse Effect.
 
8.7. Insurance . Each of the Borrowers will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent in such Borrower’s judgment.
 
8.8. Taxes . Each of the Borrowers will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and its Real Estate, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a Lien or charge upon any of its property; provided that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if such Borrower or such Subsidiary shall have set aside on its books adequate reserves or otherwise made appropriate provisions therefor as required by GAAP with respect thereto; and provided further that each such Borrower and each Subsidiary will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any Lien that may have attached as security therefor.
 
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8.9. Inspection of Properties and Books, etc .
 
8.9.1. General . Each of the Borrowers shall permit the Lenders, through the Administrative Agent or any of the Lenders’ other designated representatives, to visit and inspect any of the properties of such Borrower or any of its Subsidiaries, to examine the books of account of such Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of such Borrower and its Subsidiaries with, and to be advised as to the same by, its and their officers, and to conduct examinations and verifications (whether by internal commercial finance examiners or independent auditors), all at such reasonable times and intervals as the Administrative Agent or any Lender may reasonably request.
 
8.9.2. Communications with Accountants . Each of the Borrowers authorizes the Administrative Agent and, if accompanied by the Administrative Agent, the Lenders to communicate directly with the Accountants and authorizes the Accountants to disclose to the Administrative Agent and the Lenders any and all financial statements and other supporting financial documents and schedules including copies of any management letter with respect to the business, financial condition and other affairs of such Borrower or any of its Subsidiaries. At the request of the Administrative Agent, such Borrower shall deliver a letter addressed to the Accountants instructing them to comply with the provisions of this §8.9.2.
 
8.10. Compliance with Laws, Contracts, Licenses, and Permits . Each of the Borrowers will, and will cause each of its Subsidiaries to, comply with (a) the applicable laws and regulations wherever its business is conducted, including all Environmental Laws, (b) the provisions of its Governing Documents, (c) all agreements and instruments by which it or any of its properties may be bound and (d) all applicable decrees, orders, and judgments except for matters which, individually or in the aggregate, would not have a Material Adverse Effect. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that any of the Borrowers or any of their Subsidiaries may fulfill any of its obligations hereunder or any of the other Loan Documents to which such Borrower or such Subsidiary is a party, such Borrower will, or (as the case may be) will cause such Subsidiary to, immediately take or cause to be taken all reasonable steps within the power of such Borrower or such Subsidiary to obtain such authorization, consent, approval, permit or license and furnish the Administrative Agent and the Lenders with evidence thereof.
 
8.11. Employee Benefit Plans . Each of the Borrowers will (a) promptly upon filing the same with the Department of Labor or Internal Revenue Service upon request of the Administrative Agent, furnish to the Administrative Agent a copy of the most recent actuarial statement required to be submitted under §103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in respect of each Guaranteed Pension Plan, (b) promptly upon receipt or dispatch, furnish to the Administrative Agent any notice, report or demand sent or received in respect of a Guaranteed Pension Plan under §§302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under §§4041A, 4202, 4219, 4242, or 4245 of ERISA and (c) promptly furnish to the Administrative Agent a copy of all actuarial statements required to be submitted under all Applicable Pension Legislation.
 
8.12. Use of Proceeds . Each of the Borrowers will use the proceeds of the Loans and obtain Letters of Credit solely for the purposes set forth in §7.14.1.
 
8.13. Further Assurances . Each of the Borrowers will, and will cause each of its Subsidiaries to, cooperate with the Lenders and the Administrative Agent and execute such further instruments and documents as the Lenders or the Administrative Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Credit Agreement and the other Loan Documents.
 
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9. CERTAIN NEGATIVE COVENANTS.
 
Each of the Borrowers covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any obligation to make any Loans or the Administrative Agent has any obligations to issue, extend or renew any Letters of Credit:
 
9.1. Restrictions on Indebtedness . None of the Borrowers will, and will not permit any of its Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than:
 
(a) Indebtedness to the Lenders and the Administrative Agent arising under any of the Loan Documents;
 
(b) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business;
 
(c) Indebtedness in respect of any interest rate contracts and foreign currency contracts undertaken in the ordinary course of business;
 
(d) Existing Senior Debt, and refundings, replacements or refinancings thereof; provided that no such refunding or refinancing shall shorten the maturity or weighted average life to maturity or increase the principal amount of any of the Existing Senior Debt;
 
(e) Indebtedness of BGI’s domestic Subsidiaries not to exceed $10,000,000, including such Indebtedness outstanding on the Closing Date;
 
(f) Indebtedness of BGI’s foreign Subsidiaries not to exceed in the aggregate for all such foreign Subsidiaries, ten percent (10%) of Consolidated Total Assets and $50,000,000 in the aggregate for any foreign Subsidiary, including such Indebtedness outstanding on the Closing Date; provided that Indebtedness of foreign Subsidiaries all of whose lenders are party to the Intercreditor Agreement shall not be included in this calculation;
 
(g) Indebtedness of the Borrowers or any Subsidiary incurred to finance the acquisition of fixed or capital assets (other than pursuant to Sale Leaseback Transactions referred to in §9.1(n), whether pursuant to a loan, financing lease or otherwise) in an aggregate principal amount not to exceed $30,000,000 at any time outstanding;
 
(h) Indebtedness of the Borrowers or any Subsidiary in respect of Subordinated Debt;
 
(i) Indebtedness of the Borrowers owing to any Subsidiary of such Borrower which is expressly subordinated to the prior payment in full in cash of all Obligations on terms disclosed to and reasonably acceptable to the Administrative Agent prior to the incurrence thereof;
 
(j) Indebtedness of a Person outstanding at the time it is first acquired by any of the Borrowers in an acquisition permitted pursuant to §9.5.1(g), provided that any such Indebtedness was not created at the time of or in contemplation or in anticipation of such acquisition;
 
(k) Indebtedness of any of the Borrowers or any of their Subsidiaries incurred in connection with the issuance of any surety bonds, Performance Letters of Credit or other similar performance bonds required pursuant to any contractual Obligation or requirement of law to
 
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which any of the Borrowers or any of their Subsidiaries are subject in an aggregate principal amount not to exceed $15,000,000 at any time outstanding;
 
(l) additional Indebtedness of the Borrowers not exceeding $35,000,000 less any Indebtedness incurred under paragraph (g), in aggregate principal amount at any one time outstanding;
 
(m) Indebtedness of Subsidiaries of the Borrowers owing to any other Subsidiaries of the Borrowers or to the Borrowers which results from an Investment permitted under §9.3(g) or (i); and
 
(n) Indebtedness of BGI and its domestic Subsidiaries incurred in connection with Sale Leaseback Transactions, in an aggregate principal amount not to exceed $25,000,000 at any time outstanding.
 
Notwithstanding the foregoing, the aggregate amount of (i) Indebtedness of the Borrowers (under paragraphs (j) or (l)) secured by Liens plus (ii) Indebtedness of the Borrowers’ Subsidiaries (under paragraphs (e), (f), (j) or (l)) shall not exceed fifteen percent (15%) of Consolidated Total Assets of the Borrowers, determined as of the end of the then most recently completed fiscal year of the Borrowers.
 
9.2. Restrictions on Liens .
 
9.2.1. Permitted Liens . None of the Borrowers will, nor will permit any of its Subsidiaries to, (a) create or incur or suffer to be created or incurred or to exist any Lien upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or (e) sell, assign, pledge or otherwise transfer any receivables with or without recourse; provided that any of the Borrowers or any of their Subsidiaries may create or incur or suffer to be created or incurred or to exist:
 
(i) Liens to secure taxes, assessments and other government charges in respect of obligations not overdue or Liens to secure claims for labor, material or supplies in respect of obligations not overdue;
 
(ii) deposits or pledges made in connection with, or to secure payment of, workmen’s compensation, unemployment insurance, old age pensions or other social security obligations;
 
(iii) Liens on properties in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which such Borrower or such Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review;
 
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(iv) Liens of carriers, warehousemen, mechanics and materialmen, and other like Liens on properties in existence less than 180 days from the date of creation thereof in respect of obligations not overdue;
 
(v) encumbrances on Real Estate consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord’s or lessor’s liens and other minor Liens, provided that none of such Liens (A) interferes materially with the use of the property affected in the ordinary conduct of the business of such Borrower or its Subsidiaries, and (B) individually or in the aggregate have a Material Adverse Effect;
 
(vi) Liens securing purchase money Indebtedness and Capitalized Leases permitted under §9.1(g);
 
(vii) Liens on assets that are the subject of Sale Leaseback Transactions permitted under §9.1(n);
 
(viii) Other Liens in existence on the Closing Date and listed in Schedule 9.2 ;
 
(ix) Liens securing acquired indebtedness under §9.1(j), provided that such Liens secured such Indebtedness prior to the related acquisitions and are not spread to cover any additional assets or Indebtedness, and are not in violation of the final sentence of §9.1; and
 
(x) Other Liens in an aggregate principal amount not to exceed $25,000,000 at any time outstanding.
 
Each of the Borrowers covenants and agrees that if any of its Subsidiaries shall create or assume any Lien upon any of its respective properties or assets, whether now owned or hereafter acquired, other than Permitted Liens (unless prior written consent shall have been obtained from the Lenders), such Borrower will make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness thereby secured so long as such other Indebtedness shall be so secured. The covenants of each of the Borrowers contained herein shall only be in effect for so long as such Borrower shall be similarly obligated under any other Indebtedness. An Event of Default shall occur for so long as such other Indebtedness becomes secured notwithstanding any actions taken by any of the Borrowers to ratably secure the Obligations hereunder.
 
9.2.2. Restrictions on Negative Pledges and Upstream Limitations . None of the Borrowers will, nor will permit any of its Subsidiaries to (a) enter into or permit to exist any arrangement or agreement (excluding the Credit Agreement and the other Loan Documents) which directly or indirectly prohibits such Borrower or any of its Subsidiaries from creating, assuming or incurring any Lien upon its properties, revenues or assets or those of any of its Subsidiaries whether now owned or hereafter acquired, or (b) enter into any agreement, contract or arrangement (excluding the Credit Agreement and the other Loan Documents) restricting the ability of any Subsidiary of such Borrower to pay or make dividends or distributions in cash or kind to such Borrower, to make loans, advances or other payments of whatsoever nature to such Borrower, or to make transfers or distributions of all or any part of its assets to such Borrower; in each case other than (i) restrictions on specific assets which assets are the subject of purchase money security interests to the extent permitted under §9.2.1, (ii) customary anti-assignment provisions contained in leases and licensing agreements entered into by such
 
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Borrower or such Subsidiary in the ordinary course of its business and (iii) any negative pledges granted in the Existing Senior Debt.
 
9.3. Restrictions on Investments . None of the Borrowers will, nor will permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in:
 
(a) marketable direct or guaranteed obligations of the United States of America or Canada, or marketable obligations of any instrumentality or agency thereof, the payment of the principal and interest of which is unconditionally guaranteed by the United States of America or Canada;
 
(b) certificates of deposit or other obligations issued by, or bankers’ acceptances of, any bank or trust company organized under the laws of Brazil, Singapore, the Federal Republic of Germany, France, the United Kingdom, Japan, Canada or the United States of America or any state thereof (including foreign branches of any such bank or trust company) and having capital, surplus and undivided profits in excess of $100,000,000;
 
(c) securities commonly known as “ commercial paper ” issued by a corporation organized and existing under the laws of the United States of America or any state thereof with a maturity not in excess of 270 days from the date of acquisition thereof and that at the time of purchase have been rated and the ratings for which are not less than “P 2” if rated by Moody’s, and not less than “A 2” if rated by S&P;
 
(d) In the case of any foreign Subsidiary, but only with respect to countries in which such Subsidiary exists, such Investments of a comparable quality and term to the other Investments permitted by clauses (a), (b) and (c) of this §9.3 as are usually made in the jurisdiction or jurisdictions in which the business of such foreign Subsidiary is principally conducted by prudent corporate investors in like circumstances;
 
(e) Investments (including debt obligations and capital stock) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;
 
(f) Investments existing on the date hereof in Subsidiaries; and other Investments existing on the date hereof and listed on Schedule   9.3 hereto;
 
(g) Investments by BGI in Subsidiaries, including such Investments existing on the date hereof, not to exceed in the aggregate fifteen percent (15%) of Consolidated Total Assets; provided that the above limitation shall not apply with respect to (x) Investments made in order to effect acquisitions permitted under §9.5 or (y) Investments in Barnes Switzerland or (z) Investments in Guarantors; and provided further that notwithstanding any provision set forth in this §9.3 to the contrary, (I) Investments in the Gibraltar Subsidiary shall be limited to $100,000, and (II) Investments in the Luxembourg Subsidiaries, other than amounts being held for application to the account of BGI or Barnes Switzerland, shall be limited to $100,000;
 
(h) Investments consisting of permitted acquisitions under §9.5;
 
(i) (A) Investments by Subsidiaries of BGI in BGI, provided that any Investment by Subsidiaries in BGI must be an equity Investment or expressly subordinated to the prior payment in full in cash of all Obligations on terms disclosed to and reasonably acceptable to the
 
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Administrative Agent prior to the incurrence thereof; and (B) Investments by Subsidiaries of BGI in other Subsidiaries of BGI;
 
(j) Investments consisting of loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $2,000,000 in the aggregate at any time outstanding;
 
(k) Investments in joint ventures; provided that the operation to be invested in is in a similar or related business and provided further that after giving effect to such joint venture, the Borrowers shall be in compliance, on a pro forma historical basis, with all financial covenants; and
 
(l) Investments arising from payments under the BGI Guaranty or any Guaranty executed and delivered pursuant to §6.1 of this Credit Agreement.
 
9.4. Restricted Payments . None of the Borrowers will, nor will permit any of its Subsidiaries to make any Restricted Payments except that, so long as no Default or Event of Default then exists or would result from such payment, any of the Borrowers may (a) declare or pay any dividends, or (b) redeem, convert, retire or otherwise acquire shares of any class of its Capital Stock, provided that taking into account such Restricted Payment, the Total Commitment minus the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall exceed the outstanding amount of Loans during such calendar quarter by $10,000,000. Notwithstanding the above, any Subsidiary may make Distributions to the Borrowers and each of the Borrowers agrees that neither such Borrower nor any Subsidiary will enter into any agreement restricting Distributions from such Subsidiary to such Borrower.
 
9.5. Merger, Consolidation and Disposition of Assets .
 
9.5.1. Mergers and Acquisitions . None of the Borrowers will, nor will permit any of its Subsidiaries to, become a party to any merger, amalgamation or consolidation, or agree to or effect any asset acquisition or stock acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices) except the merger or consolidation of, or asset or stock acquisitions between existing Subsidiaries, mergers of existing Subsidiaries with and into any of the Borrowers, and asset or stock acquisitions by any of the Borrowers of existing Subsidiaries, and except as otherwise provided in this §9.5.1. The Borrowers may purchase or otherwise acquire all or substantially all of the assets or stock or other equity interests of any other Person provided that :
 
(a) the Borrowers are in current compliance with and, giving effect to the proposed acquisition (including any borrowings made or to be made in connection therewith), will continue to be in compliance with all of the covenants in §9 hereof as if the transaction occurred on the first day of the period of measurement; provided , that , to the extent such acquisition will be included as an Acquired Business, the Administrative Agent shall have received an Officer’s Certificate certifying compliance with §§10.1-10.4 on a pro forma historical combined basis as if the transaction occurred on the first day of the period of measurement and the related documentation showing the estimated calculations (subject to any adjustments) made in determination thereof;
 
(b) at the time of such acquisition, no Default or Event of Default has occurred and is continuing, and such acquisition will not otherwise create a Default or an Event of Default hereunder;
 
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(c) the business to be acquired is similar to the business conducted by BGI, or businesses reasonably related or incidental thereto;
 
(d) not later than seven (7) days prior to the proposed acquisition date, notice of any proposed acquisition with an aggregate consideration (including assumption of indebtedness) of more than $30,000,000, together with all information reasonably requested by the Administrative Agent with respect to such acquisition (including without limitation, historical financial statements and due diligence summaries) shall have been furnished to the Administrative Agent;
 
(e) the board of directors and (if required by applicable law) the shareholders, or the equivalent thereof, of the business to be acquired has approved such acquisition;
 
(f) if such acquisition is made by a merger, BGI (or a wholly-owned Subsidiary of BGI) shall be the surviving entity; and
 
(g) the total consideration to be paid in connection with any acquisition or series of related acquisitions, in the form of cash and assumption of debt with respect to any such acquisition or series of related acquisitions, shall not exceed $200,000,000 without the consent of the Administrative Agent and the Required Lenders.
 
9.5.2. Disposition of Assets . None of the Borrowers will, nor will permit any of its Subsidiaries to, become a party to or agree to or effect any disposition of assets, other than transfers of assets between such Borrower and Subsidiaries of such Borrower that would be permitted Investments under §9.3, transfers of assets from a Subsidiary of such Borrower to another Subsidiary of such Borrower, the sale of inventory or discounted receivables, the licensing of intellectual property, leases of property and the disposition of obsolete assets, in each case in the ordinary course of business consistent with past practices; provided however , that in any fiscal year, the Borrowers may dispose of up to ten percent (10%) of its Consolidated Total Assets (calculated as of the most recent quarter end prior to any proposed disposition) in the aggregate, based on the fair market value or book value, of such assets being sold or otherwise disposed of, whichever is greater.
 
9.6. Sale and Leaseback . BGI will not, and will not permit any of its domestic Subsidiaries to, enter into any Sale Leaseback Transaction, except to the extent the Indebtedness incurred in connection with such Sale Leaseback Transaction and any related Lien is permitted under §§9.1(n) and 9.2.1(vii).
 
9.7. Compliance with Environmental Laws . Except to the extent required by the day-to-day operations of each of the Borrowers and its Subsidiaries, and in all instances in compliance in all material respects with all applicable Environmental Laws, none of the Borrowers will knowingly, and will not knowingly permit any of its Subsidiaries to, (a) use any of the Real Estate or any portion thereof for the handling, processing, storage or disposal of Hazardous Substances, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances, (c) generate any Hazardous Substances on any of the Real Estate, or (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) or threatened release of Hazardous Substances on, upon or into the Real Estate.
 
9.8. Employee Benefit Plans . None of the Borrowers nor any ERISA Affiliate will:
 
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(a) engage in any “ prohibited transaction ” within the meaning of §406 of ERISA or §4975 of the Code which could have a Material Adverse Effect on such Borrower or any of its Subsidiaries; or
 
(b) permit any Guaranteed Pension Plan to incur an “ accumulated funding deficiency ”, as such term is defined in §302 of ERISA, whether or not such deficiency is or may be waived except for such deficiencies as would not have a Material Adverse Effect; or
 
(c) fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner which, could result in the imposition of a lien or encumbrance on the assets of such Borrower or any of its Subsidiaries pursuant to §302(f) or §4068 of ERISA; or
 
(d) amend any Guaranteed Pension Plan in circumstances requiring the posting of security pursuant to §307 of ERISA or §401(a)(29) of the Code;
 
(e) except for instances which would not have a Material Adverse Effect, permit or take any action which would result in the aggregate benefit liabilities (with the meaning of §4001 of ERISA) of all Guaranteed Pension Plans exceeding the fair market value of the aggregate assets of such Plans, disregarding for this purpose the benefit liabilities and assets of any such Plan with assets in excess of benefit liabilities; or
 
(f) permit or take any action which would contravene any Applicable Pension Legislation.
 
9.9. Business Activities . None of the Borrowers will, nor will permit any of its Subsidiaries to, engage directly or indirectly (whether through Subsidiaries or otherwise) in any type of business other than the businesses conducted by them on the Closing Date and in similar or related businesses.
 
9.10. Fiscal Year . None of the Borrowers will, nor will permit any of its Subsidiaries to, change the date of the end of its fiscal year from that set forth in §7.4.1.
 
9.11. Transactions with Affiliates . None of the Borrowers will, nor will permit any of its Subsidiaries to, engage in any transaction (except transactions which in any one calendar year do not involve in the aggregate an amount in excess of $500,000) with any Affiliate (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such Affiliate or, to the knowledge of such Borrower, any corporation, partnership, trust or other entity in which any such Affiliate has a substantial interest or is an officer, director, trustee or partner, on terms more favorable to such Person than would have been obtainable on an arm’s-length basis in the ordinary course of business.
 
10. FINANCIAL COVENANTS.
 
Each of the Borrowers covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any obligation to make any Loans or the Administrative Agent has any obligation to issue, extend or renew any Letters of Credit:
 
10.1. Interest Coverage . As of the end of any fiscal quarter, the Borrowers will not permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Cash Interest Expense for the four (4) consecutive fiscal quarters then ending to be less than the applicable ratio set forth in the table below:
 
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For the Four Quarters Ending
	  	Ratio
	
12/31/2005 — 9/30/2007	  	4.25:1	
12/31/2007 — Thereafter	  	4.50:1	
 
10.2. Leverage Ratio . As of the end of any fiscal quarter, the Borrowers will not permit the ratio of Consolidated Total Debt (excluding, for purposes of calculation of the Leverage Ratio, reverse interest rate swap contracts) as at such date to Consolidated EBITDA for the four (4) consecutive fiscal quarters then ending (the “ Leverage Ratio ”) to be more than the applicable ratio set forth in the table below:

For the Four Quarters Ending
	  	Ratio
	
12/31/2005 — 9/30/2007	  	4.00:1	
12/31/2007 — Thereafter	  	3.75:1	
 
10.3. Senior Leverage Ratio .
 
As of the end of any fiscal quarter, the Borrowers will not permit the ratio of Consolidated Senior Debt (excluding, for purposes of calculation of the Senior Leverage Ratio, reverse interest rate swap contracts) as at such date to Consolidated EBITDA for the four (4) consecutive fiscal quarters then ending (the “ Senior Leverage Ratio ”) to be more than the applicable ratio set forth in the table below:

For the Four Quarters Ending
	  	Ratio
	
12/31/2005 — 9/30/2007	  	3.25:1	
12/31/2007 — Thereafter	  	3.00:1	
 
10.4. Consolidated Net Worth . The Borrowers will not permit Consolidated Net Worth at any time to be less than $316,000,000 plus fifty percent (50%) of the Borrowers’ Consolidated Net Income for the final fiscal quarter of 2005 and for each fiscal year thereafter (but without deduction for any fiscal year in which Consolidated Net Income is a negative amount), with the annual adjustments to be applicable as of December 31, 2005 and as of the end of each subsequent fiscal year.
 
11. CLOSING CONDITIONS.
 
The obligations of the Lenders to convert the outstanding Loans under the Existing Credit Agreement to Loans hereunder and to make the initial Loans, and of the Administrative Agent to issue any initial Letters of Credit, shall be subject to the satisfaction of the following conditions precedent:
 
11.1. Loan Documents etc . Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Lenders. Each Lender shall have received a fully executed copy of each such document.
 
11.2. Certified Copies of Governing Documents . Each of the Lenders shall have received from each of the Borrowers a copy, certified by a duly authorized officer of such Borrower to be true and complete on the Closing Date, of each of its Governing Documents as in effect on such date of certification.
 
11.3. Corporate or Other Action . All corporate (or other) action necessary for the valid execution, delivery and performance by each of the Borrowers of this Credit Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Lenders shall have been provided to each of the Lenders.
 
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11.4. Incumbency Certificate . Each of the Lenders shall have received from each of the Borrowers an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of such Borrower, and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, each of the Loan Documents; (b) to make Loan Requests and Conversion Requests and to apply for Letters of Credit; and (c) to give notices and to take other action under the Loan Documents.
 
11.5. Solvency Certificate . Each of the Lenders shall have received an officer’s certificate of BGI dated as of the Closing Date as to the solvency of BGI and its Subsidiaries on a consolidated basis following the consummation of the transactions contemplated herein and in form and substance satisfactory to the Lenders.
 
11.6. Opinions of Counsel . Each of the Lenders and the Administrative Agent shall have received (a) a favorable legal opinion, including without limitation an opinion as to the matters set forth in §6.2 hereto, addressed to the Lenders and the Administrative Agent, dated as of the Closing Date, in form and substance satisfactory to the Lenders and the Administrative Agent, from Signe S. Gates, Esq., General Counsel to BGI, and (b) a favorable legal opinion, addressed to the Lenders and the Administrative Agent, dated as of the Closing Date, in form and substance satisfactory to the Lenders and the Administrative Agent, from Schellenberg Wittmer, special Swiss counsel to the Administrative Agent.
 
11.7. Payment of Fees . The Borrowers shall have paid to the Lenders or the Administrative Agent, as appropriate, all the Fees due on the Closing Date, including without limitation (a) the Administrative Agent’s Fee, and (b) a fee in the amount of ten hundredths of one percent (0.10%) of the Commitment of each Lender who is party both to this Credit Agreement and the Intercreditor Agreement (the “ Amendment Fee ”).
 
11.8. Financial Statements . The Administrative Agent shall have received copies of financial statements for September 30, 2005, and the Administrative Agent shall be satisfied that such financial statements fairly present the financial condition of the Borrowers and their Subsidiaries as at the close of business on the date thereof and the results of operations for the fiscal period then ended.
 
11.9. Intercreditor Arrangements .
 
The Intercreditor Agreement shall have been duly executed and delivered to the Administrative Agent by the respective parties thereto, and shall be in full force and effect.
 
12. CONDITIONS TO ALL BORROWINGS.
 
The obligations of the Lenders to make the Loans, and of the Administrative Agent to issue, extend or renew any Letter of Credit, in each case whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent:
 
12.1. Representations True; No Default or Event of Default . Each of the representations and warranties of any of the Borrowers contained in this Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Credit Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such
 
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representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing.
 
12.2. No Legal Impediment . No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make such Loan or to participate in the issuance, extension or renewal of such Letter of Credit or in the reasonable opinion of the Administrative Agent would make it illegal for the Administrative Agent to issue, extend or renew such Letter of Credit.
 
12.3. Proceedings and Documents . All proceedings in connection with the transactions contemplated by this Credit Agreement, the other Loan Documents and all other documents incident thereto (including the financial projections delivered to the Administrative Agent) shall be satisfactory in substance and in form to the Lenders and to the Administrative Agent and the Administrative Agent shall have received all information and such counterpart originals or certified or other copies of such documents as the Administrative Agent may reasonably request.
 
12.4. No Material Adverse Change . No change in the business, properties, assets or financial condition of the Borrowers and their Subsidiaries taken as a whole which is likely to have a Material Adverse Effect shall have occurred since the Balance Sheet Date.
 
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
 
13.1. Events of Default and Acceleration . If any of the following events (“ Events of Default ” or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, “ Defaults ”) shall occur:
 
(a) BGI shall fail to pay any principal of the Loans or any Reimbursement Obligation in respect of Letters of Credit, or Barnes Switzerland shall fail to pay any principal of the Barnes Switzerland Loans or any Reimbursement Obligation in respect of Letters of Credit issued for the account of Barnes Switzerland, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;
 
(b) BGI shall fail to pay any interest on the Loans, any Fees, or other sums due hereunder or under any of the other Loan Documents, or Barnes Switzerland shall fail to pay any interest on the Barnes Switzerland Loans, any Fees due and payable by Barnes Switzerland, or other sums due and payable by Barnes Switzerland hereunder or under any of the other Loan Documents, in each case within five (5) Business Days of when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;
 
(c) any of the Borrowers shall fail to comply with any of its covenants contained in §§8.1, 8.4, 8.5.1, the first sentence of 8.6, 8.12, 8.13, Article 9 or Article 10;
 
(d) any of the Borrowers shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this §13.1) for fifteen (15) days after written notice of such failure has been given to such Borrower by the Administrative Agent;
 
(e) any representation or warranty of any of the Borrowers in this Credit Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to
 
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or in connection with this Credit Agreement, including, without limitation, the Intercreditor Agreement, shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated;
 
(f) any of the Borrowers or any of their Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or in respect of any Capitalized Lease, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money or credit received or in respect of any Capitalized Lease in each case in excess of $5,000,000 for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof, or any such holder or holders shall rescind or shall have a right to rescind the purchase of any such obligations;
 
(g) any of the Borrowers or any Significant Subsidiary shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of such Borrower or such Significant Subsidiary or of any substantial part of the assets of such Borrower or such Significant Subsidiaries or shall commence any case or other proceeding relating to such Borrower or such Significant Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against any of the Borrowers or any Significant Subsidiary and such Borrower or such Significant Subsidiary shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within forty-five (45) days following the filing thereof;
 
(h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating any of the Borrowers or any Significant Subsidiary bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any of the Borrowers or any Subsidiary of the Borrowers in an involuntary case under federal bankruptcy laws as now or hereafter constituted;
 
(i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, any final judgment against any of the Borrowers or any of their Subsidiaries that, with other outstanding final judgments, undischarged, against any of the Borrowers or any of their Subsidiaries exceeds in the aggregate $5,000,000;
 
(j) if the Intercreditor Agreement or any of the Loan Documents shall be cancelled, terminated, revoked or rescinded, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Lenders, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind the Intercreditor Agreement or any of the Loan Documents shall be commenced by or on behalf of any of the Borrowers or their stockholders or, in the case of the Intercreditor Agreement, their creditors, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, the Intercreditor Agreement or any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof;
 
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(k) any Borrower or any ERISA Affiliate incurs any liability to the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate amount exceeding $10,000,000, or any Borrower or any ERISA Affiliate is assessed withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan requiring aggregate annual payments exceeding $10,000,000, or any of the following occurs with respect to a Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a failure to make a required installment or other payment (within the meaning of §302(f)(1) of ERISA), provided that the Administrative Agent determines in its reasonable discretion that such event (A) could be expected to result in liability of any Borrower or any of their Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $10,000,000 and (B) could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC, for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan or for the imposition of a lien in favor of such Guaranteed Pension Plan; or (ii) the appointment by a United States District Court of a trustee to administer such Guaranteed Pension Plan; or (iii) the institution by the PBGC of proceedings to terminate such Guaranteed Pension Plan;
 
(l) any of the Borrowers or any Significant Subsidiary shall be enjoined, restrained or in any way prevented by the order of any Governmental Authority from conducting any material part of its business and such order shall continue in effect for more than thirty (30) days;
 
(m) there shall occur any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty, which in any such case causes, for more than thirty (30) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of any Borrower or any Significant Subsidiary if such event or circumstance is not covered by business interruption insurance and could reasonably be foreseen to have a Material Adverse Effect;
 
(n) there shall occur the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by any Borrower or any of the Borrowers’ Subsidiaries if such loss, suspension, revocation or failure to renew would have a Material Adverse Effect;
 
(o) a Change of Control shall occur;
 
then, and in any such event, so long as the same may be continuing, the Administrative Agent may, and upon the request of the Required Lenders shall, by notice in writing to the Borrowers declare all amounts owing with respect to this Credit Agreement, the Notes and the other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers; provided that in the event of any Event of Default specified in §§13.1(g) or 13.1(h), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Administrative Agent or any Lender.
 
13.2. Termination of Commitments . If any one or more of the Events of Default specified in §13.1(g) or §13.1(h) shall occur, any unused portion of the credit hereunder shall forthwith terminate and each of the Lenders shall be relieved of all further obligations to make Loans to the Borrowers and the Administrative Agent shall be relieved of all further obligations to issue, extend or renew Letters of Credit. If any other Event of Default shall have occurred and be continuing, or if on any Drawdown Date or other date for issuing, extending or renewing any Letter of Credit the conditions precedent to the
 
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making of the Loans to be made on such Drawdown Date or (as the case may be) to issuing, extending or renewing such Letter of Credit on such other date are not satisfied, the Administrative Agent may and, upon the request of the Required Lenders, shall, by notice to the Borrowers, terminate the unused portion of the credit hereunder, and upon such notice being given such unused portion of the credit hereunder shall terminate immediately and each of the Lenders shall be relieved of all further obligations to make Loans and the Administrative Agent shall be relieved of all further obligations to issue, extend or renew Letters of Credit. No termination of the credit hereunder shall relieve the Borrowers of any of the Obligations.
 
13.3. Remedies . In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Lenders shall have accelerated the maturity of the Loans pursuant to §13.1, each Lender, if owed any amount with respect to the Loans or the Reimbursement Obligations, may, with the consent of the Required Lenders but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Lender are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Lender. No remedy herein conferred upon any Lender or the Administrative Agent or the holder of any Note or purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law.
 
14. THE ADMINISTRATIVE AGENT.
 
14.1. Authorization .
 
(a) Each of the Lenders and the Issuing Bank hereby irrevocably appoints Bank of America to act on its behalf as Administrative Agent hereunder and under any of the other Loan Documents and any related documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof and thereof, together with such actions and powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Administrative Agent.
 
(b) The relationship between the Administrative Agent and each of the Lenders is that of an independent contractor. The use of the term “ Administrative Agent ” is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Administrative Agent and each of the Lenders. Nothing contained in this Credit Agreement nor the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Administrative Agent and any of the Lenders;
 
(c) As an independent contractor empowered by the Lenders to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Administrative Agent is nevertheless a “ representative ” of the Lenders, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Lenders and the Administrative Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Administrative Agent as “ secured party ”, “ mortgagee ” or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment,
 
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perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Lenders and the Administrative Agent.
 
(d) The Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the Issuing Bank shall have all the benefits and immunities (i) provided to the Administrative Agent in this §14 with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in this §14 included the Issuing Bank with respect to such acts or omissions (and including any affiliates of the Issuing Bank and the officers, directors, employees, agents and attorneys-in-fact of the Issuing Bank and any affiliates), and (ii) as additionally provided herein with respect to the Issuing Bank.
 
(e) The Lenders authorize the Administrative Agent to enter into the Intercreditor Agreement. The Administrative Agent shall act on behalf of the Lenders with respect to the Intercreditor Agreement, and the Lenders agree to be bound by the terms thereof.
 
(f) The provisions of this §14 are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Bank, and none of the Borrowers nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.
 
14.2. Employees and Administrative Agents . The Administrative Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Credit Agreement and the other Loan Documents. The Administrative Agent may utilize the services of such Persons as the Administrative Agent in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrowers.
 
14.3. No Liability . Neither the Administrative Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Administrative Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability to any Lender for relying upon, any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Borrowers), independent accountants and other experts selected by the Administrative Agent. With respect to the Lenders, the Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action; provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, is contrary to any Loan Document or applicable law; provided further that, the Administrative Agent shall not be required to take any action (other than an action expressly required by this Credit Agreement to be taken by it under such circumstances) that, in its opinion or the opinion of its counsel,
 
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may expose the Administrative Agent to liability. The Administrative Agent shall in all cases be fully protected, as against the Lenders, in acting, or in refraining from acting, under this Credit Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders. Except as expressly set forth herein and in the other Loan Documents, the Administrative Agent shall have no duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrowers or any of their respective Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrowers or a Lender.
 
14.4. No Representations .
 
14.4.1. General . The Administrative Agent shall not be responsible for the execution or validity or enforceability of this Credit Agreement, the Notes, the Letters of Credit, any of the other Loan Documents, the Intercreditor Agreement, or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of any of the Borrowers or any of their Subsidiaries, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or to inspect any of the properties, books or records of any of the Borrowers or any of their Subsidiaries. The Administrative Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by any of the Borrowers or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Administrative Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Lenders, with respect to the credit worthiness or financial conditions of any of the Borrowers or any of their Subsidiaries. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement.
 
14.4.2. Closing Documentation, etc . For purposes of determining compliance with the conditions set forth in §11, each Lender that has executed this Credit Agreement shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document and matter either sent, or made available, by the Administrative Agent or the Arranger to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender, unless an officer of the Administrative Agent or the Arranger acting upon any Borrower’s account shall have received notice from such Lender not less than three days prior to the Closing Date specifying such Lender’s objection thereto and such objection shall not have been withdrawn by notice to the Administrative Agent or the Arranger to such effect on or prior to the Closing Date.
 
14.5. Payments .
 
14.5.1. Payments to Administrative Agent . A payment by any of the Borrowers to the Administrative Agent hereunder or any of the other Loan Documents for the account of any Lender shall constitute a payment to such Lender. The Administrative Agent agrees promptly to distribute to each Lender such Lender’s pro rata share of payments received by the
 
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Administrative Agent for the account of the Lenders except as otherwise expressly provided herein or in any of the other Loan Documents.
 
14.5.2. Distribution by Administrative Agent . If in the opinion of the Administrative Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Administrative Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Administrative Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court.
 
14.5.3. Delinquent Lenders . Notwithstanding anything to the contrary contained in this Credit Agreement or any of the other Loan Documents, any Lender that fails (a) to make available to the Administrative Agent its pro rata share of any Loan or to purchase any Letter of Credit Participation or (b) to comply with the provisions of §16.1 with respect to making dispositions and arrangements with the other Lenders, where such Lender’s share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Credit Agreement, shall be deemed delinquent (a “ Delinquent Lender ”) and shall be deemed a Delinquent Lender until such time as such delinquency is satisfied. A Delinquent Lender shall be deemed to have assigned any and all payments due to it from any of the Borrowers, whether on account of outstanding Loans, Unpaid Reimbursement Obligations, interest, fees or otherwise, to the remaining nondelinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Lender hereby authorizes the Administrative Agent to distribute such payments to the nondelinquent Lenders in proportion to their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations of the nondelinquent Lenders, the Lenders’ respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency.
 
14.6. Holders of Notes . The Administrative Agent may deem and treat the payee of any Note or the purchaser of any Letter of Credit Participation as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee.
 
14.7. Indemnity . To the extent not reimbursed by the Borrowers, the Lenders ratably agree hereby to indemnify and hold harmless the Administrative Agent and its Affiliates (including any of the officers, directors, employees, agents and attorneys-in-fact of any thereof) (each an “ Indemnified Party ”) from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which such Indemnified Party has not been reimbursed by the Borrowers as required by §16.3), and liabilities of every nature and character arising out of or related to this Credit Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or such Indemnified Party’s actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by such Indemnified Party’s willful misconduct or gross negligence, or, in the absence of instruction or concurrence of the Required Lenders, breach of contract.
 
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14.8. Administrative Agent as Lender; Etc. . In its individual capacity, Bank of America shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes and as the purchaser of any Letter of Credit Participations, as it would have were it not also the Administrative Agent. None of the Co-Documentation Agents or Syndication Agent shall have any obligation, liability, responsibility or duty under this Credit Agreement other than as a Lender hereunder.
 
14.9. Resignation . The Administrative Agent may at any time give notice of its resignation to the Lenders, the Issuing Bank and the Borrowers. Upon receipt of any such notice of resignation, the Required Lenders shall have the right to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. Provided that no Default or Event of Default shall have occurred and be continuing, such successor Administrative Agent shall be reasonably acceptable to the Borrowers. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrowers and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (x) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Bank under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (y) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the Issuing Bank directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this §14.9. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this §14.9). The fees payable by the Borrowers to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article 14 and §14.9 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.
 
14.10. Notification of Defaults and Events of Default . Each Lender hereby agrees that, upon learning of the existence of a Default or an Event of Default, it shall promptly notify the Administrative Agent thereof. The Administrative Agent hereby agrees that upon receipt of any notice under this §14.10 it shall promptly notify the other Lenders of the existence of such Default or Event of Default.
 
14.11. Administrative Agent May File Proofs of Claim .
 
(a) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial, administrative or like proceeding or any assignment for the benefit of creditors relative to any of the Borrowers or any of their Subsidiaries, the Administrative Agent (irrespective of whether the principal of any Loan, Reimbursement Obligation or Unpaid Reimbursement Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative
 
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Agent shall have made any demand on any of the Borrowers) shall be entitled and empowered, by intervention in such proceeding, under any such assignment or otherwise:
 
(i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Reimbursement Obligations or Unpaid Reimbursement Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under the terms of this Credit Agreement) allowed in such proceeding or under any such assignment; and
 
(ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
 
(b) Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such proceeding or under any such assignment is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, nevertheless to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel due the Administrative Agent under the terms of the Credit Agreement, and any other amounts due the Administrative Agent under the terms of this Credit Agreement.
 
(c) Nothing contained herein shall authorize the Administrative Agent to consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations owed to such Lender or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding or under any such assignment.
 
15. ASSIGNMENT AND PARTICIPATION.
 
15.1. General Conditions and Conditions to Assignment .
 
The provisions of this Credit Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that none of the Borrowers may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except:
 
(a) any Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Credit Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it and its risk associated with Letters of Credit); provided that:
 
(i) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal
 
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outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrowers, otherwise consent (each such consent not to be unreasonably withheld or delayed);
 
(ii) the parties to such assignment shall execute and deliver to the Administrative Agent, for recording in the Register (as hereinafter defined), an Assignment and Assumption, substantially in the form of Exhibit D attached hereto (an “ Assignment and Assumption ”), together with any Notes subject to such assignment, a processing and recordation fee of $3,500 and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire;
 
(iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Credit Agreement with respect to the Loans or the Commitment assigned, except that this clause (iii) shall not apply to rights in respect of Loans made pursuant to §2.6.2; and
 
(iv) (A) any assignment of a Commitment must be approved by the Administrative Agent, the Issuing Bank and the Swing Line Lender, unless the Person that is the proposed assignee is itself a Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee) and (B) unless an Event of Default has occurred and is continuing, in the case of any assignment to an Eligible Assignee who would impose costs or burdens on the Borrowers under §§5.2.2, 5.2.3, 5.5, 5.6, and/or 5.7 not applicable to the assigning Lender (or in the aggregate greater than any such costs or burdens imposed by the assigning Lender), such assignment must be approved by the Borrowers (each such approval, whether referred to in clause (A) or (B), not to be unreasonably withheld or delayed).
 
Subject to the approvals pursuant to §15.1(a)(iv), upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Assumption, which effective date shall be at least five (5) Business Days after the execution thereof, (y) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Assumption, have the rights and obligations of a Lender hereunder, and (z) the assigning Lender shall, to the extent of its interest being assigned by such Assignment and Assumption (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Credit Agreement, such Lender shall cease to be a party hereto), be released from its obligations under this Credit Agreement, but, notwithstanding such assignment, shall continue to be entitled to the benefits of (i) §§5.2.2, 5.6, 5.7 and 5.9 and (ii) §16.3 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Credit Agreement that does not comply with this paragraph shall be treated for purposes of this Credit Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with §15.4;
 
(b) by way of participation in accordance with the provisions of §15.4.; or
 
(c) by way of pledge or assignment of a security interest subject to the restrictions of §15.7 (and any other attempted assignment or transfer by any party hereto shall be null and void).
 
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Nothing in this Credit Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in §15.4 and, to the extent expressly contemplated hereby, the respective Affiliates, directors, officers, employees, agents and advisors of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Credit Agreement or any of the other Loan Documents.
 
15.2. Certain Representations and Warranties; Limitations; Covenants . By executing and delivering an Assignment and Assumption, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows:
 
(a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Lender makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage,
 
(b) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers and their Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrowers and their Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto;
 
(c) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements referred to in §7.4 and §8.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Assumption;
 
(d) such assignee will, independently and without reliance upon the assigning Lender, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement;
 
(e) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Credit Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto;
 
(f) such assignee confirms that is has received a copy of the Intercreditor Agreement and agrees to be bound to the terms therein;
 
(g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Credit Agreement are required to be performed by it as a Lender;
 
(h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Assumption;
 
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(i) such assignee acknowledges that it has made arrangements with the assigning Lender satisfactory to such assignee with respect to its pro rata share of Letter of Credit Fees in respect of outstanding Letters of Credit;
 
(j) such assignee acknowledges that it has complied with the provisions of §5.2.3 to the extent applicable; and
 
(k) such assignee represents and warrants that it is an Eligible Assignee.
 
15.3. Register . The Administrative Agent shall maintain a copy of each Assignment and Assumption delivered to it and a register or similar list (the “ Register ”) for the recordation of the names and addresses of the Lenders and the Commitment Percentage of, and principal amount of the Loans owing to and Letter of Credit Participations purchased by, the Lenders from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrowers and the Lenders at any reasonable time and from time to time upon reasonable prior notice.
 
15.4. Participations . Each Lender may sell participations to one or more Persons (other than a natural person) (each, a “ Participant ”) in all or a portion of such Lender’s rights and obligations under this Credit Agreement and the other Loan Documents; provided that (a) except in the case of any such participation sold to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, each such participation shall be in an amount of not less than $5,000,000, or shall be in an amount of such Lender’s entire remaining Commitment and the Loans at the time owing to it, (b) any such sale or participation shall not affect the rights and duties of the selling Lender hereunder to the Borrowers, (c) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (d) the Borrowers, the Administrative Agent, the Lenders and the Issuing Bank shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Credit Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Credit Agreement and to approve any amendment, modification or waiver of any provision of this Credit Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that would reduce the principal of or the interest rate on any Loans subject to such participation, extend the term or increase the amount of the Commitment of such Lender as it relates to such Participant, reduce the amount of any Facility Fee or Letter of Credit Fees or other fees to which such Participant is entitled, or extend any regularly scheduled payment date for principal or interest with respect to Loans subject to such participation. Subject to §15.5, the Borrowers agree that each Participant shall be entitled to the benefits of §§5.2.2, 5.6, 5.7 and 5.9 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to §15.1. To the extent permitted by law, each Participant also shall be entitled to the benefits of §16.1 as though it were a Lender, provided such Participant agrees to be subject to §16.1 as though it were a Lender.
 
15.5. Limitation upon Participant Rights .
 
A Participant shall not be entitled to receive any greater payment under §§5.2.2, 5.6 and 5.7 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers’ prior written consent.
 
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15.6. Assignee or Participant Affiliated with the Borrowers . If any assignee Lender is an Affiliate of any Borrower, then any such assignee Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to §13.1 or §13.2, and the determination of the Required Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to such assignee Lender’s interest in any of the Loans or Reimbursement Obligations. If any Lender sells a participating interest in any of the Loans or Reimbursement Obligations to a Participant, and such Participant is any Borrower or an Affiliate of any Borrower, then such transferor Lender shall promptly notify the Administrative Agent of the sale of such participation. A transferor Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to §13.1 or §13.2 to the extent that such participation is beneficially owned by any Borrower or any Affiliate of any Borrower, and the determination of the Required Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to the interest of such transferor Lender in the Loans or Reimbursement Obligations to the extent of such participation.
 
15.7. Miscellaneous Assignment Provisions . Any Lender may at any time pledge or assign a security interest in all or any portion of its interest and rights under this Credit Agreement (including all or any portion of its Notes) to secure obligations of such Lender, including without limitation (a) any pledge or assignment to secure obligations to any of the twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act, 12 U.S.C. §341 and (b) with respect to any Lender that is a fund that invests in bank loans, to any lender or any trustee for, or any other representative of, holders of obligations owed or securities issued by such fund as security for such obligations or securities or any institutional custodian for such fund or for such lender. Any foreclosure or similar action by any Person in respect of such pledge or assignment shall be subject to the other provisions of this §15. No such pledge or the enforcement thereof shall release the pledgor Lender from any of its obligations hereunder or under any of the other Loan Documents, provide any voting rights hereunder to the pledgee thereof, or affect any rights or obligations of the Borrowers or Administrative Agent hereunder.
 
15.8. Resignation After Assignment . Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to §15.1, Bank of America may, (i) upon thirty (30) days’ notice to the Borrowers and the Lenders, resign as Issuing Bank and/or (ii) upon thirty (30) days’ notice to the Borrowers, resign as Swing Line Lender. In the event of any such resignation as Issuing Bank or Swing Line Lender, the Borrowers shall be entitled to appoint from among the Lenders a successor Issuing Bank or Swing Line Lender hereunder; provided , however , that no failure by the Borrowers to appoint any such successor shall affect the resignation of Bank of America as Issuing Bank or Swing Line Lender, as the case may be. If Bank of America resigns as Issuing Bank, it shall retain all the rights and obligations of the Issuing Bank hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as Issuing Bank and all Unpaid Reimbursement Obligations plus the Maximum Drawing Amount with respect thereto (including the right to require the Lenders to make Base Rate Loans or make payments with respect to Reimbursement Obligations). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to §2.10.
 
16. PROVISIONS OF GENERAL APPLICATIONS.
 
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16.1. Setoff . Each Borrower hereby grants to the Administrative Agent, each of the Lenders and each Lender Affiliate, a right of setoff as security for all of its liabilities and obligations to the Administrative Agent and each Lender, whether now existing or hereafter arising, upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of the Administrative Agent or such Lender or any Lender Affiliate and their successors and assigns or in transit to any of them. Regardless of the adequacy of any collateral, (i) if any of the Obligations are due and payable and have not been paid or any Event of Default shall have occurred, any deposits or other sums credited by or due from any of the Lenders or any Lender Affiliate to BGI and any securities or other property of BGI in the possession of such Lender or any Lender Affiliate may be applied to or set off by such Lender against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of BGI to such Lender, or (ii) if any of the Barnes Switzerland Obligations are due and payable and have not been paid or any Event of Default shall have occurred, any deposits or other sums credited by or due from any of the Lenders or any Lender Affiliate to Barnes Switzerland and any securities or other property of Barnes Switzerland in the possession of such Lender or any Lender Affiliate may be applied to or set off by such Lender against the payment of the Barnes Switzerland Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of Barnes Switzerland to such Lender. ANY AND ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BGI OR BARNES SWITZERLAND, AS THE CASE MAY BE, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED . Each of the Lenders agrees with each other Lender that if such Lender shall receive from BGI and/or Barnes Switzerland, as the case may be, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes held by, or constituting Reimbursement Obligations owed to, such Lender by proceedings against BGI and/or Barnes Switzerland, as the case may be, at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Note or Notes held by, or Reimbursement Obligations owed to, such Lender any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the Notes held by, and Reimbursement Obligations owed to, all of the Lenders, such Lender will make such disposition and arrangements with the other Lenders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the Notes held by it or Reimbursement Obligations owed it, its proportionate payment as contemplated by this Credit Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest.
 
16.2. Expenses . The Borrowers agree to pay (a) the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Administrative Agent or any of the Lenders (other than taxes based upon the Administrative Agent’s or any Lender’s net income) on or with respect to the transactions contemplated by this Credit Agreement (the Borrowers hereby agreeing to indemnify the Administrative Agent and each Lender with respect thereto), (c) the reasonable fees, expenses and disbursements of the Administrative Agent’s Special Counsel or any local counsel to the Administrative Agent incurred in connection with the preparation, syndication, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, any amendments, modifications, approvals, consents or waivers hereto or hereunder, or the cancellation of any Loan Document upon payment in full in cash of all of the Obligations or pursuant to any terms of such Loan Document for providing for such cancellation, (d) the
 
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fees, expenses and disbursements of the Administrative Agent or any of its affiliates incurred by the Administrative Agent or such affiliate in connection with the preparation, syndication, administration or interpretation of the Loan Documents and other instruments mentioned herein, including all title insurance premiums and surveyor, engineering, appraisal and examination charges, (e) any fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Administrative Agent in establishing, maintaining or handling agency accounts, lock box accounts and other accounts for the collection of any collateral, (f) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (g) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys’ fees and costs, which attorneys may be employees of any Lender or the Administrative Agent, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by any Lender or the Administrative Agent in connection with (x) the enforcement of or preservation of rights under any of the Loan Documents against any of the Borrowers or any of their Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default and (y) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Lender’s or the Administrative Agent’s relationship with any of the Borrowers or any of their Subsidiaries, and (h) all reasonable fees, expenses and disbursements of any Lender or the Administrative Agent incurred in connection with UCC searches, UCC filings, intellectual property searches, intellectual property filings or mortgage recordings. The covenants contained in this §16.2 shall survive payment or satisfaction in full of all other obligations.
 
16.3. Indemnification . Each of the Borrowers and the Guarantors agrees to indemnify and hold harmless the Administrative Agent, the Lenders and their respective Affiliates, officers, directors and employees (each such Person being called an “ Indemnitee ”) from and against any and all claims, actions and suits whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of this Credit Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (a) any actual or proposed use by any of the Borrowers or any their Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (b) the reversal or withdrawal of any provisional credits granted by the Administrative Agent upon the transfer of funds from lock box, bank agency, concentration accounts or otherwise under any cash management arrangements with any Borrower or any Subsidiary or in connection with the provisional honoring of funds transfers, checks or other items, (c) any of the Borrowers or any of their Subsidiaries entering into or performing this Credit Agreement or any of the other Loan Documents or (d) with respect to any of the Borrowers and any of their Subsidiaries and each such Borrower’s or Subsidiary’s respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding. In litigation, or the preparation therefor, the Indemnitee shall be entitled to select its own counsel and, in addition to the foregoing indemnity, the Borrowers agree to pay promptly the reasonable fees and expenses of such counsel. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through Intralinks or other similar information transmission systems in connection with this Credit Agreement or for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Credit Agreement or the other Loan Documents or the transactions contemplated hereby or thereby, except, in each case, to the extent such damages are found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnitee’s gross negligence, willful misconduct or breach of contract relating to its treatment or handling of such Intralinks information,
 
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electronic telecommunications or other information transmission system. If, and to the extent that the obligations of the Borrowers under this §16.3 are unenforceable for any reason, the Borrowers hereby agree to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The covenants contained in this §16.3 shall survive payment or satisfaction in full of all other Obligations.
 
16.4. Treatment of Certain Confidential Information .
 
16.4.1. Confidentiality . Each of the Lenders and the Administrative Agent agrees, on behalf of itself and each of its Affiliates, directors, officers, employees and representatives, to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by any of the Borrowers or any of their Subsidiaries pursuant to this Credit Agreement that is identified by such Person as being confidential at the time the same is delivered to the Lenders or the Administrative Agent, provided that nothing herein shall limit the disclosure of any such information (a) after such information shall have become public other than through a violation of this §16.4, or becomes available to any of the Lenders or the Administrative Agent on a nonconfidential basis from a source other than the Borrowers who is not bound by obligations of confidentiality to the Borrowers, (b) to the extent required by statute, rule, regulation or judicial process, (c) to counsel for any of the Lenders or the Administrative Agent, (d) to bank examiners or any other regulatory authority having jurisdiction over any Lender or the Administrative Agent, or to auditors or accountants, (e) to the Administrative Agent, any Lender or, solely in connection with this Credit Agreement and the transactions contemplated hereby, any Financial Affiliate, (f) in connection with any litigation to which any one or more of the Lenders, the Administrative Agent or any Financial Affiliate is a party, or in connection with the enforcement of rights or remedies hereunder or under any other Loan Document, (g) solely in connection with this Credit Agreement and the transactions contemplated hereby, to a Lender Affiliate or a Subsidiary or Affiliate of the Administrative Agent (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (h) to any actual or prospective assignee or participant or any actual or prospective counterparty (or its advisors) to any swap or derivative transactions referenced to credit or other risks or events arising under this Credit Agreement or any other Loan Document so long as such assignee, participant or counterparty, as the case may be, agrees to be bound by the provisions of §16.4 or (i) with the consent of the Borrowers. Moreover, each of the Administrative Agent, the Lenders and any Financial Affiliate is hereby expressly permitted by the Borrowers to refer to any of the Borrowers and any of their Subsidiaries in connection with any advertising, promotion or marketing undertaken by the Administrative Agent, such Lender or such Financial Affiliate and, for such purpose, the Administrative Agent, such Lender or such Financial Affiliate may utilize any trade name, trademark, logo or other distinctive symbol associated with the Borrowers or any of their Subsidiaries or any of their businesses; provided that the Borrowers be provided with notice and opportunity to review such use to ensure consistency of presentation.
 
16.4.2. Prior Notification . Unless specifically prohibited by applicable law or court order, each of the Lenders and the Administrative Agent shall, prior to disclosure thereof, notify the Borrowers of any request for disclosure of any such non-public information by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) or pursuant to legal process.
 
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16.4.3. Other . In no event shall any Lender or the Administrative Agent be obligated or required to return any materials furnished to it or any Financial Affiliate by the Borrowers or any of their Subsidiaries. The obligations of each Lender under this §16.4 shall supersede and replace the obligations of such Lender under any confidentiality letter in respect of this financing signed and delivered by such Lender to any Borrower prior to the date hereof and shall be binding upon any assignee of, or purchaser of any participation in, any interest in any of the Loans or Reimbursement Obligations from any Lender.
 
16.5. Survival of Covenants, Etc . All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of any of the Borrowers or any of their Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Lenders and the Administrative Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default, and shall survive the making by the Lenders of any of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit or any amount due under this Credit Agreement or the Notes or any of the other Loan Documents remains outstanding or any Lender has any obligation to make any Loans or the Administrative Agent has any obligation to issue, extend or renew any Letter of Credit, and for such further time as may be otherwise expressly specified in this Credit Agreement, subject to, in each case the applicable statute of limitations. All statements contained in any certificate or other paper delivered to any Lender or the Administrative Agent at any time by or on behalf of any of the Borrowers or any of their Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by such Borrower or such Subsidiary hereunder.
 
16.6. Notices, Etc .
 
16.6.1. Notices Generally . Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the Notes or any Letter of Credit Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows:
 
(a) if to BGI, at 123 Main Street, P.O. Box 489, Bristol, Connecticut 06011, Attention: Treasurer, or at such other address for notice as BGI shall last have furnished in writing to the Administrative Agent, with a copy to 123 Main Street, P.O. Box 489, Bristol, Connecticut 06011, Attention: General Counsel;
 
(b) if to Barnes Switzerland, at 1426 Palm Grove Villas, Four Seasons Estate, Nevis, West Indies, Attention: Treasurer, or at such other address for notice as Barnes Switzerland shall last have furnished in writing to the Administrative Agent, with a copy to BGI, 123 Main Street, P.O. Box 489, Bristol, Connecticut 06011, Attention: General Counsel;
 
(c) if to the Administrative Agent or the Issuing Bank, at the addresses set forth on Schedule 16.6.1 hereto, or such other address for notice as the Administrative Agent or the Issuing Bank shall last have furnished in writing to the Person giving the notice; and
 
(d) if to any Lender, at such Lender’s address set forth on Schedule   1 hereto, or such other address for notice as such Lender shall have last furnished in writing to the Person giving the notice.
 
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Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof. Any notice or other communication to be made hereunder or under the Notes or any Letter of Credit Applications, even if otherwise required to be in writing under other provisions of this Credit Agreement, the Notes or any Letter of Credit Applications, may alternatively be made in an electronic record transmitted electronically under such authentication and other procedures as the parties hereto may from time to time agree in writing (but not an electronic record), and such electronic transmission shall be effective at the time set forth in such procedures. Unless otherwise expressly provided in such procedures, such an electronic record shall be equivalent to a writing under the other provisions of this Credit Agreement, the Notes or any Letter of Credit Applications, and such authentication, if made in compliance with the procedures so agreed by the parties hereto in writing (but not an electronic record), shall be equivalent to a signature under the other provisions of this Credit Agreement, the Notes or any Letter of Credit Applications. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
 
16.6.2. Electronic Communications .
 
Notices and other communications to the Lenders and the Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to §§2.6, 3.3 and 4.1. The Administrative Agent or the Borrowers may, in their discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
 
The Administrative Agent, the Issuing Bank and the Lenders shall be entitled to reasonably rely and act in good faith upon any notices (including telephonic Loan Requests, including requests for Swing Line Loans) purportedly given by or on behalf of the Borrowers even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrowers shall indemnify the Administrative Agent, the Issuing Bank, each Lender and the directors, officers, employees, agents and advisors of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person pursuant to this §16.6 on each notice purportedly
 
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given by or on behalf of the Borrowers. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.
 
16.7. GOVERNING LAW; SUBMISSION TO JURISDICTION . THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW §5-1401, BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. EACH BORROWER CONSENTS AND AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON SUCH BORROWER IN ACCORDANCE WITH LAW AT THE ADDRESS SPECIFIED IN §16.6. EACH BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
 
16.8. Headings . The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof.
 
16.9. Counterparts . This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. Delivery by facsimile by any of the parties hereto of an executed counterpart hereof or of any amendment or waiver hereto shall be as effective as an original executed counterpart hereof or of such amendment or waiver and shall be considered a representation that an original executed counterpart hereof or such amendment or waiver, as the case may be, will be delivered.
 
16.10. Entire Agreement, Etc . The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Credit Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in §16.12.
 
16.11. WAIVER OF JURY TRIAL . TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER, THE ADMINISTRATIVE AGENT OR ANY AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER, THE ADMINISTRATIVE AGENT OR SUCH AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
 
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FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE ADMINISTRATIVE AGENT, AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BECAUSE OF, AMONG OTHER THINGS, SUCH BORROWER’S WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
 
16.12. Consents, Amendments, Waivers, Etc . Any consent or approval required or permitted by this Credit Agreement to be given by the Lenders may be given, and any term of this Credit Agreement, the other Loan Documents or any other instrument related hereto or mentioned herein may be amended, and the performance or observance by any of the Borrowers or any of their Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Borrowers and the written consent of the Required Lenders. Notwithstanding the foregoing, no amendment, modification or waiver shall:
 
(a) without the written consent of the Borrowers and each Lender directly affected thereby:
 
(i) reduce or forgive the principal amount of any Loans or Reimbursement Obligations, or reduce the rate of interest on the Notes or the amount of the Facility Fee or Letter of Credit Fees or eliminate indemnity rights in favor of such Lender;
 
(ii) increase the amount of such Lender’s Commitment or extend the expiration date of such Lender’s Commitment;
 
(iii) postpone or extend the Loan Maturity Date or any other regularly scheduled dates for payments of principal of, or interest on, the Loans or Reimbursement Obligations or any Fees or other amounts payable to such Lender, or extend the termination of any Letters of Credit for which such Lender has a Letter of Credit Participation beyond the Loan Maturity Date;
 
(b) without the written consent of all of the Lenders, release any of the Significant Subsidiaries from its guaranty obligations under the Guaranty to which it is a party (it being understood that this limitation shall not apply to any release related to transactions permitted by §9.5), release BGI from its guaranty obligations under the BGI Guaranty, amend or waive this §16.12 or the definition of Required Lenders (it being understood that the addition of one or more additional credit facilities, the allowance of the credit extensions, interest and fees thereunder to share ratably or on a subordinated basis with the Loans, Letters of Credit, interest and Fees in the benefits of the Loan Documents and the inclusion of the holders of such facilities in the determination of Required Lenders shall require only the approval of the Required Lenders); and
 
(c) without the written consent of the Administrative Agent, amend or waive §14, the amount or time of payment of the Administrative Agent’s Fee or any Letter of Credit Fees payable for the Administrative Agent’s account or any other provision applicable to the Administrative Agent.
 
No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Administrative Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrowers shall entitle the Borrowers to other or further notice or demand in similar or other circumstances.
 
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16.13. Severability . The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction.
 
16.14. USA Patriot Act Notice . Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “ Patriot Act ”), it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrowers in accordance with the Act.
 
16.15. Liability for the Obligations .
 
(a) Notwithstanding anything herein to the contrary, BGI covenants and agrees that all Obligations with respect to all Loans, Reimbursement Obligations and any other Obligations payable to the Administrative Agent or any of the Lenders shall constitute the obligations of BGI individually.
 
(b) Notwithstanding any other provision hereof or of any other Loan Document, Barnes Switzerland shall have no liability for any Obligations other than the Barnes Switzerland Obligations, or for any other liability or obligation of BGI.
 
17. TRANSITIONAL ARRANGEMENTS.
 
17.1. Existing Credit Agreement Superseded . This Credit Agreement shall on the Closing Date supersede the Existing Credit Agreement in its entirety, except as provided in this §17. On the Closing Date, the rights and obligations of the parties evidenced by the Existing Credit Agreement shall be evidenced by the Credit Agreement, the “ Revolving Credit Loans ” as defined in the Existing Credit Agreement shall be converted to Revolving Credit Loans hereunder, and all outstanding letters of credit issued by Bank of America for the account of BGI prior to the Closing Date (the “ Existing Letters of Credit ”) shall, for the purposes of this Credit Agreement, be Letters of Credit.
 
17.2. Return and Cancellation of Notes . Upon receipt by any Lender of its Notes hereunder on the Closing Date, any “ Notes ” of BGI held by such Lender pursuant to and as defined in the Existing Credit Agreement shall be deemed to be no longer outstanding. As soon as reasonably practicable after its receipt of its Notes hereunder on the Closing Date, each Lender will promptly return to BGI, marked “ Substituted ” or “ Cancelled ”, as the case may be, any notes of BGI held by such Lender pursuant to the Existing Credit Agreement.
 
17.3. Interest and Fees Under Superseded Agreement . All interest and fees and expenses, if any, including outstanding commitment fees, owing or accruing under or in respect of the Existing Credit Agreement through the Closing Date shall be calculated as of the Closing Date (prorated in the case of any fractional periods), and shall be paid as of the Closing Date. Commencing on the Closing Date and all periods going forward, the Facility Fee shall be payable by the Borrowers to the Administrative Agent for the account of the Lenders in accordance with §2.2.
 
[Remainder of Page Intentionally Left Blank]
 
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IN WITNESS WHEREOF , the undersigned have duly executed this Credit Agreement as of the date first set forth above.

BARNES GROUP INC.	
		
By:	 	/s/    W ILLIAM C. D ENNINGER        	
 	 	William C. Denninger	
 	 	Senior Vice President, Finance and
Chief Financial Officer	
		
By:	 	/s/    L AWRENCE W. O’B RIEN        	
 	 	Lawrence W. O’Brien	
 	 	Vice President,Treasurer	
	
BARNES GROUP SWITZERLAND GmbH	
		
By:	 	/s/    P IETER V AN T OL        	
Name:	 	Pieter Van Tol	
Title:	 	Director	
 
S-1

			
BANK OF AMERICA, N.A., successor by merger to Fleet National Bank, individually, as Issuing Bank and as Swing Line Lender 	
		
By:	 	/s/    K ENNETH S. S TRUGLIA        	
 	 	Kenneth S. Struglia	
 	 	Managing Director	
	
BANK OF AMERICA, N.A., successor by merger to Fleet National Bank, as Administrative Agent 	
		
By:	 	/s/    M ATTHEW C. C ORREIA        	
 	 	Matthew C. Correia	
 	 	Assistant Vice President	
 
S-2

			
HSBC BANK USA NATIONAL ASSOCIATION, individually and as Co-Documentation Agent 	
		
By:	 	/s/     R OBERT H. R OGERS        	
Name:	 	Robert H. Rogers	
Title:	 	First Vice President	
 
S-3

			
KEYBANK NATIONAL ASSOCIATION, individually and as Syndication Agent 	
		
By:	 	/s/     S UZANNAH H ARRIS        	
Name:	 	Suzannah Harris	
Title:	 	Vice President	
 
S-4

			
MELLON BANK, N.A.	
		
By:	 	/s/    W ILLIAM M. F EATHERS        	
Name:	 	William M. Feathers	
Title:	 	Vice President	
 
S-5

			
WEBSTER BANK, NATIONAL ASSOCIATION,
individually and as Co-Documentation Agent	
		
By:	 	/s/    C AROL C ARVER        	
Name:	 	Carol Carver	
Title:	 	Vice President	
 
S-6

			
THE BANK OF NEW YORK	
		
By:	 	/s/    K ENNETH P. S NEIDER , J R .        	
Name:	 	Kenneth P. Sneider, Jr.	
Title:	 	Vice President	
 
S-7

			
COMERICA BANK	
		
By:	 	/s/    S TACEY V. J UDD        	
Name:	 	Stacey V. Judd	
Title:	 	Vice President	
 
S-8

			
JPMORGAN CHASE BANK, N.A.,
f/k/a Bank One, NA (Main Office Chicago)	
		
By:	 	/s/    P ETER M. K ILLEA        	
Name:	 	Peter M. Killea	
Title:	 	Vice President	
 
S-9

			
THE GOVERNOR & COMPANY OF THE BANK OF IRELAND	
		
By:	 	/s/    D EIRDRE R EDDAN        	
Name:	 	Deirdre Reddan	
Title:	 	Authorized Signatory	

		
By:	 	/s/    P ETER C ULLIVAN        	
Name:	 	Peter Cullivan	
Title:	 	Authorized Signatory	
 
S-10

			
BRANCH BANKING AND TRUST COMPANY	
		
By:	 	/s/    T ROY A. W EAVER        	
Name:	 	Troy A. Weaver	
Title:	 	Senior Vice President	
 
S-11

			
CALYON NEW YORK BRANCH	
		
By:	 	/s/    M ICHAEL M ADNICK        	
Name:	 	Michael Madnick	
Title:	 	Director	

		
By:	 	/s/    Y URI M UZICHENKO        	
Name:	 	Yuri Muzichenko	
Title:	 	Vice President	
 
S-12

Exhibit A
 
FORM OF
[SECOND AMENDED AND RESTATED] * / REVOLVING CREDIT NOTE

$__________	  	January 11, 2006	
 
FOR VALUE RECEIVED , the undersigned [BARNES GROUP INC. , a Delaware corporation ] ** / [BARNES GROUP SWITZERLAND GmbH , a limited liability company organized under the laws of Switzerland ] *** / (the “ Borrower ”), hereby promises to pay to the order of [                      ] , a [ an ] [          ] (the “ Lender ”) at the Administrative Agent’s office at 100 Federal Street, Boston, Massachusetts, 02110:
 
(a) prior to or on the Loan Maturity Date the principal amount of _____ DOLLARS ( $___ ) or, if less, the aggregate unpaid principal amount of Revolving Credit Loans advanced by the Lender to the Borrower pursuant to the Second Amended and Restated Revolving Credit Agreement dated as of January 11, 2006 (as amended and in effect from time to time, the “ Credit Agreement ”), by and among the Borrower, the Lender, the Administrative Agent and other parties thereto;
 
(b) the principal outstanding hereunder from time to time at the times provided in the Credit Agreement; and
 
(c) interest on the principal balance hereof from time to time outstanding from the Closing Date under the Credit Agreement through and including the maturity date hereof at the times and at the rate provided in the Credit Agreement.
 
[This Second Amended and Restated Revolving Credit Note (this “ Note ”) constitutes the amendment and restatement in its entirety of the Amended and Restated Revolving Credit Note, dated as of June 2, 2004, issued by the Borrower to the Lender in the principal amount of $ [              ] (the “Prior Note”), and is in substitution therefor and an amendment and replacement thereof. Nothing herein shall be construed to constitute payment of the Prior Note or to release or terminate any guaranty or lien, mortgage, pledge or other security entered in favor of the Administrative Agent, the Lender, or any other Lender under the Credit Agreement. ] * /
 
This Note evidences borrowings under and has been issued by the Borrower in accordance with the terms of the Credit Agreement. The Lender and any holder hereof is entitled to the benefits of the Credit Agreement and the other Loan Documents, and may enforce the agreements of the Borrower contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. All capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement.

* /	Bracketed text to be inserted if Note is a replacement of a Prior Note, as defined herein.	
 
** /	Bracketed text to be inserted if Barnes Group Inc. is the Borrower executing and delivering this Note.	
 
*** /	Bracketed text to be inserted if Barnes Group Switzerland GmbH is the Borrower executing and delivering this Note.	

The Borrower irrevocably authorizes the Lender to make or cause to be made, at or about the time of the Drawdown Date of any Revolving Credit Loan or at the time of receipt of any payment of principal of this Note, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, reflecting the making of such Revolving Credit Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Credit Loans set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Lender with respect to any Revolving Credit Loans shall be prima facie evidence of the principal amount thereof owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on any such grid, continuation or other record shall not limit or otherwise affect the obligation of the Borrower hereunder or under the Credit Agreement to make payments of principal of and interest on this Note when due.
 
The Borrower has the right in certain circumstances and the obligation under certain other circumstances to prepay the whole or part of the principal of this Note on the terms and conditions specified in the Credit Agreement.
 
If any one or more of the Events of Default shall occur, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement.
 
No delay or omission on the part of the Lender or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of the Lender or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any further occasion.
 
The Borrower and every endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable.
 
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW §5-1401, BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. THE BORROWER CONSENTS AND AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN §16.6 OF THE CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
 
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
 
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IN WITNESS WHEREOF , the undersigned has caused this Note to be signed in its corporate name and its corporate seal to be impressed thereon by its duly authorized officer as of the day and year first above written.
 
[Corporate Seal]

[BARNES GROUP INC.	
		
By:	 	 	
Name:	 	William C. Denninger	
Title:	 	Senior Vice President, Finance
and Chief Financial Officer	
		
By:	 	 	
Name:	 	Lawrence W. O’Brien	
Title:	 	Vice President, Treasurer ] ** /	
	
[BARNES GROUP SWITZERLAND GmbH	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
		
By:	 	 	
Name:	 	 	
Title:	 	 	 	] *** /	

									
Date
	  	Amount
of Loan
	  	Amount of
Principal Paid
or Prepaid
	  	Balance of
Principal
Unpaid
	  	Notation
Made By:

 	  	 	  	 	  	 	  	 	

 	  	 	  	 	  	 	  	 	

 	  	 	  	 	  	 	  	 	

 	  	 	  	 	  	 	  	 	

 	  	 	  	 	  	 	  	 	

 	  	 	  	 	  	 	  	 	

 	  	 	  	 	  	 	  	 	

 	  	 	  	 	  	 	  	 	

 	  	 	  	 	  	 	  	 	

 	  	 	  	 	  	 	  	 	

Exhibit B
 
FORM OF LOAN REQUEST
 
_________ __, ____
 
Bank of America, N.A.,
successor by merger to
Fleet National Bank,
as Administrative Agent
100 Federal Street
Boston, Massachusetts 02110
 
 	Re:	[ Loan] [Conversion] [Continuation] Request under Second Amended and Restated Revolving Credit Agreement, dated as of January 11, 2006	
 
Ladies and Gentlemen:
 
Reference is hereby made to that certain Second Amended and Restated Revolving Credit Agreement, dated as of January 11, 2006 (as the same may be amended and in effect from time to time, the “ Credit Agreement ”), by and among Barnes Group Inc. (“ BGI ”), Barnes Group Switzerland GmbH, Nevis Branch (“ Barnes Switzerland ”, and together with BGI, the “ Borrowers ”, and each individually a “ Borrower ”), Bank of America, N.A. (“ Bank of America ”), successor by merger to Fleet National Bank, and the other lending institutions referred to therein as Lenders (collectively, the “ Lenders ”), Bank of America, as administrative agent (the “ Administrative Agent ”) for itself and the other Lenders party thereto, with KeyBank National Association, as syndication agent (the “ Syndication Agent ”) and HSBC Bank USA National Association and Webster Bank , National Association, as co-documentation agents (the “ Documentation Agents ”). Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement.
 
Pursuant to §2.6 of the Credit Agreement, the undersigned Borrower hereby requests that a Revolving Credit Loan consisting of a [ Base Rate Loan in the principal amount of $__________ ] [ LIBOR Rate Loan in the principal amount of $__________ with an Interest Period of [ 1 ] [ 2 ] [ 3 ] [ 6 ] months ] be made on _________ __, 20__.
 
[ Pursuant to §2.7 of the Credit Agreement, the undersigned Borrower hereby requests that the Revolving Credit Loans in the amount of $_______ which are currently [ Base Rate ][ LIBOR Rate ] Loans be [ converted to ] [ continued as ] [ Base Rate Loans ] [ LIBOR Rate Loans with an Interest Period of [ 1 ] [ 2 ] [ 3 ] [ 6 ] months ] on _________ __, 20__.]
 
The undersigned Borrower understands that this request is irrevocable and binding on such Borrower and obligates such Borrower to accept the requested Revolving Credit Loan on such date. This Loan Request constitutes a certification that the conditions precedent set forth in §12 of the Credit Agreement to the making of the Revolving Credit Loans requested hereby have been satisfied as of the date hereof.

The undersigned Borrower hereby certifies (a) that the aggregate outstanding principal amount of the Revolving Credit Loans plus the Maximum Drawing Amount plus all Unpaid Reimbursement Obligations on today’s date is less than the Total Commitment after giving effect to this Loan Request [and that the outstanding principal amount of the Barnes Switzerland Loans after giving effect to this Loan Request is less than the Barnes Switzerland Sublimit ] ** , (b) that the proceeds of the requested Revolving Credit Loan will be used in accordance with the provisions of the Credit Agreement, (c) that each of the representations and warranties contained in the Credit Agreement or in any document or instrument delivered pursuant to or in connection therewith was true as of the date as of which it was made and is true at and as of the date hereof (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and changes occurring in the ordinary course of business that singly or in the aggregate do not have a Material Adverse Effect, and to the extent that such representations and warranties related expressly to an earlier date) and (d) that no Default or Event of Default has occurred and is continuing.

Very truly yours,	
	
[BARNES GROUP INC.	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
		
By:	 	 	
Name:	 	 	
Title:	 	] * 	
	
[BARNES GROUP SWITZERLAND GmbH	
		
By:	 	 	
Name:	 	 	
Title:	 	] ** 	

*	Bracketed text to be inserted if Barnes Group Inc. is submitting the Loan Request.	
 
** 	Bracketed text to be inserted if Barnes Group GmbH is submitting the Loan Request.	
 
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Exhibit C
 
FORM OF
COMPLIANCE CERTIFICATE
 
______ __, 20__
 
Bank of America, N.A.,
successor by merger to Fleet National Bank,
as Administrative Agent
and the Lenders referred to below
100 Federal Street
Boston, Massachusetts 02110
 
Ladies and Gentlemen:
 
Reference is hereby made to that certain Second Amended and Restated Revolving Credit Agreement, dated as of January 11, 2006 (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), by and among Barnes Group Inc., a Delaware corporation (“ BGI ”), Barnes Group Switzerland GmbH, Nevis Branch, a limited liability company organized under the laws of Switzerland (“ Barnes Switzerland ”, and together with BGI, the “ Borrowers ”, and each individually a “ Borrower ”), Bank of America, N.A. (“ Bank of America ”), successor by merger to Fleet National Bank, and the other lending institutions listed on Schedule 1 thereto (the “ Lenders ”) and Bank of America, as administrative agent (the “ Administrative Agent ”) for itself and the Lenders, with KeyBank National Association, as syndication agent (the “ Syndication Agent ”) and HSBC Bank USA National Association and Webster Bank, National Association, as co-documentation agents (the “ Documentation Agents ”). Capitalized terms used herein without definition shall have the same meanings herein as in the Credit Agreement.
 
This is a certificate delivered pursuant to §8.4(c) of the Credit Agreement for purposes of evidencing compliance with the financial covenants provided for in §10 of the Credit Agreement. This certificate has been duly executed by the principal financial or accounting officer of the Borrower.
 
To the best of the knowledge and belief of the undersigned: (a) each of the representations and warranties contained in the Credit Agreement and the other Loan Documents are true in all material respects as of the date hereof, with the same effect as if made at and as of the date hereof (except to the extent of any changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and to the extent that such representations and warranties relate expressly to an earlier date); (b) attached hereto as Appendix 1 and set forth in reasonable detail are computations evidencing compliance with the covenants contained in §10 of the Credit Agreement as of the date and for the applicable period to which the financial statements delivered herewith relate; (c) the information furnished in the calculations attached hereto was true, accurate, correct, and complete in all material respects as of the last day of such period and for such applicable period, as the case may be, subject to normal year end adjustments; (d) as of the date hereof, no Default or Event of Default has occurred or is continuing and (e) the annual financial statements delivered to the Lenders and the Administrative Agent herewith as required by §8.4 of the Credit Agreement were prepared in accordance with generally accepted accounting principles (except for the absence of footnotes required by generally accepted accounting principles) and fairly represent the financial position of BGI and its Subsidiaries as of the date thereof.

IN WITNESS WHEREOF , the undersigned has executed this certificate as an instrument under seal as of the date first written above.

BARNES GROUP INC.	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
		
By:	 	 	
Name:	 	 	
Title:	 	 	

Appendix 1
 
COMPLIANCE CERTIFICATE
 
BARNES GROUP INC.
 
A.	Interest Coverage	
 
1.	Consolidated EBITDA:	

(A)     Consolidated Net Income of BGI, its Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (1) extraordinary gains and losses in accordance with GAAP, (2) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses, and (3) gains or losses on discontinued operations for the four (4) consecutive fiscal quarters ended on such date)	  	$__________________	
		
(B)     Consolidated Cash Interest Expense of BGI, its Subsidiaries and, without duplication, the Acquired Businesses for such period	  	$___________________	
		
(C)     To the extent deducted in computing such Consolidated Net Income of BGI, its Subsidiaries and, without duplication, the Acquired Businesses, for such period:	  	 	
		
(i)     Income taxes	  	$___________________	
		
(ii)    Depreciation	  	$___________________	
		
(iii)  Amortization	  	$___________________	
		
Sum of Items (i) through (iii)	  	$___________________	
		
Consolidated EBITDA (Sum of Items (A) through (C))	  	$___________________	
 
2.	Consolidated Cash Interest Expense for the four (4) consecutive fiscal quarters then ending:	

Consolidated Cash Interest Expense	  	$	___________________	
 
3.	Consolidated EBITDA to Consolidated Cash Interest Expense Ratio (Ratio of Item 1 to Item 2)	
 
_____ : _____

4.	Consolidated EBITDA to Consolidated Cash Interest Expense Ratio (Interest Coverage) under Section 10.1 of the Credit Agreement during the period shall not be less than the applicable ratio set forth in the table below	

For the Four Quarters Ending 
	  	Ratio
	
12/31/2005 — 9/30/2007	  	4.25:1	
12/31/2007 — Thereafter	  	4.50:1	

B.	Leverage Ratio	
 
1.	Consolidated Total Debt as at such date:	

(A)     With respect to BGI and its Subsidiaries, without duplication, the aggregate amount of Indebtedness of BGI and its Subsidiaries, on a consolidated basis, outstanding on such date for the borrowed money or the deferred purchase price of property including, without limitation, in respect of any Synthetic Leases or Capitalized Leases	  	$	___________________	
		
(B)     With respect to BGI and its Subsidiaries, without duplication, Indebtedness of the type referred to in clause (A) of another Person (not including BGI or its Subsidiaries) guaranteed by BGI or any of its Subsidiaries	  	$	___________________	
		
Consolidated Total Debt	  	$	___________________	
 
2.	Consolidated EBITDA for the four (4) consecutive fiscal quarters then ending:	

Consolidated EBITDA (See Item 1 of Interest Coverage above)	  	$	___________________	
 
3.	Consolidated Total Debt to Consolidated EBITDA Ratio (Ratio of Item 1 to Item 2)	
 
_____ : _____
 
4.	Consolidated Total Debt to Consolidated EBITDA Ratio (Leverage Ratio) under Section 10.2 of the Credit Agreement during the period shall not be more than the applicable ratio set forth in the table below:	

For the Four Quarters Ending 
	  	Ratio
	
12/31/2005 — 9/30/2007	  	4.00:1	
12/31/2007 - Thereafter	  	3.75:1	

C.	Senior Leverage Ratio	
 
1.	Consolidated Senior Debt as at such date:	

(A)   Consolidated Total Debt as at such date (see Item 1 of Leverage Ratio above)	  	$	___________________	
		
(B)   Subordinated Debt as at such date	  	$	___________________	
		
Consolidated Senior Debt ((A) - (B))	  	$	___________________	
 
2.	Consolidated EBITDA for the four (4) consecutive fiscal quarters then ending:	

Consolidated EBITDA (See Item 1 of Interest Coverage above)	  	$	___________________	
 
3.	Consolidated Senior Debt to Consolidated EBITDA Ratio (Ratio of Item 1 to Item 2)	
 
_____ : _____
 
4.	Consolidated Senior Debt to Consolidated EBITDA Ratio (Senior Leverage Ratio) under Section 10.3 of the Credit Agreement during the period shall not be more than the applicable ratio set forth in the table below:	

For the Four Quarters Ending 
	  	Ratio
	
12/31/2005 — 9/30/2007	  	3.25:1	
12/31/2007 - Thereafter	  	3.00:1	

D.	Consolidated Net Worth	
 
1.	Consolidated Net Worth:	
 
The Borrowers have not permitted Consolidated Net Worth at any time to be less than $316,000,000 plus 50% of the Borrowers’ Consolidated Net Income for the final fiscal quarter of 2005 and for each fiscal year thereafter (but without deduction for any fiscal year in which Consolidated Net Income is a negative amount), with the annual adjustments to be applicable as of December 31, 2005 and as of the end of each subsequent fiscal year.

Exhibit D
 
ASSIGNMENT AND ASSUMPTION
 
This Assignment and Assumption (this “ Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between [ Insert name of Assignor ] (the “ Assignor ”) and [ Insert name of Assignee ] (the “ Assignee ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “ Credit Agreement ”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
 
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including, without limitation, the Letters of Credit and the Swing Line Loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the “ Assigned Interest ”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
 
1.	Assignor : ______________________________	
 
2.	Assignee : ______________________________ [and is an Affiliate/Approved Fund of [ identify Lender ]] 1	
 
3.	Borrowers : Barnes Group Inc. and Barnes Group Switzerland GmbH	
 
4.	Administrative Agent : Bank of America, N.A., as the administrative agent under the Credit Agreement	
 
5.	Credit Agreement : Second Amended and Restated Revolving Credit Agreement, by and among Barnes Group Inc., Barnes Group Switzerland GmbH, Nevis Branch, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Issuing Bank, and Swing Line Lender, with Banc of America Securities LLC, as Arranger, KeyBank National Association, as Syndication Agent, and HSBC Bank USA National Association and Webster Bank, National Association, as Co-Documentation Agents	

1	Select as applicable.	

6.	Assigned Interest :	

Facility Assigned
	  	Aggregate
Amount of
Commitment
for all Lenders *
	  	Amount of
Commitment
Assigned *
	  	Percentage
Assigned of
Commitment 2 
	  	CUSIP Number
	
Revolving Credit Loan	  	$______________	  	$______________	  	______________%	  	____________	
 
[7.	Trade Date : __________________] 3	
 
Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
 
The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR	
[NAME OF ASSIGNOR]	
		
By:	 	 	
Title:	 	 	
	
ASSIGNEE	
[NAME OF ASSIGNEE]	
		
By:	 	 	
Title:	 	 	

*	Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.	
 
2	Set forth, to at least 9 decimals, as a percentage of the Commitment of all Lenders thereunder.	
 
3	To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.	

[Consented to and] 4 Accepted:

BANK OF AMERICA, N.A., as	
Administrative Agent	
		
By:	 	 	
Title:	 	 	
	
[Consented to:] 5 	
		
By:	 	 	
Title:	 	 	

4	To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.	
 
5	To be added only if the consent of the Borrowers and/or other parties (e.g. Swing Line Lender, Issuing Bank) is required by the terms of the Credit Agreement.	

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION
 
SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
 
1. Representations and Warranties .
 
1.1. Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.
 
1.2. Assignee . The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.4 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
 
2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
 
3. General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

Exhibit E
 
FORM OF
GUARANTY
 
GUARANTY, dated as of _____ __, 20__, by [              ], a [an ] [              ] (the “ Guarantor ”) in favor of (i)  BANK OF AMERICA, N.A. , successor by merger to Fleet National Bank, as administrative agent (hereinafter, in such capacity, the “ Administrative Agent ”) for itself and the other lending institutions (hereinafter, collectively, the “ Lenders ”) which are or may become parties to a SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of January 11, 2006 (as amended and in effect from time to time, the “ Credit Agreement ”), by and among Barnes Group Inc., a Delaware corporation (“ BGI ”), Barnes Group Switzerland GmbH, Nevis Branch, a limited liability company organized under the laws of Switzerland (“ Barnes Switzerland ”, and together with BGI, collectively referred to herein as the “ Company ”), the Lenders, and the Administrative Agent, with KeyBank National Association, as syndication agent (the “ Syndication Agent ”) and HSBC Bank USA National Association and Webster Bank, National Association, as co-documentation agents (the “ Documentation Agents ”) and (ii) each of the Lenders.
 
WHEREAS , the Company and the Guarantor are members of a group of related corporations, the success of any one of which is dependent in part on the success of the other members of such group;
 
WHEREAS , the Guarantor expects to receive substantial direct and indirect benefits from the extensions of credit to the Company by the Lenders pursuant to the Credit Agreement (which benefits are hereby acknowledged); and
 
WHEREAS , the Guarantor wishes to guaranty the Company’s obligations to the Lenders and the Administrative Agent under or in respect of the Credit Agreement as provided herein;
 
NOW, THEREFORE , the Guarantor hereby agrees with the Lenders and the Administrative Agent as follows:
 
1. Definitions . The term “ Obligations ” and all other capitalized terms used herein without definition shall have the respective meanings provided therefor in the Credit Agreement.
 
2. Guaranty of Payment and Performance . The Guarantor hereby guarantees to the Lenders and the Administrative Agent the full and punctual payment when due (whether at stated maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of all of the Obligations including all such which would become due but for the operation of the automatic stay pursuant to §362(a) of the Federal Bankruptcy Code and the operation of §§502(b) and 506(b) of the Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of all of the Obligations and not of their collectibility only and is in no way conditioned upon any requirement that the Administrative Agent or any Lender first attempt to collect any of the Obligations from the Company or resort to any collateral security or other means of obtaining payment. Should the Company default in the payment or performance of any of the Obligations,

the obligations of the Guarantor hereunder with respect to such Obligations in default shall, upon demand by the Administrative Agent, become immediately due and payable to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, without demand or notice of any nature, all of which are expressly waived by the Guarantor. Payments by the Guarantor hereunder may be required by the Administrative Agent on any number of occasions. All payments by the Guarantor hereunder shall be made to the Administrative Agent, in the manner and at the place of payment specified therefor in the Credit Agreement, for the account of the Lenders and the Administrative Agent.
 
3. Guarantor’s Agreement to Pay Enforcement Costs, etc. The Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to the Administrative Agent, on demand, all costs and expenses (including court costs and legal expenses) incurred or expended by the Administrative Agent or any Lender in connection with the Obligations, this Guaranty and the enforcement thereof, together with interest on amounts recoverable under this §3 from the time when such amounts become due until payment, whether before or after judgment, at the rate of interest for overdue principal set forth in the Credit Agreement, provided that if such interest exceeds the maximum amount permitted to be paid under applicable law, then such interest shall be reduced to such maximum permitted amount.
 
4. Waivers by Guarantor; Bank’s Freedom to Act . The Guarantor agrees that the Obligations will be paid and performed strictly in accordance with their respective terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any Lender with respect thereto. The Guarantor waives promptness, diligences, presentment, demand, protest, notice of acceptance, notice of any Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling of assets of the Company or any other entity or other person primarily or secondarily liable with respect to any of the Obligations, and all suretyship defenses generally. Without limiting the generality of the foregoing, the Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Obligation and agrees that the obligations of the Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any right or remedy against the Company or any other entity or other person primarily or secondarily liable with respect to any of the Obligations; (ii) any extensions, compromise, refinancing, consolidation or renewals of any Obligation; (iii) any change in the time, place or manner of payment of any of the Obligations or any rescissions, waivers, compromise, refinancing, consolidation or other amendments or modifications of any of the terms or provisions of the Credit Agreement , the Notes, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any of the Obligations, (iv) the addition, substitution or release of any entity or other person primarily or secondarily liable for any Obligation; (v) the adequacy of any rights which the Administrative Agent or any Lender may have against any collateral security or other means of obtaining repayment of any of the Obligations; (vi) the impairment of any collateral securing any of the Obligations, including without limitation the failure to perfect or preserve any rights which the Administrative Agent or any Lender might have in such collateral security or the substitution, exchange, surrender,
 
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release, loss or destruction of any such collateral security; or (vii) any other act or omission which might in any manner or to any extent vary the risk of the Guarantor or otherwise operate as a release or discharge of the Guarantor, all of which may be done without notice to the Guarantor. To the fullest extent permitted by law, the Guarantor hereby expressly waives any and all rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law which would otherwise prevent the Administrative Agent or any Lender from bringing any action, including any claim for a deficiency, or exercising any other right or remedy (including any right of set-off), against the Guarantor before or after the Administrative Agent’s or such Lender’s commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (B) any other law which in any other way would otherwise require any election of remedies by the Administrative Agent or any Lender.
 
5. Unenforceability of Obligations Against Company . If for any reason the Company has no legal existence or is under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from the Company by reason of the Company’s insolvency, bankruptcy or reorganization or by other operation of law or for any other reason, this Guaranty shall nevertheless be binding on the Guarantor to the same extent as if the Guarantor at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Company, or for any other reason, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement , the Note, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any Obligation shall be immediately due and payable by the Guarantor.
 
6. Subrogation; Subordination .
 
6.1. Waiver of Rights Against Company . Until the final payment and performance in full of all of the Obligations, the Guarantor shall not exercise and hereby waives any rights against the Company arising as a result of payment by the Guarantor hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and will not prove any claim in competition with the Administrative Agent or any Lender in respect of any payment hereunder in any bankruptcy, insolvency or reorganization case or proceedings of any nature; the Guarantor will not claim any setoff, recoupment or counterclaim against the Company in respect of any liability of the Guarantor to the Company; and the Guarantor waives any benefit of and any right to participate in any collateral security which may be held by the Administrative Agent or any Lender.
 
6.2. Subordination . The payment of any amounts due with respect to any indebtedness of the Company for money borrowed or credit received now or hereafter owed to the Guarantor is hereby subordinated to the prior payment in full of all of the Obligations. The Guarantor agrees that, after the occurrence of any default in the payment or performance of any of the Obligations, the Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Company to the Guarantor until all of the Obligations shall have been paid in full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Obligations are still outstanding, such amounts shall be collected, enforced and received by the Guarantor as trustee for the Lenders and the
 
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Administrative Agent and be paid over to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, on account of the Obligations without affecting in any manner the liability of the Guarantor under the other provisions of this Guaranty.
 
6.3. Provisions Supplemental . The provisions of this §6 shall be supplemental to and not in derogation of any rights and remedies of the Lenders and the Administrative Agent under any separate subordination agreement which the Administrative Agent may at any time and from time to time enter into with the Guarantor for the benefit of the Lenders and the Administrative Agent.
 
7. Setoff . Regardless of the adequacy of any collateral security or other means of obtaining payment of any of the Obligations, each of the Administrative Agent and the Lenders is hereby authorized at any time and from time to time, without notice to the Guarantor (any such notice being expressly waived by the Guarantor) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of the Guarantor under this Guaranty, whether or not the Administrative Agent or such Lender shall have made any demand under this Guaranty and although such obligations may be contingent or unmatured.
 
8. Further Assurances . The Guarantor agrees that it will from time to time, at the request of the Administrative Agent, do all such things and execute all such documents as the Administrative Agent may consider necessary or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of the Lenders and the Administrative Agent hereunder. The Guarantor acknowledges and confirms that the Guarantor itself has established its own adequate means of obtaining from the Company on a continuing basis all information desired by the Guarantor concerning the financial condition of the Company and that the Guarantor will look to the Company and not to the Administrative Agent or any Lender in order for the Guarantor to keep adequately informed of changes in the Company’s financial condition.
 
9. Termination; Reinstatement . This Guaranty shall remain in full force and effect until the Administrative Agent is given written notice of the Guarantor’s intention to discontinue this Guaranty, notwithstanding any intermediate or temporary payment or settlement of the whole or any part of the Obligations. No such notice shall be effective unless received and acknowledged by an officer of the Administrative Agent at the address of the Administrative Agent for notices set forth in §16.6 of the Credit Agreement. No such notice shall affect any rights of the Administrative Agent or any Lender hereunder, including without limitation the rights set forth in §§4 and 6, with respect to any Obligations incurred or accrued prior to the receipt of such notice or any Obligations incurred or accrued pursuant to any contract or commitment in existence prior to such receipt. This Guaranty shall continue to be effective or be reinstated, notwithstanding any such notice, if at any time any payment made or value received with respect to any Obligation is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of the Company, or otherwise, all as though such payment had not been made or value received.
 
10. Successors and Assigns . This Guaranty shall be binding upon the Guarantor, its successors and assigns, and shall inure to the benefit of the Administrative Agent and the Lenders and their respective successors, transferees and assigns. Without limiting the generality of the foregoing sentence, each Lender may assign or otherwise transfer the Credit Agreement,
 
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the Note, the other Loan Documents or any other agreement or note held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to such Lender herein, all in accordance with §15 of the Credit Agreement. The Guarantor may not assign any of its obligations hereunder. Notwithstanding the foregoing, the Guarantor may assign its Obligations to the surviving entity in its merger with another domestic Subsidiary in accordance with §9.5 of the Credit Agreement, provided that no Event of Default exists and is continuing under the Credit Agreement.
 
11. Joinder Agreement and Affirmation . To the extent requested by the Administrative Agent, the Guarantor will cause each Subsidiary (excluding any foreign Subsidiaries) assigned any of the Guarantor’s Obligations in accordance with §10, to execute and deliver to the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, (a) a Joinder Agreement and Affirmation in the form of Exhibit I attached hereto, and (b) any other instruments and documents as the Administrative Agent may reasonably require, together with legal opinions in form and substance reasonably satisfactory to the Administrative Agent to be delivered to the Administrative Agent and the Lenders opining as to authorization, validity and enforceability of such Guaranty.
 
12. Amendments and Waivers . No amendment or waiver of any provision of this Guaranty nor consent to any departure by the Guarantor therefrom shall be effective unless the same shall be in writing and signed by the Administrative Agent with the consent of the Required Lenders. No failure on the part of the Administrative Agent or any Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.
 
13. Notices . All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic or telexed notice, when transmitted, answer back received, addressed as follows: if to the Guarantor, at the address set forth beneath its signature hereto, and if to the Administrative Agent, at the address for notices to the Administrative Agent set forth in §16.6 of the Credit Agreement, or at such address as either party may designate in writing to the other.
 
14. Governing Law; Consent to Jurisdiction . THIS GUARANTY SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW §5-1401, BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The Guarantor agrees that any suit for the enforcement of this Guaranty may be brought in the courts of the State of New York or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court and to service of process in any such suit being made upon the Guarantor by mail at the address specified by reference in §13. The Guarantor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court.
 
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15. Waiver of Jury Trial . THE GUARANTOR AND EACH OF THE BENEFICIARIES HEREBY WAIVE THEIR RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Guarantor hereby waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Guarantor (i) certifies that neither the Administrative Agent or any Lender nor any representative, agent or attorney of the Administrative Agent or any Lender has represented, expressly or otherwise, that the Administrative Agent or any Lender would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in entering into the Credit Agreement and the other Loan Documents to which the Administrative Agent or any Lender is a party, the Administrative Agent and the Lenders are relying upon, among other things, the waivers and certifications contained in this §15.
 
16. Miscellaneous . This Guaranty constitutes the entire agreement of the Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall be in addition to any other guaranty of or collateral security for any of the Obligations. The invalidity or unenforceability of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined.
 
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and delivered as of the date first above written.

[SUBSIDIARY]	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
		
Address:	 	 	

	

 	
		
Telex:	 	 	

Exhibit I
 
FORM OF
JOINDER AGREEMENT AND AFFIRMATION
 
This Joinder Agreement and Affirmation (this “ Joinder Agreement ”) is executed and delivered as of ________ ___, 20__, by [NEW SUBSIDIARY] , a _______ corporation (the “ New Subsidiary ”), pursuant to §11 of the Guaranty, dated as of _______ ___, 20__, as amended (as so amended, and as may be further amended and in effect from time to time, the “ Guaranty ”), by ________ in favor of (i)  BANK OF AMERICA, N.A. , successor by merger to Fleet National Bank, as Administrative Agent for itself and the other Lenders which are or may become parties to a Second Amended and Restated Revolving Credit Agreement, dated as of January 11, 2006 (as amended and in effect from time to time, the “ Credit Agreement ”), by and among Barnes Group Inc., a Delaware corporation, Barnes Group Switzerland GmbH, a limited liability company organized under the laws of Switzerland, the Lenders, and the Administrative Agent, with KeyBank National Association, as syndication agent (the “ Syndication Agent ”) and HSBC Bank USA National Association and Webster Bank, National Association, as co-documentation agents (the “ Documentation Agents ”) and (ii) each of the Lenders. All capitalized terms used in this Joinder Agreement and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement.
 
§1. Joinder to Guaranty . The New Subsidiary hereby agrees to become a guarantor of the full and punctual payment when due (whether at stated maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of all the Obligations and, by executing and delivering this Joinder Agreement, does hereby join and become a party to the Guaranty as a “Guarantor” (as defined in the Guaranty), assuming all of the obligations and liabilities of a “Guarantor” (as defined in the Guaranty) thereunder. The New Subsidiary hereby agrees to comply with, and be bound by, all of the terms and conditions of the Guaranty in all respects as an original guarantor thereunder, as if the New Subsidiary was an original signatory thereto, including without limitation, guaranteeing all Obligations arising or incurred after the Closing Date.
 
§2. Effectiveness . This Joinder Agreement shall become effective upon the receipt by the Administrative Agent of facsimile copies of original counterparts (to be followed promptly by original counterparts) or original counterparts of this Joinder Agreement, duly authorized, executed and delivered by the New Subsidiary.
 
§3. Governing Law . THIS JOINDER AGREEMENT SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW §5-1401, BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
 
§4. Representations and Covenants . The New Subsidiary hereby represents and warrants to the Administrative Agent and each of the Lenders that its chief executive office and principal place of business is at the location set forth beneath its signature hereto.

§5. Miscellaneous . The undersigned agrees that this Joinder Agreement shall be deemed to be, and is hereby made a part of the applicable Loan Documents as if set forth therein in full. This Joinder Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which counterparts taken together shall be deemed to constitute one and the same instrument.
 
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IN WITNESS WHEREOF , the undersigned has caused this Joinder Agreement to be duly executed as of the date first written above.

[NEW SUBSIDIARY]	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
	
Address:	

	

 	
		
Telex:	 	 	
 
Agreed and Accepted to as of this __ day of _________, 20__:

BANK OF AMERICA, N.A.,	
successor by merger to Fleet National Bank	
		
By:	 	 	
Name:	 	 	
Title:	 	 	

Exhibit F
 
FORM OF
BGI GUARANTY
 
BGI GUARANTY , dated as of January 11, 2006, by BARNES GROUP INC. , a Delaware corporation (“ BGI ” and the “ Guarantor ”) in favor of (i)  BANK OF AMERICA, N.A., successor by merger to Fleet National Bank, as administrative agent (hereinafter, in such capacity, the “ Administrative Agent ”) for itself and the other lending institutions (hereinafter, collectively, the “ Lenders ”) which are or may become parties to a SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of January 11, 2006 (as amended and in effect from time to time, the “ Credit Agreement ”), by and among BGI, Barnes Group Switzerland GmbH, a limited liability company organized under the laws of Switzerland (“ Barnes Switzerland ”, and the “ Company ”), the Lenders, and the Administrative Agent, with KeyBank National Association, as syndication agent (the “ Syndication Agent ”) and HSBC Bank USA National Association and Webster Bank, National Association, as co-documentation agents (the “ Documentation Agents ”) and (ii) each of the Lenders.
 
WHEREAS , the Company and the Guarantor are members of a group of related corporations, the success of any one of which is dependent in part on the success of the other members of such group;
 
WHEREAS , the Guarantor expects to receive substantial direct and indirect benefits from the extensions of credit to the Company by the Lenders pursuant to the Credit Agreement (which benefits are hereby acknowledged); and
 
WHEREAS , the Guarantor wishes to guaranty the Company’s obligations to the Lenders and the Administrative Agent under or in respect of the Credit Agreement as provided herein;
 
NOW, THEREFORE , the Guarantor hereby agrees with the Lenders and the Administrative Agent as follows:
 
1. Definitions . The term “ Barnes Switzerland Obligations ” and all other capitalized terms used herein without definition shall have the respective meanings provided therefor in the Credit Agreement.
 
2. Guaranty of Payment and Performance . The Guarantor hereby guarantees to the Lenders and the Administrative Agent the full and punctual payment when due (whether at stated maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of all of the Barnes Switzerland Obligations including all such which would become due but for the operation of the automatic stay pursuant to §362(a) of the Federal Bankruptcy Code and the operation of §§502(b) and 506(b) of the Federal Bankruptcy Code. This BGI Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of all of the Barnes Switzerland Obligations and not of their collectibility only and is in no way conditioned upon any requirement that the Administrative Agent or any Lender first attempt to collect any of the Barnes Switzerland Obligations from the Company or resort to any collateral security or other means of obtaining payment. Should the

Company default in the payment or performance of any of the Barnes Switzerland Obligations, the obligations of the Guarantor hereunder with respect to such Barnes Switzerland Obligations in default shall, upon demand by the Administrative Agent, become immediately due and payable to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, without demand or notice of any nature, all of which are expressly waived by the Guarantor. Payments by the Guarantor hereunder may be required by the Administrative Agent on any number of occasions. All payments by the Guarantor hereunder shall be made to the Administrative Agent, in the manner and at the place of payment specified therefor in the Credit Agreement, for the account of the Lenders and the Administrative Agent.
 
3. Guarantor’s Agreement to Pay Enforcement Costs, etc. The Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to the Administrative Agent, on demand, all costs and expenses (including court costs and legal expenses) incurred or expended by the Administrative Agent or any Lender in connection with the Barnes Switzerland Obligations, this BGI Guaranty and the enforcement thereof, together with interest on amounts recoverable under this §3 from the time when such amounts become due until payment, whether before or after judgment, at the rate of interest for overdue principal set forth in the Credit Agreement, provided that if such interest exceeds the maximum amount permitted to be paid under applicable law, then such interest shall be reduced to such maximum permitted amount.
 
4. Waivers by Guarantor; Bank’s Freedom to Act . The Guarantor agrees that the Barnes Switzerland Obligations will be paid and performed strictly in accordance with their respective terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any Lender with respect thereto. The Guarantor waives promptness, diligences, presentment, demand, protest, notice of acceptance, notice of any Barnes Switzerland Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling of assets of the Company or any other entity or other person primarily or secondarily liable with respect to any of the Barnes Switzerland Obligations, and all suretyship defenses generally. Without limiting the generality of the foregoing, the Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Barnes Switzerland Obligation and agrees that the obligations of the Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any right or remedy against the Company or any other entity or other person primarily or secondarily liable with respect to any of the Barnes Switzerland Obligations; (ii) any extensions, compromise, refinancing, consolidation or renewals of any Barnes Switzerland Obligation; (iii) any change in the time, place or manner of payment of any of the Barnes Switzerland Obligations or any rescissions, waivers, compromise, refinancing, consolidation or other amendments or modifications of any of the terms or provisions of the Credit Agreement , the Notes, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any of the Barnes Switzerland Obligations, (iv) the addition, substitution or release of any entity or other person primarily or secondarily liable for any Barnes Switzerland Obligation; (v) the adequacy of any rights which the Administrative Agent or any Lender may have against any collateral security or other means of obtaining repayment of any of the Barnes
 
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Switzerland Obligations; (vi) the impairment of any collateral securing any of the Barnes Switzerland Obligations, including without limitation the failure to perfect or preserve any rights which the Administrative Agent or any Lender might have in such collateral security or the substitution, exchange, surrender, release, loss or destruction of any such collateral security; or (vii) any other act or omission which might in any manner or to any extent vary the risk of the Guarantor or otherwise operate as a release or discharge of the Guarantor, all of which may be done without notice to the Guarantor. To the fullest extent permitted by law, the Guarantor hereby expressly waives any and all rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law which would otherwise prevent the Administrative Agent or any Lender from bringing any action, including any claim for a deficiency, or exercising any other right or remedy (including any right of set-off), against the Guarantor before or after the Administrative Agent’s or such Lender’s commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (B) any other law which in any other way would otherwise require any election of remedies by the Administrative Agent or any Lender.
 
5. Unenforceability of Barnes Switzerland Obligations Against Company . If for any reason the Company has no legal existence or is under no legal obligation to discharge any of the Barnes Switzerland Obligations, or if any of the Barnes Switzerland Obligations have become irrecoverable from the Company by reason of the Company’s insolvency, bankruptcy or reorganization or by other operation of law or for any other reason, this BGI Guaranty shall nevertheless be binding on the Guarantor to the same extent as if the Guarantor at all times had been the principal obligor on all such Barnes Switzerland Obligations. In the event that acceleration of the time for payment of any of the Barnes Switzerland Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Company, or for any other reason, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement , the Note, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any Barnes Switzerland Obligation shall be immediately due and payable by the Guarantor.
 
6. Subrogation; Subordination .
 
6.1. Waiver of Rights Against Company . Until the final payment and performance in full of all of the Barnes Switzerland Obligations, the Guarantor shall not exercise and hereby waives any rights against the Company arising as a result of payment by the Guarantor hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and will not prove any claim in competition with the Administrative Agent or any Lender in respect of any payment hereunder in any bankruptcy, insolvency or reorganization case or proceedings of any nature; the Guarantor will not claim any setoff, recoupment or counterclaim against the Company in respect of any liability of the Guarantor to the Company; and the Guarantor waives any benefit of and any right to participate in any collateral security which may be held by the Administrative Agent or any Lender.
 
6.2. Subordination . The payment of any amounts due with respect to any indebtedness of the Company for money borrowed or credit received now or hereafter owed to the Guarantor is hereby subordinated to the prior payment in full of all of the Barnes Switzerland Obligations. The Guarantor agrees that, after the occurrence of any
 
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default in the payment or performance of any of the Barnes Switzerland Obligations, the Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Company to the Guarantor until all of the Barnes Switzerland Obligations shall have been paid in full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Barnes Switzerland Obligations are still outstanding, such amounts shall be collected, enforced and received by the Guarantor as trustee for the Lenders and the Administrative Agent and be paid over to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, on account of the Barnes Switzerland Obligations without affecting in any manner the liability of the Guarantor under the other provisions of this BGI Guaranty.
 
6.3. Provisions Supplemental . The provisions of this §6 shall be supplemental to and not in derogation of any rights and remedies of the Lenders and the Administrative Agent under any separate subordination agreement which the Administrative Agent may at any time and from time to time enter into with the Guarantor for the benefit of the Lenders and the Administrative Agent.
 
7. Setoff . Regardless of the adequacy of any collateral security or other means of obtaining payment of any of the Barnes Switzerland Obligations, each of the Administrative Agent and the Lenders is hereby authorized at any time and from time to time, without notice to the Guarantor (any such notice being expressly waived by the Guarantor) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of the Guarantor under this BGI Guaranty, whether or not the Administrative Agent or such Lender shall have made any demand under this BGI Guaranty and although such obligations may be contingent or unmatured.
 
8. Further Assurances . The Guarantor agrees that it will from time to time, at the request of the Administrative Agent, do all such things and execute all such documents as the Administrative Agent may consider necessary or desirable to give full effect to this BGI Guaranty and to perfect and preserve the rights and powers of the Lenders and the Administrative Agent hereunder. The Guarantor acknowledges and confirms that the Guarantor itself has established its own adequate means of obtaining from the Company on a continuing basis all information desired by the Guarantor concerning the financial condition of the Company and that the Guarantor will look to the Company and not to the Administrative Agent or any Lender in order for the Guarantor to keep adequately informed of changes in the Company’s financial condition.
 
9. Termination; Reinstatement . This BGI Guaranty shall remain in full force and effect until the Administrative Agent is given written notice of the Guarantor’s intention to discontinue this BGI Guaranty, notwithstanding any intermediate or temporary payment or settlement of the whole or any part of the Barnes Switzerland Obligations. No such notice shall be effective unless received and acknowledged by an officer of the Administrative Agent at the address of the Administrative Agent for notices set forth in §16.6 of the Credit Agreement. No such notice shall affect any rights of the Administrative Agent or any Lender hereunder, including without limitation the rights set forth in §§4 and 6, with respect to any Barnes Switzerland Obligations incurred or accrued prior to the receipt of such notice or any Barnes
 
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Switzerland Obligations incurred or accrued pursuant to any contract or commitment in existence prior to such receipt. This BGI Guaranty shall continue to be effective or be reinstated, notwithstanding any such notice, if at any time any payment made or value received with respect to any Barnes Switzerland Obligation is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of the Company, or otherwise, all as though such payment had not been made or value received.
 
10. Successors and Assigns . This BGI Guaranty shall be binding upon the Guarantor, its successors and assigns, and shall inure to the benefit of the Administrative Agent and the Lenders and their respective successors, transferees and assigns. Without limiting the generality of the foregoing sentence, each Lender may assign or otherwise transfer the Credit Agreement , the Note, the other Loan Documents or any other agreement or note held by it evidencing, securing or otherwise executed in connection with the Barnes Switzerland Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to such Lender herein, all in accordance with §15 of the Credit Agreement. The Guarantor may not assign any of its obligations hereunder.
 
11. Amendments and Waivers . No amendment or waiver of any provision of this BGI Guaranty nor consent to any departure by the Guarantor therefrom shall be effective unless the same shall be in writing and signed by the Administrative Agent with the consent of the Required Lenders. No failure on the part of the Administrative Agent or any Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.
 
12. Notices . All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic or telexed notice, when transmitted, answer back received, addressed as follows: if to the Guarantor, at the address set forth beneath its signature hereto, and if to the Administrative Agent, at the address for notices to the Administrative Agent set forth in §16.6 of the Credit Agreement, or at such address as either party may designate in writing to the other.
 
13. Governing Law; Consent to Jurisdiction . THIS BGI GUARANTY SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW §5-1401, BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The Guarantor agrees that any suit for the enforcement of this BGI Guaranty may be brought in the courts of the State of New York or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court and to service of process in any such suit being made upon the Guarantor by mail at the address specified by reference in §12. The Guarantor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court.
 
14. Waiver of Jury Trial . THE GUARANTOR AND EACH OF THE BENEFICIARIES HEREBY WAIVE THEIR RIGHT TO A JURY TRIAL WITH
 
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RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS BGI GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Guarantor hereby waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Guarantor (i) certifies that neither the Administrative Agent or any Lender nor any representative, agent or attorney of the Administrative Agent or any Lender has represented, expressly or otherwise, that the Administrative Agent or any Lender would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in entering into the Credit Agreement and the other Loan Documents to which the Administrative Agent or any Lender is a party, the Administrative Agent and the Lenders are relying upon, among other things, the waivers and certifications contained in this §14.
 
15. Miscellaneous . This BGI Guaranty constitutes the entire agreement of the Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this BGI Guaranty shall be in addition to any other guaranty of or collateral security for any of the Barnes Switzerland Obligations. The invalidity or unenforceability of any one or more sections of this BGI Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this BGI Guaranty shall be equally applicable to the singular and plural forms of the terms defined.
 
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IN WITNESS WHEREOF, the Guarantor has caused this BGI Guaranty to be executed and delivered as of the date first above written.

BARNES GROUP INC.	
		
By:   	 	 	
 	 	William C. Denniger	
 	 	Senior Vice President, Finance and Chief Financial Officer	
		
By:   	 	 	
 	 	Lawrence W. O’Brien	
 	 	Vice President, Treasurer	
	
Address:	
		
 	 	123 Main Street
P.O. Box 489
Bristol, CT 06011
Attention: General Counsel	
		
Telex:	 	(203) 578-2579	
 
Exhibit 4.1(ii)
 
BGI GUARANTY
 
BGI GUARANTY , dated as of January 11, 2006, by BARNES GROUP INC., a Delaware corporation (“ BGI ” and the “ Guarantor ”) in favor of (i) BANK OF AMERICA, N.A., successor by merger to Fleet National Bank, as administrative agent (hereinafter, in such capacity, the “ Administrative Agent ”) for itself and the other lending institutions (hereinafter, collectively, the “ Lenders ”) which are or may become parties to a SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of January 11, 2006 (as amended and in effect from time to time, the “ Credit Agreement ”), by and among BGI, Barnes Group Switzerland GmbH, a limited liability company organized under the laws of Switzerland (“ Barnes Switzerland ”, and the “ Company ”), the Lenders, and the Administrative Agent, with KeyBank National Association, as syndication agent (the “ Syndication Agent ”) and HSBC Bank USA National Association and Webster Bank, National Association, as co-documentation agents (the “ Documentation Agents ”) and (ii) each of the Lenders.
 
WHEREAS , the Company and the Guarantor are members of a group of related corporations, the success of any one of which is dependent in part on the success of the other members of such group;
 
WHEREAS , the Guarantor expects to receive substantial direct and indirect benefits from the extensions of credit to the Company by the Lenders pursuant to the Credit Agreement (which benefits are hereby acknowledged); and
 
WHEREAS , the Guarantor wishes to guaranty the Company’s obligations to the Lenders and the Administrative Agent under or in respect of the Credit Agreement as provided herein;
 
NOW, THEREFORE , the Guarantor hereby agrees with the Lenders and the Administrative Agent as follows:
 
1. Definitions . The term “ Barnes Switzerland Obligations ” and all other capitalized terms used herein without definition shall have the respective meanings provided therefor in the Credit Agreement.
 
2. Guaranty of Payment and Performance . The Guarantor hereby guarantees to the Lenders and the Administrative Agent the full and punctual payment when due (whether at stated maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of all of the Barnes Switzerland Obligations including all such which would become due but for the operation of the automatic stay pursuant to §362(a) of the Federal Bankruptcy Code and the operation of §§502(b) and 506(b) of the Federal Bankruptcy Code. This BGI Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of all of the Barnes Switzerland Obligations and not of their collectibility only and is in no way conditioned upon any requirement that the Administrative Agent or any Lender first attempt to collect any of the Barnes Switzerland Obligations from the Company or resort to any collateral security or other means of obtaining payment. Should the Company default in the payment or performance of any of the Barnes Switzerland Obligations, the obligations of the Guarantor hereunder with respect to such Barnes Switzerland Obligations in default shall, upon demand by the Administrative Agent, become immediately due and

payable to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, without demand or notice of any nature, all of which are expressly waived by the Guarantor. Payments by the Guarantor hereunder may be required by the Administrative Agent on any number of occasions. All payments by the Guarantor hereunder shall be made to the Administrative Agent, in the manner and at the place of payment specified therefor in the Credit Agreement, for the account of the Lenders and the Administrative Agent.
 
3. Guarantor’s Agreement to Pay Enforcement Costs, etc. The Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to the Administrative Agent, on demand, all costs and expenses (including court costs and legal expenses) incurred or expended by the Administrative Agent or any Lender in connection with the Barnes Switzerland Obligations, this BGI Guaranty and the enforcement thereof, together with interest on amounts recoverable under this §3 from the time when such amounts become due until payment, whether before or after judgment, at the rate of interest for overdue principal set forth in the Credit Agreement, provided that if such interest exceeds the maximum amount permitted to be paid under applicable law, then such interest shall be reduced to such maximum permitted amount.
 
4. Waivers by Guarantor; Bank’s Freedom to Act . The Guarantor agrees that the Barnes Switzerland Obligations will be paid and performed strictly in accordance with their respective terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any Lender with respect thereto. The Guarantor waives promptness, diligences, presentment, demand, protest, notice of acceptance, notice of any Barnes Switzerland Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling of assets of the Company or any other entity or other person primarily or secondarily liable with respect to any of the Barnes Switzerland Obligations, and all suretyship defenses generally. Without limiting the generality of the foregoing, the Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Barnes Switzerland Obligation and agrees that the obligations of the Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any right or remedy against the Company or any other entity or other person primarily or secondarily liable with respect to any of the Barnes Switzerland Obligations; (ii) any extensions, compromise, refinancing, consolidation or renewals of any Barnes Switzerland Obligation; (iii) any change in the time, place or manner of payment of any of the Barnes Switzerland Obligations or any rescissions, waivers, compromise, refinancing, consolidation or other amendments or modifications of any of the terms or provisions of the Credit Agreement , the Notes, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any of the Barnes Switzerland Obligations, (iv) the addition, substitution or release of any entity or other person primarily or secondarily liable for any Barnes Switzerland Obligation; (v) the adequacy of any rights which the Administrative Agent or any Lender may have against any collateral security or other means of obtaining repayment of any of the Barnes Switzerland Obligations; (vi) the impairment of any collateral securing any of the Barnes Switzerland Obligations, including without limitation the failure to perfect or preserve any rights which the Administrative Agent or any Lender might have in such collateral security or the
 
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substitution, exchange, surrender, release, loss or destruction of any such collateral security; or (vii) any other act or omission which might in any manner or to any extent vary the risk of the Guarantor or otherwise operate as a release or discharge of the Guarantor, all of which may be done without notice to the Guarantor. To the fullest extent permitted by law, the Guarantor hereby expressly waives any and all rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law which would otherwise prevent the Administrative Agent or any Lender from bringing any action, including any claim for a deficiency, or exercising any other right or remedy (including any right of set-off), against the Guarantor before or after the Administrative Agent’s or such Lender’s commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (B) any other law which in any other way would otherwise require any election of remedies by the Administrative Agent or any Lender.
 
5. Unenforceability of Barnes Switzerland Obligations Against Company . If for any reason the Company has no legal existence or is under no legal obligation to discharge any of the Barnes Switzerland Obligations, or if any of the Barnes Switzerland Obligations have become irrecoverable from the Company by reason of the Company’s insolvency, bankruptcy or reorganization or by other operation of law or for any other reason, this BGI Guaranty shall nevertheless be binding on the Guarantor to the same extent as if the Guarantor at all times had been the principal obligor on all such Barnes Switzerland Obligations. In the event that acceleration of the time for payment of any of the Barnes Switzerland Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Company, or for any other reason, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement , the Note, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any Barnes Switzerland Obligation shall be immediately due and payable by the Guarantor.
 
6. Subrogation; Subordination .
 
6.1. Waiver of Rights Against Company . Until the final payment and performance in full of all of the Barnes Switzerland Obligations, the Guarantor shall not exercise and hereby waives any rights against the Company arising as a result of payment by the Guarantor hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and will not prove any claim in competition with the Administrative Agent or any Lender in respect of any payment hereunder in any bankruptcy, insolvency or reorganization case or proceedings of any nature; the Guarantor will not claim any setoff, recoupment or counterclaim against the Company in respect of any liability of the Guarantor to the Company; and the Guarantor waives any benefit of and any right to participate in any collateral security which may be held by the Administrative Agent or any Lender.
 
6.2. Subordination . The payment of any amounts due with respect to any indebtedness of the Company for money borrowed or credit received now or hereafter owed to the Guarantor is hereby subordinated to the prior payment in full of all of the Barnes Switzerland Obligations. The Guarantor agrees that, after the occurrence of any default in the payment or performance of any of the Barnes Switzerland Obligations, the Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Company to the Guarantor until all of the Barnes Switzerland Obligations shall
 
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have been paid in full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Barnes Switzerland Obligations are still outstanding, such amounts shall be collected, enforced and received by the Guarantor as trustee for the Lenders and the Administrative Agent and be paid over to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, on account of the Barnes Switzerland Obligations without affecting in any manner the liability of the Guarantor under the other provisions of this BGI Guaranty.
 
6.3. Provisions Supplemental . The provisions of this §6 shall be supplemental to and not in derogation of any rights and remedies of the Lenders and the Administrative Agent under any separate subordination agreement which the Administrative Agent may at any time and from time to time enter into with the Guarantor for the benefit of the Lenders and the Administrative Agent.
 
7. Setoff . Regardless of the adequacy of any collateral security or other means of obtaining payment of any of the Barnes Switzerland Obligations, each of the Administrative Agent and the Lenders is hereby authorized at any time and from time to time, without notice to the Guarantor (any such notice being expressly waived by the Guarantor) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of the Guarantor under this BGI Guaranty, whether or not the Administrative Agent or such Lender shall have made any demand under this BGI Guaranty and although such obligations may be contingent or unmatured.
 
8. Further Assurances . The Guarantor agrees that it will from time to time, at the request of the Administrative Agent, do all such things and execute all such documents as the Administrative Agent may consider necessary or desirable to give full effect to this BGI Guaranty and to perfect and preserve the rights and powers of the Lenders and the Administrative Agent hereunder. The Guarantor acknowledges and confirms that the Guarantor itself has established its own adequate means of obtaining from the Company on a continuing basis all information desired by the Guarantor concerning the financial condition of the Company and that the Guarantor will look to the Company and not to the Administrative Agent or any Lender in order for the Guarantor to keep adequately informed of changes in the Company’s financial condition.
 
9. Termination; Reinstatement . This BGI Guaranty shall remain in full force and effect until the Administrative Agent is given written notice of the Guarantor’s intention to discontinue this BGI Guaranty, notwithstanding any intermediate or temporary payment or settlement of the whole or any part of the Barnes Switzerland Obligations. No such notice shall be effective unless received and acknowledged by an officer of the Administrative Agent at the address of the Administrative Agent for notices set forth in §16.6 of the Credit Agreement. No such notice shall affect any rights of the Administrative Agent or any Lender hereunder, including without limitation the rights set forth in §§4 and 6, with respect to any Barnes Switzerland Obligations incurred or accrued prior to the receipt of such notice or any Barnes Switzerland Obligations incurred or accrued pursuant to any contract or commitment in existence prior to such receipt. This BGI Guaranty shall continue to be effective or be reinstated, notwithstanding any such notice, if at any time any payment made or value received with respect
 
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to any Barnes Switzerland Obligation is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of the Company, or otherwise, all as though such payment had not been made or value received.
 
10. Successors and Assigns . This BGI Guaranty shall be binding upon the Guarantor, its successors and assigns, and shall inure to the benefit of the Administrative Agent and the Lenders and their respective successors, transferees and assigns. Without limiting the generality of the foregoing sentence, each Lender may assign or otherwise transfer the Credit Agreement , the Note, the other Loan Documents or any other agreement or note held by it evidencing, securing or otherwise executed in connection with the Barnes Switzerland Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to such Lender herein, all in accordance with §15 of the Credit Agreement. The Guarantor may not assign any of its obligations hereunder.
 
11. Amendments and Waivers . No amendment or waiver of any provision of this BGI Guaranty nor consent to any departure by the Guarantor therefrom shall be effective unless the same shall be in writing and signed by the Administrative Agent with the consent of the Required Lenders. No failure on the part of the Administrative Agent or any Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.
 
12. Notices . All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic or telexed notice, when transmitted, answer back received, addressed as follows: if to the Guarantor, at the address set forth beneath its signature hereto, and if to the Administrative Agent, at the address for notices to the Administrative Agent set forth in §16.6 of the Credit Agreement, or at such address as either party may designate in writing to the other.
 
13. Governing Law; Consent to Jurisdiction . THIS BGI GUARANTY SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW §5-1401, BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The Guarantor agrees that any suit for the enforcement of this BGI Guaranty may be brought in the courts of the State of New York or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court and to service of process in any such suit being made upon the Guarantor by mail at the address specified by reference in §12. The Guarantor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court.
 
14. Waiver of Jury Trial . THE GUARANTOR AND EACH OF THE BENEFICIARIES HEREBY WAIVE THEIR RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS BGI GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR
 
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OBLIGATIONS. Except as prohibited by law, the Guarantor hereby waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Guarantor (i) certifies that neither the Administrative Agent or any Lender nor any representative, agent or attorney of the Administrative Agent or any Lender has represented, expressly or otherwise, that the Administrative Agent or any Lender would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in entering into the Credit Agreement and the other Loan Documents to which the Administrative Agent or any Lender is a party, the Administrative Agent and the Lenders are relying upon, among other things, the waivers and certifications contained in this §14.
 
15. Miscellaneous . This BGI Guaranty constitutes the entire agreement of the Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this BGI Guaranty shall be in addition to any other guaranty of or collateral security for any of the Barnes Switzerland Obligations. The invalidity or unenforceability of any one or more sections of this BGI Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this BGI Guaranty shall be equally applicable to the singular and plural forms of the terms defined.
 
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
 
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IN WITNESS WHEREOF, the Guarantor has caused this BGI Guaranty to be executed and delivered as of the date first above written.

BARNES GROUP INC.	
		
By:	 	/s/    W ILLIAM C. D ENNINGER        	
 	 	William C. Denninger
Senior Vice President, Finance and Chief Financial Officer	
		
By:	 	/s/    L AWRENCE W. O’B RIEN         	
 	 	Lawrence W. O’Brien
Vice President, Treasurer	
	
Address:	
		
 	 	123 Main Street
P.O. Box 489
Bristol, CT 06011
Attention: General Counsel	
	
Telex: (860) 585-5396	
 
Signature Page to BGI Guaranty
 
Exhibit 4.1(iii)
 
SHARING AGREEMENT
 
THIS SHARING AGREEMENT, dated as of January 11, 2006, is among (i) Bank of America, N.A., as agent for the Lenders (as defined below) under the Credit Agreement referred to below, (ii) the holders of the 1999 Notes issued pursuant to the 1999 Note Agreement (as defined below) listed on the signature pages hereof (together with their respective successors and assigns, the “ 1999 Noteholders ”), (iii) the holders of the 2000 Notes issued pursuant to the 2000 Note Agreement (as defined below) listed on the signature pages hereof (together with their respective successors and assigns, the “ 2000 Noteholders ”) and (iv) the holders from time to time (together with their respective successors and assigns, the “Parity Debtholders” ) of an Additional Obligor’s (as defined below) indebtedness under one or more credit, loan or note agreements, indentures or other financing instruments with an Additional Obligor and such Parity Debtholders (or a trustee or agent or similar Person acting for such Parity Debtholders) (as such agreements, indentures or instruments shall from time to time be amended and in effect being herein called the “ Parity Debt Agreements ”), which Parity Debtholders shall have become parties hereto in the manner provided in Section 5.4 hereof. Capitalized terms not otherwise defined herein shall have the meaning set forth in Section 2.1 hereof.
 
1.	PRELIMINARY STATEMENT	
 
1.1. The 1999 Noteholders have each entered into a Note Agreement, dated as of November 12, 1999, with 3031786 Nova Scotia Company (“ 3031786 ”) as amended by (i) that certain Amendment No. 1 dated as of February 5, 2003 pursuant to which the 1999 Noteholders purchased from 3031786 7.66% Senior Notes due November 12, 2007, in the aggregate principal amount of its U.S.$24,500,000 (the “ 7.66% Notes ”) and its 7.80% Senior Notes due November 12, 2010, in the aggregate principal amount of U.S.$45,500,000 (the “ 7.80% Notes ” and together with the 7.66% Notes, collectively, the “ 1999 Notes ”), (ii) that certain Assumption and Amendment Agreement, dated as of August 26, 2005, whereby Barnes Group Inc. (the “ Company ”) assumed the obligations of 30301786 under said Note Agreement and the 1999 Notes, and (iii) that certain Amendment No. 3 dated as of the date hereof among the 1999 Noteholders and the Company (said Note Agreement, as so amended, and as it may hereafter be amended, modified, supplemented or restated from time to time, the “ 1999 Note Agreement ”);
 
1.2. The Lenders and the Agent have entered into the Second Amended and Restated Revolving Credit Agreement, dated as of January 11, 2006 (and as it may hereafter be amended, restated, modified or otherwise supplemented from time to time, the “ Credit Agreement ”), with the Company and Barnes Group Switzerland GmbH (“ Barnes Switzerland ”, together with the Company and each Additional Obligor, collectively, the “ Obligors ”), and other parties thereto pursuant to which the Lenders are making and providing, and may continue to make and provide, revolving loans and other financial accommodations to the Obligors;
 
1.3. The 2000 Noteholders have each entered into a Note Agreement, dated as of November 21, 2000 (as amended by Amendment No. 1 dated February 21, 2002, Amendment No. 2 dated as of February 5, 2003 and Amendment No. 3 dated the date hereof, and as it may be amended, modified, supplemented or restated from time to time, the “ 2000 Note Agreement ”),

with the Company pursuant to which the 2000 Noteholders have purchased from the Company its 8.59% Senior Notes due November 21, 2008, in the aggregate principal amount of $60,000,000 (the “ 2000 Notes ”);
 
1.4. The parties hereto wish to define their rights and obligations with respect to each other such that, after a Notice of Election to Share has been sent and so long as such notice remains in effect, any payments by a Obligor of the Company received by any Creditor on account of the Noteholder Obligations, the Loan Obligations or any Parity Debt Agreement Obligations shall be shared among all Creditors equally and ratably in accordance with their respective Sharing Percentages, all as set forth in this Agreement.
 
2.	INTERPRETATION OF THIS AGREEMENT	
 
 	2.1.	Defined Terms.	
 
As used in this Agreement, capitalized terms have the respective meanings specified below or set forth in the section of this Agreement referred to immediately following such term (such definitions, unless otherwise expressly provided, to be equally applicable to both the singular and plural forms of the terms defined):
 
Additional Obligor – means a Foreign Subsidiary of the Company (i) designated by the Company as an “Additional Obligor”, (ii) all of whose lenders have become a party to this Agreement in accordance with Section 5.4 of this Agreement and (iii) the Company has entered into a guaranty of such Foreign Subsidiary’s debt owing to such lenders.
 
Agent – has the meaning given to “Administrative Agent” as set forth in the Credit Agreement.
 
Agreement, this – means this Sharing Agreement, as it may be amended, modified, supplemented or restated from time to time.
 
Barnes Switzerland – has the meaning set forth in Section 1.2 of this Agreement.
 
Commitment – has the meaning set forth in the Credit Agreement.
 
Company – has the meaning set forth in Section 1.1 of this Agreement.
 
Company Loan Documents – means, as applicable, the 1999 Note Agreement, the 2000 Note Agreement, the Loan Documents and any Parity Debt Agreements.
 
Credit Agreement – has the meaning set forth in Section 1.2 of this Agreement.
 
Creditor Joinder Agreement – has the meaning set forth in Section 5.4(a) of this Agreement.
 
Creditors – means, collectively, the Lenders, the Noteholders and the Parity Debtholders.
 
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Distribution Agent – has the meaning set forth in Section 3.3(a) of this Agreement.
 
Event of Default – means an “Event of Default,” as defined in any of the 1999 Note Agreement, the Credit Agreement, the 2000 Note Agreement or any Parity Debt Agreement, as the case may be.
 
Foreign Subsidiaries – means any Subsidiary organized under the laws of a jurisdiction other than the United States of America or one its states or the District of Columbia.
 
Issuing Bank – has the meaning set forth in the Credit Agreement.
 
Lenders – has the meaning set forth in the Credit Agreement.
 
Letter of Credit – has the meaning set forth in the Credit Agreement.
 
Letter of Credit Obligations – has the meaning set forth in the Credit Agreement.
 
Loan Documents – means the “Loan Documents”, as defined in the Credit Agreement.
 
Loan Obligations – means, collectively, without duplication (a) all amounts owing by the Company and its Subsidiaries to the Lenders (including the Issuing Bank) and the Agent, pursuant to the terms of the Credit Agreement and the other Loan Documents in respect of principal, interest, reimbursement obligations, fees (including facility and agent fees) and expenses (including breakage costs) plus (b) the aggregate undrawn amount of all unexpired Letters of Credit.
 
Net Lender Exposure – means in connection with any Sharing Payment by the Lenders with respect to the Clawback Period, the difference, if any, of (i) the outstanding Loan Obligations on the first day of the Clawback Period and (ii) the outstanding Loan Obligations on the date the Notice of Election to Share is received by the Creditors.
 
1999 Noteholders – has the meaning set forth in the first paragraph of this Agreement.
 
1999 Note Agreement – has the meaning set forth in Section 1.1 of this Agreement.
 
1999 Notes – has the meaning set forth in Section 1.1 of this Agreement.
 
Noteholder Obligations – means, collectively, without duplication, all amounts owing by the Company and its Subsidiaries to (a) the 1999 Noteholders, pursuant to the terms of the 1999 Note Agreement and the other documents, agreements and instruments executed in connection therewith (including any related notes), in respect of principal, interest, Make-Whole Price (as such term is defined in the 1999 Note Agreement), fees and expenses and (b) the 2000 Noteholders, pursuant to the terms of the 2000 Note
 
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Agreement and the other documents, agreements and instruments executed in connection therewith (including any related notes), in respect of principal, interest, Make-Whole Price (as each such term is defined in the 2000 Note Agreement), fees and expenses.
 
Noteholders – means, collectively, the 1999 Noteholders and the 2000 Noteholders.
 
Notice of Election to Share – a Notice in substantially the form of Exhibit A attached hereto, executed and delivered by the Requisite 1999 Noteholders, the Requisite 2000 Noteholders, the Agent (on behalf of the Requisite Lenders) or the Requisite Parity Debtholders, as the case may be, pursuant to Section 3.1 hereof, which Notice shall invoke the sharing provisions provided for herein.
 
Notice of Shared Payment – means a written notification given by or on behalf of any Creditor stating that such Creditor has received a Shared Payment.
 
Obligations – means, collectively, the Loan Obligations, the Noteholder Obligations and the Parity Debt Agreement Obligations.
 
Obligors – has the meaning set forth in Section 1.2 of this Agreement.
 
Original Lenders – has the meaning set forth in the first paragraph of this Agreement.
 
Parity Debt Agreements – has the meaning set forth in the first paragraph of this Agreement.
 
Parity Debtholders – has the meaning set forth in the first paragraph of this Agreement.
 
Parity Debt Agreement Obligations – means as to any particular Parity Debt Agreement, all payment obligations of the Company and all its Subsidiaries to the Parity Debtholders under such Parity Debt Agreement and the documents, agreements and/or instruments executed in connection therewith in respect of principal, interest, reimbursement obligations, premiums, breakage, make-whole payments, fees and expenses with respect to such Parity Debt Agreement Obligations.
 
Person – means an individual, partnership, corporation (including a business trust), limited liability company or partnership, joint stock company, trust, unincorporated association, joint venture, governmental agency or other authority.
 
Receiving Creditor – has the meaning set forth in Section 3.2 of this Agreement.
 
Requisite Creditors – means the Requisite 1999 Noteholders, the Requisite Lenders, the Requisite 2000 Noteholders and, so long as Parity Debtholders hold Obligations aggregating at least 33-1/3% of all Obligations outstanding at such time, the Requisite Parity Debtholders under each Parity Debt Agreement.
 
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Requisite Lenders – means, at any time, those Lenders which are then in compliance with their obligations under the Credit Agreement holding (a) 51% of the Commitments of such Lenders or (b) in the event the Commitments shall have expired or been terminated, 51% of the then outstanding Loan Obligations of such Lenders.
 
Requisite 1999 Noteholders – means the holder or holders of at least 51% of the aggregate principal amount of the Noteholder Obligations owing to the 1999 Noteholders from time to time outstanding, exclusive of Noteholder Obligations owing to the 1999 Noteholders then owned by any one or more of the Obligors, any Subsidiary of any Obligor or any affiliate of any Obligor (including, without limitation, all Subsidiaries that are not Obligors).
 
Requisite Parity Debtholders – means the holder or holders of at least the minimum percentage of the aggregate principal amount of the Parity Debt Agreement Obligations outstanding under any Parity Debt Agreement necessary to permit such holders to cause such principal to become due and payable prior to its scheduled maturity date, exclusive of any such Parity Debtholder Agreement Obligations then owned by any one or more of the Obligors, any Subsidiary of any Obligor or any affiliate of any Obligor.
 
Requisite 2000 Noteholders – means the holder or holders of at least 51% of the aggregate principal amount of the Noteholder Obligations owing to the 2000 Noteholders from time to time outstanding, exclusive of Noteholder Obligations owing to the 2000 Noteholders then owned by any one or more of the Obligors, any Subsidiary of any Obligor or any affiliate of any Obligor (including, without limitation, all Subsidiaries that are not Obligors).
 
Reserve Account – has the meaning set forth in Section 3.2(a) of this Agreement.
 
Shared Payment – has the meaning set forth in Section 3.2(a) of this Agreement.
 
Sharing Percentage – means, with respect to any Creditor, the percentage equal to (a) the sum of (i) the amount of the then outstanding Obligations owed to such Creditor plus (ii) with respect to any Lender, its pro rata share of the Letter of Credit Obligations determined in accordance with the Credit Agreement divided by (b) the sum of (i) the amount of the then outstanding Obligations owed to all Creditors plus (ii) the aggregate amount of the Letter of Credit Obligations. In determination of the Sharing Percentage any amounts not denominated in US Dollars will be converted to the US Dollar Equivalent thereof. With respect to any Shared Payment received during the Clawback Period each Creditor’s Sharing Percentage shall be determined as of the first day of the Clawback Period without giving effect to any payments received during such Clawback Period. With respect to any Shared Payment received after the Clawback Period, each Creditor’s Sharing Percentage shall be determined as of the first day of the Event of Default after giving effect to any Shared Payments received during the Clawback Period.
 
Subsidiary – means, as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other
 
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than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company.
 
Total Commitment – has the meaning set forth in the Credit Agreement.
 
2000 Noteholders – has the meaning set forth in the first paragraph of this Agreement.
 
2000 Note Agreement – has the meaning set forth in Section 1.3 of this Agreement.
 
2000 Notes – has the meaning set forth in Section 1.3 of this Agreement.
 
U.S. Dollar Equivalent – means, at any time of determination, with regard to any amount designated in a currency other than U.S Dollars, the equivalent amount in U.S. Dollars determined using the Specified Exchange Rate as of the business day immediately prior to such date of determination. For purposes hereof, “Specified Exchange Rate” means the rate at which such other currency may be exchanged into U.S. Dollars as set forth at 10:00 a.m., New York City time on the applicable date (for spot delivery) on the applicable Bloomberg Key Cross Currency Rates Page FXC (or any successor thereto); in the event that such rate does not appear on such page, the Specified Exchange Rate shall be determined by reference to such other nationally recognized, publicly available service for displaying exchange rates selected by the Requisite 1999 Holders, the Requisite 2000 Holders and the Agent for such purposes.
 
 	2.2.	Certain Other Terms.	
 
The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Section references are to this Agreement unless otherwise specified. All terms defined in this Agreement in the singular shall have comparable meanings when used in the plural, and vice versa, unless otherwise specified.
 
3.	PAYMENTS, ETC.; CONSENTS AND JOINDERS	
 
 	3.1.	Notice of Election to Share; Receipt of Shared Payment.	
 
(a) Upon and during the continuance of an Event of Default,
 
(i) the Requisite 1999 Noteholders may invoke the sharing provisions hereof by sending to the Agent and the other Creditors (other than the Lenders) a Notice of Election to Share signed by the Requisite 1999 Noteholders;
 
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(ii) the Requisite Lenders may invoke the sharing provisions hereof by having the Agent send to the Creditors (other than the Lenders) a Notice of Election to Share signed by the Agent on behalf of the Requisite Lenders;
 
(iii) the Requisite 2000 Noteholders may invoke the sharing provisions hereof by sending to the Agent and the other Creditors (other than the Lenders) a Notice of Election to Share signed by the Requisite 2000 Noteholders; or
 
(iv) the Requisite Parity Debtholders, so long as such Parity Debtholders hold at least 33 1/3% of the then outstanding Obligations, may invoke the sharing provisions hereof by sending to the Agent and the other Creditors (other than the Lenders) a Notice of Election to Share signed by the Requisite Parity Debtholders.
 
(b) A Notice of Election to Share shall be sent by a Creditor or the Agent, as the case may be, by overnight courier for receipt the next business day.
 
(c) Once a Notice of Election to Share has been sent pursuant to paragraph (a) above, as the case may be, such Notice shall remain in effect until the Requisite Creditors shall agree otherwise in writing, notwithstanding that the Event of Default triggering the sending of such Notice may be waived; provided that the Person(s) sending such Notice may revoke such Notice by giving written notice to each other Creditor (other than a Lender) and the Agent so long as no obligation pursuant to Section 3.2 on the part of any Creditor has arisen prior to such revocation.
 
(d) On and after the date that a Creditor (other than a Lender) shall send or receive a Notice of Election to Share in accordance with the provisions hereof, such Creditor shall give a Notice of Shared Payment to each other Creditor (other than a Lender) and the Agent promptly upon obtaining actual knowledge of the receipt by such Creditor of a Shared Payment. The Agent shall promptly send any such notice to the Lenders. On and after the date that the Agent shall receive or send a Notice of Election to Share in accordance with the provisions hereof, the Agent shall give a Notice of Shared Payment to each Creditor promptly upon obtaining actual knowledge of the receipt by the Agent or any Lender of a Shared Payment.
 
 	3.2.	Sharing of Payments.	
 
(a) Each Creditor (a “ Receiving Creditor ”) agrees that on and after the delivery by such Creditor (or in the case of the Lenders, by the Agent) of a Notice of Election to Share or its (or, in the case of the Lenders, the Agent’s) receipt of a Notice of Election to Share, in each case in accordance with the provisions hereof, and so long as such Notice has not been terminated pursuant to Section 3.1(c) hereof, any payment of any kind (including, without limitation, any payment resulting from a set-off of a deposit account, any offset or any payment or distribution made in the context of any insolvency or reorganization proceeding) received by it within 90 days prior to the applicable Event of Default (the “ Clawback Period ”) and at any time thereafter on account of the Obligations (such payment, a “ Shared Payment ”), directly or indirectly, from or on behalf of any Obligor is to be distributed to each Creditor equally and ratably in accordance with the respective Sharing Percentage of each Creditor without
 
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discrimination or preference; provided that Shared Payments received by the Lenders during the Clawback Period shall be equal to the Net Lender Exposure. Notwithstanding the foregoing, to the extent that any amounts available for distribution pursuant to this Section 3.2 are attributable to the Loan Obligations that relate to undrawn amounts under Letters of Credit, such amounts shall be held in a reserve or other account unavailable to the Company or any Subsidiary thereof (the “ Reserve Account ”) to be established by the Agent. Amounts in the Reserve Account shall be used from time to time to pay the applicable Loan Obligations in respect of the Letters of Credit as they become due. Any amounts remaining in the Reserve Account following the expiration or satisfaction in full of the Loan Obligations in respect of the Letters of Credit for which such sums were held in reserve shall be applied against any Obligations remaining unpaid in accordance with this Section 3.2. Prior to the appointment of the Distribution Agent, as set forth in Section 3.3(a) hereof, each Receiving Creditor shall hold all Shared Payments received by it in trust for the benefit of all Creditors.
 
(b) Each Obligor hereby grants to the Agent a lien on and security interest in the Reserve Account and all funds or other assets contained therein or credited thereto to secure first, the Letter of Credit Obligations and then all other Obligations.
 
 	3.3.	Distribution Agent.	
 
(a) Appointment. Each Creditor agrees that upon the sending of a Notice of Election to Share in accordance with and pursuant to Section 3.1 hereof, the Requisite Creditors shall in good faith promptly seek to appoint an agent (the “ Distribution Agent ”) to distribute Shared Payments to the Creditors. If no Distribution Agent shall have been appointed by the Requisite Creditors and accepted appointment in the manner hereinafter provided within 30 days after the sending of such Notice of Election to Share, any Creditor may petition any court of competent jurisdiction in New York City for the appointment of the Distribution Agent.
 
(b) Acceptance of Appointment. The Distribution Agent appointed hereunder shall execute, acknowledge and deliver to each Creditor an instrument accepting such appointment and agreeing to be bound by the terms of this Agreement.
 
(c) Remittance and Distribution. Upon the appointment of the Distribution Agent, each Receiving Creditor shall remit any Shared Payment received by it to the Distribution Agent for distribution in accordance with Section 3.2 hereof. Upon receipt of any Shared Payment, the Distribution Agent shall calculate the amount of such Shared Payment distributable to each Creditor pursuant to Section 3.2 hereof as of the date the Receiving Creditor received such Shared Payment and remit such amount to each Creditor, accompanied by computations in reasonable detail showing the manner of calculation of the amounts distributable to each Creditor pursuant to Section 3.2 hereof.
 
 	3.4.	Invalidated Payments.	
 
If any amount distributed by the Distribution Agent to the Creditors in accordance with the provisions of this Agreement is subsequently required to be returned or repaid to any Obligor or their representatives or successors in interest, whether by court order, settlement or otherwise, each Creditor shall, promptly upon its receipt of notice thereof (together with
 
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information explaining why such amount is required to be returned or repaid) from the Distribution Agent, pay to the Distribution Agent the pro rata portion received by it of such amount (without interest) for payment to the appropriate Creditor or Obligor or its representatives or successors in interest, as the case may be. If any such amounts are subsequently recovered by any Creditor from any Obligor or its representatives or successors in interest, such Creditor shall remit such amounts to the Distribution Agent and the Distribution Agent shall redistribute such amounts to the Creditors on the same basis as such amounts were originally distributed. The obligations of the Creditors and the Distribution Agent under this Section 3.4 shall survive the repayment of the Obligations and termination of the Loan Documents, the 1999 Note Agreement, the 2000 Note Agreement and any Parity Debt Agreement and related documents.
 
 	3.5.	Application of Shared Payments.	
 
Each Obligor and each Creditor agrees that, to the extent a Receiving Creditor does not retain all or any portion of a Shared Payment, such Receiving Creditor shall be deemed to have only applied the amount retained by such Receiving Creditor in payment of the Obligations owing to such Receiving Creditor. Each other Creditor which is allocated a portion of a Shared Payment in accordance with Section 3.2 shall be deemed to have received such allocated portion as a direct payment of such other Creditor’s Obligations. The Creditors and the Obligors agree that no Creditors Company Loan Documents shall be satisfied until such time such Creditor has received and retained (after giving effect to all Sharing Payments) payment in full in cash of its Obligations.
 
 	3.6.	Additional Obligor	
 
A Subsidiary of the Company shall execute and deliver to the Agent and the Creditors an Additional Obligor Joinder Agreement in the form attached hereto as Exhibit B (as amended, supplemented, restated or otherwise modified, an “ Additional Obligor Joinder Agreement ”) upon being designated an “Additional Obligor” by the Company.
 
4.	DISTRIBUTION AGENT	
 
 	4.1.	Distributions and Consents.	
 
In making the distributions to the Creditors provided for in Section 3 hereof, the Distribution Agent may rely upon information available to it or supplied by each Creditor to it with respect to the amount and composition ( i.e ., as to principal and other amounts) of the Obligations owing to each Creditor, and the Distribution Agent shall have no liability to any Creditor for actions taken in reliance on such information in the absence of its gross negligence or willful misconduct. Each of the Creditors hereby agrees, on two business days’ telephonic, telegraphic, telexed, overnight courier or similar notice from the Distribution Agent, to confirm to the Distribution Agent in writing, including by telecopy of a signed confirmation or by telex, the outstanding balance of the Obligations, if any (and, if requested by the Distribution Agent, itemized as to principal, reimbursement obligations, interest, fees, premiums and other amounts, if any), owing to such Creditor as of the date or dates specified in such notice. In the event of any distribution to any Creditor in lawful currency of any other jurisdiction (the “ Other
 
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Currency ”) than the currency of the jurisdiction in which such Obligations are payable (the “ Contractual Currency ”) shall constitute a discharge of such Creditor’s Obligations only to the extent of the amount of the Contractual Currency which such Creditor could purchase in the London foreign exchange markets with the amount of the Other Currency in accordance with normal banking procedures at the rate of exchange prevailing on the first day (other than a Saturday) on which banks in London are generally open for business following receipt of the payment first referred to above.
 
 	4.2.	Appointment, Powers of Distribution Agent.	
 
Each of the Creditors, by its entering into this Agreement, hereby appoints and authorizes the Distribution Agent to act as its agent hereunder with such powers as are specifically delegated to the Distribution Agent by the terms of this Agreement, together with such powers as are reasonably incidental thereto. The Distribution Agent shall not have a fiduciary relationship in respect of any Creditor by reason of this Agreement.
 
 	4.3.	Liability.	
 
The Distribution Agent shall have no duties to the Creditors under this Agreement except those expressly set forth herein. Neither the Distribution Agent nor any of its officers, directors, employees or agents shall be liable to any Creditor for any action taken or omitted by it or them hereunder or in connection herewith, unless caused by its or their gross negligence or willful misconduct.
 
 	4.4.	Resignation or Removal of Distribution Agent.	
 
The Distribution Agent may resign and be discharged of its duties hereunder by giving written notice thereof to all holders of the Obligations then outstanding. Such resignation shall take effect at such time as a successor distribution agent shall have been appointed or, if no successor is appointed before then, upon ninety (90) days prior written notice to each Creditor. The Distribution Agent may be removed at any time with or without cause by the Requisite Creditors. Upon any such resignation or removal, the Requisite Creditors shall have the right to appoint a successor distribution agent. Upon the acceptance of any appointment as distribution agent hereunder by a successor distribution agent, such successor distribution agent shall thereupon succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Distribution Agent. After any retiring Distribution Agent’s resignation or removal hereunder as Distribution Agent, the provisions of this Section 4 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Distribution Agent.
 
 	4.5.	Employment of Agents and Counsel.	
 
The Distribution Agent may execute any of its duties as Distribution Agent hereunder by or through employees, agents and attorneys-in-fact and shall not be answerable to the Creditors, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Distribution Agent shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder.
 
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 	4.6.	Reliance on Documents; Counsel.	
 
The Distribution Agent shall be entitled to rely upon any notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and, with respect to legal matters, upon the opinion or advice of counsel selected by the Distribution Agent, which counsel may be employees of the Distribution Agent.
 
 	4.7.	Distribution Agent’s Reimbursement and Indemnification.	
 
(a) The Obligors, jointly and severally, shall reimburse and indemnify the Distribution Agent for expenses incurred by the Distribution Agent on behalf of the Creditors, in connection with the execution, delivery, administration and enforcement of this Agreement and for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Distribution Agent in any way relating to or arising out of this Agreement or any other document delivered in connection herewith or the transactions contemplated hereby, or the enforcement of any of the terms hereof, provided that the Obligors shall not be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Distribution Agent. The obligations of the Obligors under this Section 4.7 shall survive payment of the Obligations and termination of this Agreement.
 
(b) Without limiting the obligations of the Obligors, the Creditors severally agree to, in accordance with their respective Sharing Percentages (determined as of the date of delivery of the relevant request for reimbursement or indemnification), reimburse and indemnify the Distribution Agent for expenses incurred by the Distribution Agent on behalf of the Creditors, in connection with the execution, delivery, administration and enforcement of this Agreement and for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Distribution Agent in any way relating to or arising out of this Agreement or any other document delivered in connection herewith or the transactions contemplated hereby, or the enforcement of any of the terms hereof, provided that the Creditors shall not be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Distribution Agent. The obligations of the Creditors under this Section 4.7 shall survive payment of the Obligations and termination of this Agreement.
 
 	4.8.	Rights as Creditor.	
 
In the event the Distribution Agent, in its individual capacity, is a Creditor, the Distribution Agent shall have the same rights and powers hereunder in such capacity as any Creditor and may exercise the same as though it were not the Distribution Agent, and the term “Creditor” or “Creditors” shall, at any time when the Distribution Agent is a Creditor, unless the context otherwise indicates, include the Distribution Agent in its individual capacity. The Distribution Agent in its individual capacity may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those
 
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contemplated by this Agreement, with the Company and its Subsidiaries. The Distribution Agent, in its individual capacity, is not obligated to be a Creditor.
 
5.	MISCELLANEOUS	
 
 	5.1.	Governing Law.	
 
THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
 
 	5.2.	Creditor Credit Decision.	
 
Each Creditor acknowledges that it has, independently and without reliance upon any other Creditor and based on the financial statements prepared by the Company and its Subsidiaries and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Creditor also acknowledges that it will, independently and without reliance upon any other Creditor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
 
 	5.3.	Counterparts.	
 
This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one agreement, and shall constitute a binding agreement when executed by each of the parties hereto. A facsimile or electronic copy of the signature of any party on any counterpart shall be effective as the signature of the party executing such counterpart for purposes of effectiveness of this Agreement.
 
 	5.4.	Successors and Assigns; Additional Creditors.	
 
(a) This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto including any assignees of the Obligations. Each Creditor agrees that it will not assign any of the Obligations unless the assignee agrees to become a party to and be bound by this Sharing Agreement by executing a Creditor Joinder Agreement in the form attached hereto as Exhibit C (the “ Creditor Joinder Agreement ”), provided that the failure of any Creditor to obtain such acknowledgment shall not affect the effectiveness of the immediately preceding sentence.
 
(b) Any Parity Debtholder may, with the prior written consent of the Agent, the Requisite 1999 Noteholders and the Requisite 2000 Noteholders (such consent not to be unreasonably withheld and shall be deemed to have been given unless the Agent, the Requisite 1999 Noteholders or the Requisite 2000 Noteholders, shall have notified the Creditors to the contrary within ten (10) business days of receipt of the request for such consent), become a party hereto and be subject to all the provisions hereof and entitled to the benefits hereof if such Parity Debtholder shall execute and deliver to each other Creditor a Creditor Joinder Agreement.
 
-12-

 	5.5.	Amendments.	
 
This Agreement may be amended only in writing executed by the Requisite Creditors.
 
 	5.6.	Termination.	
 
This Agreement (except for Section 3.4 and Section 4.7) shall terminate upon the payment in full of all Obligations.
 
 	5.7.	Cooperation.	
 
Each party hereto agrees to cooperate fully with the other parties hereto, in the exercise of its reasonable judgment, to the end that the terms and provisions of this Agreement may be promptly and fully carried out. Each party hereto also agrees, from time to time, to execute and deliver any and all other agreements, documents or instruments and to take such other actions, all as may be reasonably necessary or desirable to effectuate the terms, provisions and the intent of this Agreement.
 
 	5.8.	No Waiver.	
 
No failure or delay on the part of any Creditor in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder.
 
 	5.9.	Notices.	
 
All written communications provided for hereunder shall be sent by first class mail or nationwide overnight delivery service, with charges prepaid ( provided that any Notice of Election to Share or Notice of Shared Payment or copy thereof to be sent by the Agent or a Creditor, as the case may be, shall be sent by nationwide overnight delivery service) and (i) if to any Creditor (other than a Lender), addressed to such Creditor at the address specified in Annex 1 hereto or in a Creditor Joinder Agreement, or at such other address as such Creditor shall have specified to the other Creditors and the Agent in writing, (ii) if to any Lender or the Agent, addressed to the Agent (and the Agent shall forward each such communication to each Lender) at the address specified in Annex 1 hereto, or at such other address as the Agent shall have specified to the Creditors (other than the Lenders) and (iii) if to the Distribution Agent, addressed to the Distribution Agent at such address as the Distribution Agent shall have specified to each Creditor and the Agent in writing.
 
 	5.10.	Notices of Events of Default.	
 
Each Creditor agrees use its best efforts to promptly provide each other Creditor (other than the Lenders) and the Agent written notice of any Event of Default arising under such Creditor’s Loan Documents. The failure to provide such written notice shall not affect the rights of any Creditor hereunder.
 
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 	5.11.	Agent.	
 
Pursuant to Section 14.1(e) of the Credit Agreement, (a) the Lenders have authorized the Agent to enter into, and act with respect to, this Agreement on their behalf and (b) the Lenders agree to be bound by the terms hereof. Except as to any assignment pursuant to Section 15.1 of the Credit Agreement, the Agent agrees on its behalf and behalf of each Lender that no Lender shall be released from its obligations in respect of this Agreement or any Shared Payment without the prior written consent of the Requisite 1999 Noteholders, the Requisite 2000 Noteholders and the Requisite Parity Debtholders.
 
 	5.12.	Third Party Beneficiaries.	
 
No Person, including, without limitation, the Obligors, other than the Creditors, the Agent, the Distribution Agent and their respective successors and assigns, shall have any rights under this Agreement.
 
[Remainder of page intentionally blank. Next page is signature page.]
 
-14-

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

BANK OF AMERICA, N.A. , successor by
merger to Fleet National Bank, as Agent	
		
By:	 	/s/    M ATTHEW C. C ORREIA        	
Name:	 	Matthew C. Correia	
Title:	 	Assistant Vice President	
	
1999 Noteholders:	
	
ALLSTATE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
		
 	 	Authorized Signatories	
	
ALLSTATE LIFE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
		
 	 	Authorized Signatories	
 
[Signature Page to Sharing Agreement]

			
STATE FARM LIFE INSURANCE COMPANY	
		
By:	 	/s/    J EFF A TTWOOD        	
Name:	 	Jeff Attwood	
Title:	 	Investment Officer	
		
By:	 	/s/    L ARRY R OTTUNDA        	
Name:	 	Larry Rottunda	
Title:	 	Assistant Secretary	
	
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY	
By:	 	Babson Capital Management LLC
as Investment Adviser	
		
By:	 	/s/    M ICHAEL H ERMSEN        	
Name:	 	Michael Hermsen	
Title:	 	Managing Director	
	
PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY	
By:	 	Prudential Investment Management,
Inc., as Investment Manager	
		
By:	 	/s/    P AUL M EIRING        	
Name:	 	Paul Meiring	
Title:	 	Vice President	
	
NATIONWIDE LIFE INSURANCE COMPANY	
		
By:	 	/s/    W AYNE T. F RISBEE        	
Name:	 	Wayne T. Frisbee	
Title:	 	Vice President-Portfolio Management	
 
[Signature Page to Sharing Agreement]

			
THE CANADA LIFE ASSURANCE COMPANY	
		
By:	 	/s/    T AD A NDERSON        	
Name:	 	Tad Anderson	
Title:	 	Assistant Vice President, Investments, U.S. Operations	
		
By:	 	/s/    E VE H AMPTON        	
Name:	 	Eve Hampton	
Title:	 	Vice President, Investments, U.S. Operations	
	
PAN-AMERICAN LIFE INSURANCE COMPANY	
		
By:	 	/s/    L ISA B AUDOT        	
Name:	 	Lisa Baudot	
Title:	 	Vice President, Securities	
	
2000 Noteholders	
	
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA	
		
By:	 	/s/    P AUL M EIRING        	
Name:	 	Paul Meiring	
Title:	 	Vice President	
	
ALLSTATE LIFE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
		
 	 	Authorized Signatories	
 
[Signature Page to Sharing Agreement]

			
AMERICAN HERITAGE LIFE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
		
 	 	Authorized Signatories	
	
NATIONWIDE LIFE INSURANCE COMPANY	
		
By:	 	/s/    W AYNE T. F RISBEE        	
Name:	 	Wayne T. Frisbee	
Title:	 	Vice President-Portfolio Management	
	
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY	
		
By:	 	/s/    W AYNE T. F RISBEE        	
Name:	 	Wayne T. Frisbee	
Title:	 	Vice President-Portfolio Management	
	
NATIONWIDE INDEMNITY COMPANY	
		
By:	 	/s/    W AYNE T. F RISBEE        	
Name:	 	Wayne T. Frisbee	
Title:	 	Vice President-Portfolio Management	
 
[Signature Page to Sharing Agreement]

The Obligors agree to perform their obligations under Section 3.5, Section 3.6 and Section 4.7 and acknowledge that no consent or other action by them is necessary for any action to be taken under, or for any amendment of, this Sharing Agreement, including, without limitation, the appointment of the Distribution Agent or a successor distribution agent, except that their consent shall be necessary for any amendment to Section 3.5 or Section 4.7. The Obligors hereof hereby grant to the Agent a security interest in and lien upon the Reserve Account and all funds or other assets contained therein or credited thereto as security for (a) first, the Letter of Credit Obligations and (b) second, all other Obligations.

BARNES GROUP INC.	
		
By:	 	/s/    L AWRENCE W. O’B RIEN        	
Name:	 	Lawrence W. O’Brien	
Title:	 	Vice President and Treasurer	
		
By:	 	/s/    W ILLIAM C. D ENNINGER         	
Name:	 	William C. Denninger	
Title:	 	Senior Vice President, Finance and Chief Financial Officer	
	
BARNES GROUP SWITZERLAND GmbH	
		
By:	 	/s/    W ILLIAM C. D ENNINGER         	
Name:	 	William C. Denninger	
Title:	 	Director	
 
[Signature Page to Sharing Agreement]

Annex 1
 
Addresses of the Noteholders and the Agent
 
NOTEHOLDERS :
 
Annex 1-1

EXHIBIT A
 
Form of Notice of Election to Share
 
[DATE]
 
Re: Sharing Agreement/Notice of Election to Share
 
Dear Sir or Madam:
 
Reference is hereby made to the Sharing Agreement, dated as of January 11, 2006, among the holders of the Loan Obligations party thereto, the holders of Noteholder Obligations party thereto, the holders of Parity Debt Agreement Obligations, if any, party thereto, and Bank of America, N.A., as Agent (as heretofore amended, modified, supplemented or restated from time to time, the “ Sharing Agreement ”). Unless otherwise defined herein, terms defined in the Sharing Agreement are used herein as therein defined.
 
An Event of Default has occurred by reason of [explain cause of Event of Default and sections of the relevant agreement which have been violated]. In addition, other Events of Default may exist. In accordance with the Sharing Agreement, this Notice of Election to Share is hereby being sent to invoke the sharing provisions of the Sharing Agreement.

Very truly yours,	
 
Exhibit A-1

Distribution List
 
[Insert Names and Addresses of those receiving a copy of the Notice of Election to Share]
 
Exhibit A-2

EXHIBIT B
 
[FORM OF ADDITIONAL OBLIGOR JOINDER AGREEMENT]
 
ADDITIONAL OBLIGOR JOINDER AGREEMENT
TO SHARING AGREEMENT
 
Reference is hereby made to the Sharing Agreement dated as of January 11, 2006 (as it may have been amended, modified or otherwise supplemented, the “ Sharing Agreement ”) among the Lenders, the 1999 Noteholders, the 2000 Noteholders, the Parity Debtholders, if any, and Bank of America, N.A., as agent for the Lenders under the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings specified in the Sharing Agreement.
 
WHEREAS , pursuant to Section 3.6 of the Sharing Agreement the undersigned has been designated on “Additional Obligor” and agreed to execute this Joinder Agreement with respect to its Parity Debt Agreement Obligations.
 
NOW THEREFORE , in consideration thereof and for other good and valuable consideration, the receipt of which is hereby acknowledged, the undersigned agrees as follows:
 
Section 1. Agreement to be Bound . By executing and delivering this Joinder Agreement, the undersigned hereby agrees to become a party to and be bound by, and comply with, the provisions of the acknowledgement to the Sharing Agreement in the same manner as if the undersigned were an original Obligor. The undersigned agrees that it shall be an Additional Obligor, as such term is defined in the Sharing Agreement, and that the undersigned shall have all the obligations described therein. All references to the term “Additional Obligor” or “Obligor” in the Sharing Agreement, or in any document or instrument executed and delivered or furnished, or to be executed and delivered or furnished, in connection therewith shall be deemed to be references to, and shall include, the undersigned.
 
Section 2. Governing Law . This Joinder Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York, without regard to any conflicts of law provisions thereof.
 
Exhibit B-1

IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement to be duly executed by its duly authorized officer, all as of the date and year set forth below.

[__________________________________]	
as Additional Obligor	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
		
Date:	 	____________________________	
 
Exhibit B-2

EXHIBIT C
 
[FORM OF LENDER JOINDER AGREEMENT]
 
LENDER JOINDER AGREEMENT TO SHARING AGREEMENT
 
Reference is hereby made to the Sharing Agreement dated as of January 11, 2006 (as it may have been amended, modified or otherwise supplemented, the “ Sharing Agreement ”) among the 1999 Noteholders, the 2000 Noteholders, the Parity Debtholders, if any, and Bank of America, N.A., as agent for the Lenders under the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meaning specified in the Sharing Agreement.
 
WHEREAS , the Sharing Agreement requires that any assignee of any Noteholder Obligations become a party to the Sharing Agreement contemporaneously with acquiring such Noteholder Obligations; and
 
WHEREAS , the Sharing Agreement also provides that, subject to the terms thereof, any Parity Debtholder may become a party to the Sharing Agreement by executing this Joinder Agreement; and
 
WHEREAS , the undersigned has agreed to execute this Joinder Agreement in consideration of, and as a condition to, [becoming a Noteholder/becoming a Parity Debtholder].
 
NOW THEREFORE, in consideration thereof and for other good and valuable consideration, the receipt of which is hereby acknowledged, the undersigned agrees as follows:
 
Section 1. Agreement to be Bound . By executing and delivering this Joinder Agreement, the undersigned hereby agrees to become a Creditor under the Sharing Agreement and be bound by, and comply with, the provisions of the Sharing Agreement in the same manner as if the undersigned were an original signatory to the Sharing Agreement. The undersigned agrees that it shall be a Creditor and [Noteholder/Parity Debtholder] under the Sharing Agreement, and that the undersigned shall have all the obligations described therein with respect to the Obligations held by the undersigned. All references to the terms “Creditor” or “[Noteholder/Parity Debtholder]” in the Sharing Agreement, or in any document or instrument executed and delivered or furnished, or to be executed and delivered or furnished, in connection therewith shall be deemed to be references to, and shall include, the undersigned.
 
Section 2. Notices . Notices and other communications provided for under Sharing Agreement to be provided to the undersigned shall be sent to the addresses set forth on Schedule I attached hereto.
 
Section 3. Governing Law . This Joinder Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York, without regard to any conflicts of law provisions thereof.
 
Exhibit C-1

IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement to be duly executed by its duly authorized officer, all as of the date and year set forth below.

[__________________________________]	
as additional Creditor	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
		
Date:	 	 	
 
Exhibit C-2
 
EXHIBIT 4.3 (iii)
 
BARNES GROUP INC.

 
ASSUMPTION AND AMENDMENT AGREEMENT

 
Dated as of August 26, 2005
 
re:
U.S. $24,500,000 7.66% Amended and Restated Senior
Notes due November 12, 2007
U.S. $45,500,000 7.80% Amended and Restated Senior
Notes due November 12, 2010

 
BARNES GROUP INC.
123 Main Street
Bristol, Connecticut 06010
 
ASSUMPTION AND AMENDMENT AGREEMENT
 
re:
U.S. $24,500,000 7.66% Amended and Restated Senior
Notes due November 12, 2007
U.S. $45,500,000 7.80% Amended and Restated Senior
Notes due November 12, 2010
 
As of August 26, 2005
 
To the Persons identified on
Schedule A and Schedule B attached hereto
 
Ladies and Gentlemen:
 
BARNES GROUP INC ., a Delaware corporation (together with its successors and assigns, “ Barnes ”), and 3031786 NOVA SCOTIA COMPANY , a Nova Scotia company (together with its successors and assigns, “ 3031786 ”), hereby agree with you as follows:
 
1.	BACKGROUND; SUCCESSION AND ASSUMPTION; AMENDMENTS AND RESTATEMENTS; CONSENT.	
 
1.1. Background .
 
(a) Issuance and Sale of 1999 Existing Notes . Pursuant to that certain Note Purchase Agreement dated as of November 12, 1999 (as amended up to, but excluding, the Effective Date, the “ Existing Note Purchase Agreement ”), entered into by 3031786 with each of the institutions named on Schedule A thereto, 3031786 issued its
 
(i) 7.66% Senior Notes due November 12, 2007 in the original aggregate principal amount of U.S.$24,500,000 (collectively, as amended up to, but excluding, the Effective Date, the “ Existing 7.66% Notes ”); and
 
(ii) 7.80% Senior Notes due November 12, 2010 in the original aggregate principal amount of U.S.$45,500,000 (collectively, as amended up to, but excluding, the Effective Date, the “ Existing 7.80% Notes ”). The Existing 7.66% Notes and the Existing 7.80% Existing Notes are referred to, collectively, herein as the “ Existing Notes ”.
 
One hundred percent of the original aggregate principal amount of the Existing Notes is outstanding and is held by the institutions identified as “1999 Noteholders” on the signature pages to this Assumption Agreement (collectively, the “ 1999 Noteholders ”).

(b) Relationship between 3031786 and Barnes . 3031786 is, and since prior to the Original Closing Date has been, a direct wholly-owned subsidiary of Barnes. Barnes has guaranteed the obligations of 3031786 pursuant to that certain Guaranty Agreement dated November 12, 1999.
 
1.2. 3031786 and Barnes’ Request for Consent.
 
3031786 and Barnes hereby request that each of you grant your consent to the following, as further provided in this Assumption Agreement:
 
(a) the assumption by Barnes of the obligations of 3031786 under the Existing Notes and the Existing Note Purchase Agreement;
 
(b) the release of 3031786 of its obligations under the Existing Notes and the Existing Note Purchase Agreement (such release is referred to herein as the “ Release ”);
 
(c) the amendment of certain terms and provisions of the Existing Note Purchase Agreement; and
 
(d) the amendment and restatement of the Existing Notes,
 
1.3. Assumption by Barnes.
 
Barnes has authorized its assumption of, and (subject to the effectiveness of your Consent as provided in Section 1.6 hereof) hereby assumes and shall be fully liable for, all of the obligations and undertakings of 3031786, whether now existing or hereafter arising, provided for in the Existing Note Purchase Agreement (as amended by this Assumption Agreement) and the Existing Notes (as amended and restated pursuant to this Assumption Agreement), including, without limitation, the obligation to duly and punctually pay the principal of, and the interest and Make-Whole Price, if any, on, the Existing Notes (as amended and restated by this Assumption Agreement) in accordance with the terms of the Existing Note Purchase Agreement (as amended by this Assumption Agreement) and the Existing Notes (as amended and restated by this Assumption Agreement). Such assumption and agreement by Barnes is referred to herein as the “ Assumption. ”
 
1.4. Amendments.
 
(a) Amendment of Existing Note Purchase Agreement . Effective as of the Effective Date, the Existing Note Purchase Agreement is hereby amended (as so amended, the “ Amended Note Agreement ”) as follows:
 
(i) Amendments to Sections 4, 5 and 6. Sections 4, 5 and 6 of the Existing Note Purchase Agreement are hereby amended by deleting all references to “the Company” or “The Company”, as applicable in such Sections and substituting “Barnes” in lieu thereof.
 
2

(ii) Amendments to Section 7. Section 7 of the Existing Note Purchase Agreement is deleted in its entirety and replaced in its entirety, for all purposes of the Amended Note Agreement, with the following:
 
“SECTION 7. COMPANY BUSINESS COVENANTS.
 
Barnes covenants that on and after the date of the Assumption Agreement until the Notes are paid in full:
 
7.1 Payment of Taxes and Claims.
 
Except in situations where the failure to pay would not result in a material adverse impact on Barnes and its Subsidiaries taken as a whole, Barnes and each such Subsidiary, will pay, before they become delinquent,
 
 	(a)	all taxes, assessments and governmental charges or levies imposed upon it or its Property, and	
 
 	(b)	all claims or demands of any kind (including, but not limited to, those of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons) which, if unpaid, might result in the creation of a Lien upon its Property not permitted by Section 7.6,	
 
provided that items of the foregoing description need not be paid while being contested in good faith and by appropriate proceedings, if and for so long as book reserves reasonably believed by Barnes and independent certified public accountants of recognized national standing to be adequate have been established with respect thereto; provided further that, unless contesting in good faith in accordance with the provisions hereof, notwithstanding the foregoing provisions of this Section 7.1, Barnes and each such Subsidiary will pay all taxes known by Senior Management to be due and payable no later than fifteen days after the date such taxes are due.
 
7.2 Maintenance of Properties and Corporate Existence.
 
(a) Except where the failure to do so would not have a material adverse impact on Barnes and its Subsidiaries taken as a whole, Barnes will and will cause each of its Subsidiaries to:
 
 	(i)	Property — maintain its Property in good condition and make all necessary renewals, replacements, additions, betterments and improvements thereto required to keep such Property in good condition and in compliance with all requirements of law;	
 
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 	(ii)	Insurance — keep its properties adequately insured at all times, by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage as is customary with companies in the same or similar businesses located or operating in areas with similar geological conditions; maintain in full force and effect public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it, in such amounts as Barnes or any Subsidiary, as the case may be, shall reasonably deem necessary; and maintain such other insurance as may be required by law;	
 
 	(iii)	Financial Records — keep true books of records and accounts in which full and correct entries will be made of all of its business transactions, and will reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with generally accepted accounting principles, consistently applied; and	
 
 	(iv)	Corporate Existence and Rights — do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights and franchises, except as otherwise permitted by Section 7.4, provided , however , that Barnes may liquidate or sell any Subsidiary if the transaction is permitted by Section 7.4.	
 
(b) Barnes will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and except as disclosed on Exhibit D, will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective business, in each case to the extent failure to so comply, maintain or obtain could, individually or in the aggregate, reasonably be expected to have a material adverse effect on Barnes or any Subsidiary.
 
7.3 Maintenance of Office.
 
Barnes will maintain an office in the State of Connecticut where notices, presentations and demands in respect of the Assumption Agreement or the Notes may be made upon it. The office shall be maintained at 123 Main Street, Bristol, Connecticut 06010, until such time as Barnes shall notify the holders of the Notes of a change of location.
 
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7.4 Sale of Assets or Merger.
 
(a) Sale of Assets — Barnes will not, nor will it permit any of its Subsidiaries to, directly or indirectly, except in the ordinary course of business, sell, lease, transfer or otherwise dispose of any of its Property or assets, now owned or hereafter acquired, if, as a result of such sale, lease, transfer or disposition, the aggregate net book value or fair market value , whichever shall be higher, of all Property and assets sold, leased, transferred or otherwise disposed of by Barnes and its Subsidiaries in the then current fiscal year of Barnes would exceed an amount equal to 10% of the book value (computed in accordance with GAAP) of all Property and assets of Barnes and its Consolidated Subsidiaries at the end of the preceding year.
 
(b) Consolidation; Merger — Barnes will not, nor will it permit any of its Subsidiaries to, directly or indirectly, consolidate with or merge into any other corporation, or permit another corporation to merge into it, provided , however , that (i) any Subsidiary of Barnes may be merged into Barnes or another wholly-owned Subsidiary, (ii) Barnes or any Subsidiary of Barnes may merge or consolidate with another Person or business, if Barnes or such Subsidiary, as the case may be, is the surviving corporation, (iii) Barnes or any Subsidiary may consolidate with or merge with another Person or business in a transaction where Barnes or the Subsidiary is not the surviving entity if (1) the continuing or surviving entity shall assume in writing all of the obligations of Barnes under this Agreement, the Assumption Agreement and the Notes, (2) the continuing or surviving entity shall not, immediately after such merger or consolidation, be in default of any of Barnes’ obligations under this Agreement, the Assumption Agreement or the Notes, (3) the continuing or surviving entity shall be a corporation organized under the laws of the United States or any state thereof, and (4) after giving effect to such consolidation or merger, the continuing or surviving entity could incur $1 of additional Indebtedness under Section 7.7.
 
7.5 Leases.
 
Barnes will not, nor will it not permit any of its Subsidiaries, directly or indirectly, to incur, create or assume any commitment to make any direct or indirect payment, whether as rent or otherwise, under any lease, rental or other arrangement for the use of real or personal Property or both of any other Person unless (a) after giving effect to such lease the aggregate rental obligations of Barnes and its Subsidiaries (exclusive of obligations to pay taxes and rental increments attributable to escalator clauses) during any fiscal year shall not exceed an amount equal to 15% of the book value (computed in accordance with GAAP) of all Properties and assets of Barnes and its Consolidated Subsidiaries at the end of the
 
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preceding fiscal year or (b) such lease was in existence as of the Closing Date and disclosed on Schedule I hereto.
 
7.6 Liens and Encumbrances.
 
(a) Negative Pledge . Barnes will not, nor will it permit any of its Subsidiaries to, directly or indirectly, incur, create, assume or permit to exist any mortgage, pledge, security interest, lien, charge or other encumbrance of any nature whatsoever (including conditional sales or other title retention agreements) on any of its Property or assets, whether owned at the date hereof or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, except:
 
(i) liens incurred or pledges and deposits made in connection with worker’s compensation, unemployment insurance, old-age pensions, social security and public liability and similar legislation;
 
(ii) liens securing the performance of bids, tenders, leases, contracts (other than for the repayment of borrowed money), statutory obligations, surety and appeal bonds and other obligations of like nature, incurred as an incident to and in the ordinary course of business;
 
(iii) statutory liens of landlords and other liens imposed by law, such as carriers’, warehousemen’s, mechanics’, materialmen’s and vendors’ liens incurred in good faith in the ordinary course of business;
 
(iv) liens securing the payment of taxes, assessments and governmental charges or levies, either (1) not delinquent, or (2) being contested in good faith by appropriate proceedings;
 
(v) zoning restrictions, easements, licenses, reservations, restrictions on the use of real property or minor irregularities incident thereto which do not in the aggregate materially detract from the value of the Property or assets of Barnes or such Subsidiary, as the case may be, or impair the use of such Property in the operation of its business;
 
(vi) purchase money liens on real Property or equipment (which are filed against the real Property or equipment within 180 days of purchase) that do not exceed 100% of the fair market value of the related Property;
 
(vii) liens existing on any Property prior to the acquisition thereof by Barnes or any Subsidiary, provided such lien was not created in contemplation of such acquisition, the amount
 
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secured thereby does not exceed the fair market value of the Property and such lien does not extend to any other Property of Barnes or such Subsidiary;
 
(viii) other liens, that in the aggregate, do not exceed 15% of the book value (computed in accordance with GAAP) of all Properties and assets of Barnes and its Consolidated Subsidiaries at the end of the preceding fiscal year.
 
(b) Equal and Ratable Lien; Equitable Lien . In case any Property is subjected to a Lien in violation of Section 7.6(a), Barnes will make or cause to be made provision whereby the Notes will be secured pursuant to documents reasonably satisfactory to the holders of at least 51% in outstanding principal amount of the Notes (exclusive of Notes owed by Barnes, Subsidiaries and Affiliates) equally and ratably, with all other obligations secured thereby, and in any case the Notes shall have the benefit, to the full extent that, and with such priority as, the holders may be entitled thereto under applicable law, of an equitable Lien on such Property securing the Notes. Such violation of Section 7.6(a) shall constitute an Event of Default hereunder, whether or not any such provision is made pursuant to this Section 7.6(b).
 
7.7 Indebtedness.
 
Except to the extent permitted under Section 7.7(e) and (f), Barnes will not, nor will it permit any of its Subsidiaries to, directly or indirectly incur, create, assume or permit to exist any Indebtedness other than:
 
 	(a)	Indebtedness incurred by Barnes Group under the Revolving Credit Agreement;	
 
 	(b)	the Notes;	
 
 	(c)	Indebtedness outstanding on the date hereof under Barnes Group Inc.’s $25,000,000, 7.13% Senior Notes due December 5, 2005;	
 
 	(d)	Indebtedness outstanding on the date hereof under Barnes Group Inc.’s $60,000,000, 8.59% Senior Notes due November 21, 2008;	
 
 	(e)	Indebtedness which constitutes extensions, renewals or replacements on substantially the same terms and conditions (and does not increase the amount outstanding) of (a) through (c) above; and	
 
 	(f)	additional Indebtedness of Barnes and its Subsidiaries; provided , however , that (i) the total Indebtedness of	
 
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 	Barnes’ Subsidiaries shall not at any time exceed $100 million; (ii) total Indebtedness of Barnes’ Domestic Subsidiaries shall not at any time exceed $10 million (excluding from the calculation thereof for all purposes except compliance with Section 7.4(b)(4) any preexisting indebtedness of a newly acquired Domestic Subsidiary for a period not exceeding 90 days after acquisition of such Domestic Subsidiary), and (iii) the aggregate amount of all Indebtedness of Barnes and its Subsidiaries at any time outstanding shall not exceed an amount equal to 155% of Consolidated Net Worth at such time; provided further that if any Subsidiary shall have aggregate Indebtedness of at least $50,000,000, then the Company shall cause such Subsidiary’s lenders to enter into an intercreditor agreement with the holders of the Notes in form and substance satisfactory to the Required Holders.	
 
7.8 Net Worth.
 
Barnes will not permit Consolidated Net Worth of Barnes and its Subsidiaries at any time to be less than $201 million plus 50% of Consolidated Net Income for each fiscal year beginning December 31, 1999 (but without duplication for any fiscal year in which Consolidated Net Income is a negative amount), with the annual adjustments to be applicable as of December 31, 1999 and as of the end of each subsequent fiscal year.
 
7.9 ERISA Compliance.
 
Neither Barnes nor any Related Person will at any time permit any Pension Plan maintained by it to:
 
(i) engage in any “prohibited transaction” as such term is defined in Section 4975 of the Internal Revenue Code of 1986, as amended, or described in Section 406 of ERISA;
 
(ii) incur any “accumulated funding deficiency” as such term is defined in Section 302 of ERISA, whether or not waived; or
 
(iii) terminate under circumstances which could result in the imposition of a Lien on the Property of Barnes or any Subsidiary pursuant to Section 4068 of ERISA.
 
7.10 Transactions with Affiliates.
 
Neither Barnes nor any Subsidiary will enter into any transaction (except transactions which do not in any one calendar year involve in the
 
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aggregate an amount in excess of $500,000), including, without limitation, the purchase, sale or exchange of Property or the rendering of any service, with any Affiliate except in the ordinary course of and pursuant to the reasonable requirements of Barnes or such Subsidiary’s business and upon fair and reasonable terms no less favorable to Barnes or such Subsidiary than would be obtained in a comparable arm’s-length transaction with a Person not an Affiliate.
 
7.11 Tax Consolidation.
 
Barnes will not file or consent to the filing of any consolidated income tax return with any Person other than a Subsidiary.
 
7.12 Acquisition of Notes.
 
Neither Barnes nor any Subsidiary or any Affiliate will, directly or indirectly, acquire or make any offer to acquire any Notes unless Barnes or such Subsidiary or Affiliate has offered to acquire the Notes, pro rata, from all holders of the Notes upon the same terms. In case any of such parties acquires any Notes, such Notes shall thereafter be cancelled and no Notes shall be issued in substitution therefor.
 
7.13 Lines of Business.
 
Neither Barnes nor any Subsidiary will engage in any line of business if as a result thereof the business of Barnes and its Subsidiaries taken as a whole would be substantially different from what it was at December 31, 1998, as described in the Private Placement Memorandum.
 
7.14 Restricted Payments and Restricted Investments.
 
Barnes will not nor shall it permit any Subsidiary to, at any time make or permit to exist any loans or advances to, or purchase any stock, other securities or evidences of indebtedness of, or make or permit to exist any investment or acquire any interest whatsoever in, any other Person, except (a) the purchase of Barnes’ common or preferred stock, (b) loans or advances of Barnes or any Subsidiary of Barnes (in addition to loans or advances permitted by clauses (d) and (e) of this Section 7.14) not in excess of $10,000,000 aggregate principal amount for Barnes and its Subsidiaries at any time outstanding, (c) investments of its cash by Barnes or any Subsidiary in (i) marketable direct obligations of, or marketable obligations guaranteed by, the United States of America or Canada, or marketable obligations of any instrumentality or agency thereof, the payment of the principal and interest of which is unconditionally guaranteed by the United States of America or Canada, (ii) certificates of deposit or other obligations issued by, or bankers’ acceptances of , any bank or trust company organized under the laws of the Federal Republic of Germany, France, the United Kingdom, Japan, Canada or the United
 
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States of America or any state thereof (including foreign branches of any such bank or trust company) and having capital, surplus and undivided profits in excess of $100,000,000, (iii) open market commercial paper with a maturity not in excess of 270 days form date of acquisition thereof and having the highest credit rating by either Standard & Poor’s Corporation or Moody’s Investors Service, Inc., or (iv) in the case of any foreign Subsidiary of Barnes in a country in which a Subsidiary exists as of the date of the Assumption Agreement, such investments of a comparable quality and term to the other investments permitted by this clause (c) as are usually made in the jurisdiction or jurisdictions in which the business of such foreign Subsidiary is principally conducted by prudent corporate investors in like circumstances, (d) loans or advances of Barnes to any of its Subsidiaries and loans or advances of any Subsidiary of Barnes to Barnes or another such Subsidiary, (e) purchases of stock or other securities of any corporations, associations or other business entities; provided , however , that the aggregate cost to or fair market value of the consideration paid by Barnes and its Subsidiaries for such stock or securities of any such corporation, association or other business entity shall not exceed the sum of: (A) $25,000,000, plus (B) 50% of Consolidated Net Income for the period commencing on October 1, 1999 and ending on the date of such stock or securities purchase (or minus 100% of Consolidated Net Income for such period if Consolidated Net Income for such period is a loss) or (f) such other investments in an aggregate amount not to exceed $250,000 as Barnes or a Subsidiary may elect.
 
7.15 Limitation on Restrictions on Dividends by Subsidiaries, etc.
 
Barnes shall not permit any Subsidiary or other entity in which it or any of its subsidiaries has an equity investment (a “Subsidiary Investment”) to be or become subject to any restriction (except restrictions applicable to corporations generally and those restrictions set forth in the Revolving Credit Agreement), whether arising by agreement, its articles of incorporation, by-laws or other constituent documents of such Subsidiary or Subsidiary Investment or otherwise, or the right of such Subsidiary or Subsidiary Investment from time to time to (w) declare and pay Stock Payments with respect to capital stock owned by Barnes from time to time owed to Barnes or any of its Subsidiaries, or (y) make loans or advances to Barnes or any of its Subsidiaries, or (z) transfer any of its properties or assets to Barnes or any of its Subsidiaries; provided , however , that such restriction may be permitted with respect to any Subsidiary or Subsidiary Investment in which Barnes or a Subsidiary directly or indirectly owns less than 80% of the Voting Stock and in which Barnes’ or such Subsidiary’s cumulative investment since the Closing Date (in terms of cash invested in and/or assets contributed to the entity) (i) individually is less than 10% of the book value of the assets of Barnes and its
 
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consolidated Subsidiaries, and (ii) when taken together with all such Subsidiaries and Subsidiary Investments subject to any such restrictions in which Barnes or a Subsidiary directly or indirectly owns less than 80% of the Voting Stock, is less than 15% of the book value of the assets of Barnes and its consolidated Subsidiaries.”
 
(iii) Amendments to Section 8.
 
(1) Sections 8.1(a), (b), (c), (d), (e), (g) and (h) of the Existing Note Purchase Agreement are hereby amended by (i) deleting all references to “the Guarantor” and the words “or the Guarantor”, as applicable, and substituting “Barnes” in lieu thereof and (ii) deleting all references to “the Company” in such Sections in their entirety.
 
(2) Section 8.1(f) of the Existing Note Purchase Agreement is hereby amended by deleting all references to “the Company” and substituting “Barnes” in lieu thereof.
 
(3) Section 8.2 of the Existing Note Purchase Agreement is hereby amended by (i) deleting all references to “the Company” in such Section and substituting “Barnes” in lieu thereof and (ii) deleting the all references the “the Guarantor” and the words “the Guarantor and”, as applicable, in their entirety.
 
(4) Section 8.4 of the Existing Note Purchase Agreement is hereby amended by (i) deleting in the first line of such Section the words “The Guarantor and the Company each” and substituting “Barnes” in lieu thereof, (ii) deleting all remaining references to “the Guarantor” in such Section and substituting “Barnes” in lieu thereof (ii) deleting the words “and the Company each” from such Section and all remaining references to “the Company” in their entirety.
 
(iv) Amendments to Section 9.
 
(1) Sections 9.1(a) through (j), inclusive of the Existing Note Purchase Agreement are hereby amended by (i) deleting in the words “the Company”, “the Company or” and “or the Company” in their entirety and (ii) deleting all references to “the Guarantor” in such Sections and substituting “Barnes” in lieu thereof.
 
(2) The caption and text of Sections 9.1(l) and (m) of the Existing Note Purchase Agreement are hereby deleted and there is substituted therefor “Intentionally Omitted”.
 
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(3) Section 9.2 of the Existing Note Purchase Agreement is hereby amended by (i) deleting all references to “the Guarantor” in their entirety and (ii) deleting all references to “the Company” or “The Company”, as applicable, in their entirety and substituting “Barnes” in lieu thereof.
 
(v) Amendments to Section 10.
 
(1) The following definitions appearing in Section 10 to the Existing Note Purchase Agreement are hereby amended and restated in their entirety to read as follows:
 
“ Business Day - any day other than a Saturday, Sunday or a U.S. national, Connecticut or New York holiday.
 
“ Notes shall mean the Amended 7.66% Notes and the Amended 7.80% Notes.”
 
(2) The definitions of “Change of Control”, “Consolidated Assets”, “Consolidated Net Worth”, “Related Person”, and “Senior Management” appearing in Section 10 to the Existing Note Purchase Agreement are hereby amended by deleting all references to “the Guarantor” or “the Company”, as applicable, and substituting “Barnes” in lieu thereof.
 
(3) Section 10 of the Existing Note Purchase Agreement is amended by adding the following definitions in their appropriate alphabetical order:
 
“ Assumption Agreement shall mean that certain Assumption and Amendment Agreement, dated the Effective Date, among Barnes, 3031786 and each of the holders of Notes a party thereto, as it may from time to time be amended or supplemented.”
 
“ Barnes shall mean Barnes Group, Inc., a Delaware corporation.”
 
“ Effective Date shall mean August 26, 2005.”
 
“ 3031786 shall mean 3031786 Nova Scotia Company, a Nova Scotia corporation.”
 
“ Amended 7.66% Notes shall mean Barnes’ Amended and Restated 7.66% Senior Notes due November 12, 2007 issued pursuant to the Assumption Agreement.”
 
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“ Amended 7.80% Notes shall mean Barnes’ Amended and Restated 7.80% Senior Notes due November 12, 2010 issued pursuant to the Assumption Agreement.”
 
(vi) Amendments to Section 11. Sections 11.1, 11.2, 11.3, 11.4 and 11.5 of the Existing Note Purchase Agreement are hereby amended by (i) deleting all references to “the Guarantor” or the words “or the Guarantor” in their entirety and (ii) deleting all references to “the Company” or “The Company”, as applicable, in their entirety and substituting “Barnes” in lieu thereof.
 
(b) Amendment and Restatement of Existing Notes.
 
(i) Existing 7.66% Notes. Effective as of the Effective Date, each then outstanding Existing 7.66% Note shall be deemed to be amended and restated to be in the form of Note set forth as Exhibit B-1 hereto, without changing the outstanding principal amount thereof or amount of interest accrued thereon. The Existing 7.66% Notes as so amended and restated (including each note delivered pursuant to any provision of this Assumption Agreement and any note delivered in substitution or exchange for any such note pursuant to any such provisions, as each of such notes may be amended, restated or otherwise modified from time to time) are hereinafter sometimes referred to, collectively, as the “ Amended 7.66% Notes .”
 
(ii) Existing 7.80% Notes. Effective as of the Effective Date, each then outstanding Existing 7.80% Note shall be deemed to be amended and restated to be in the form of Note set forth as Exhibit B-2 hereto, without changing the outstanding principal amount thereof or amount of interest accrued thereon. The Existing 7.80% Notes as so amended and restated (including each note delivered pursuant to any provision of this Assumption Agreement and any note delivered in substitution or exchange for any such note pursuant to any such provisions, as each of such notes may be amended, restated or otherwise modified from time to time) are hereinafter sometimes referred to, collectively, as the “ Amended 7.80% Notes ”; and together with the Amended 7.66% Notes, are hereinafter sometimes referred to as the “ Notes .”
 
(c) Amendments to Exhibits. The Existing Note Purchase Agreement is amended to delete therefrom each of Exhibit B-1 and Exhibit B-2 and to substitute, respectively, in lieu thereof Exhibit B-1 and Exhibit B-2 attached hereto.
 
(d) Terms Defined. The amendments to the Existing Note Purchase Agreement referred to in Section 1.4(a) and the amendment and restatement of the Existing Notes referred to in Section 1.4(b) are referred to herein, collectively, as the “ Amendments and Restatements .”
 
(e) Notice Provision. Notices to be delivered to Barnes pursuant to Section 18 of each of the Amended Note Agreement should be addressed as follows until such
 
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time as Barnes shall have specified a different address to each holder of a Note in accordance with said Section 18:
 
Barnes Group Inc.
123 Main Street
Bristol, Connecticut 06010
Attn: Vice President, Treasurer
 
1.5. Waiver of 2000 Note Purchase Agreement. Each of the current holders identified on Schedule B attached hereto (the “ 2000 Noteholders ” and, together with the 1999 Noteholders, the “ Noteholders ”), of the $60,000,000 aggregate principal amount of 8.59% Senior Notes due November 21, 2008 issued and sold pursuant to a Note Agreement, dated as of November 21, 2000 by and among Barnes and Purchasers listed in Schedule A attached thereto and as amended by Amendment No. 1 to the Note Agreement, dated as of February 21, 2002 and Amendment No. 2 to the Note Agreement, dated as of February 5, 2003 (the “ 2000 Note Agreement ”), hereby waive the provision of Section 7.7(b) of the 2000 Note Agreement which restricts Barnes’ ability to assume the obligations of 3031786.
 
1.6. Consent by Holder, Exchange of Notes, etc.
 
(a) Subject to Barnes’ satisfaction of each of the conditions set forth in Section 3, each 2000 Noteholder, by its execution and delivery of this Assumption Agreement, agrees and consents to the Assumption, the Release and the Amendments and Restatements (its “ Consent ”).
 
(b) On or before the Effective Date, Barnes will deliver to the 1999 Noteholders’ special counsel, Bingham McCutchen LLP, One State Street, Hartford, CT 06103, one or more Notes, of the series and in the denominations specified below such 1999 Noteholder’s name on Schedule A hereto, dated the date hereof, and payable to such 1999 Noteholder or as otherwise indicated on Schedule A hereto, against delivery by such 1999 Noteholders of the Existing Notes or before the Effective Date to Bingham McCutchen LLP, One State Street, Hartford, CT 06103. On the Effective Date, Bingham McCutchen LLP will forward the Notes to the 1999 Noteholders as directed in Schedule A hereto and the Existing Notes to 3031786 for cancellation. All amounts owing under, and evidenced by, the Existing Notes as of the Effective Date shall continue to be outstanding under, and shall after the Effective Date be evidenced by, the Notes, and shall be repayable in accordance with the Amended Note Agreement and the Notes.
 
1.7. Acquisition for Investment.
 
Each 1999 Noteholder hereby acknowledges that the Notes have not and will not be registered or qualified under the Securities Act, any securities laws of any state of the United States of America, or the securities laws of any other applicable jurisdiction and such 1999 Noteholder represents to Barnes that it is acquiring the Notes listed on Schedule A hereto below its name for its own account or for the account of one or more separate accounts maintained by it for investment and with no present intention or view of distributing or otherwise selling the
 
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Notes or any part thereof, but without prejudice to each such 1999 Noteholder’s right at all times to
 
(a) sell or otherwise dispose of all or any part of the Notes
 
(i) under a registration statement filed under the Securities Act and/or other applicable securities law, or
 
(ii) in a transaction exempt from the registration or qualification requirements of the Securities Act and other applicable securities laws, and
 
(b) have control over the disposition of all of its assets to the fullest extent required by any applicable insurance law.
 
It is understood that, in making the representations set out in Section 2.10, Barnes is relying, to the extent applicable, upon your representations in this Section 1.7.
 
1.8. Failure to Deliver, Failure of Conditions.
 
If on or before the Effective Date Barnes fails to tender to any 1999 Noteholder the Notes to be acquired by it on such date, or if the conditions specified in Section 3 hereof to be fulfilled on or before the Effective Date have not been fulfilled, the 1999 Noteholders shall, at their election, be relieved of all further obligations under this Assumption Agreement, without thereby waiving any rights the 1999 Noteholders may have by reason of such failure or such nonfulfillment, and the Existing Note Purchase Agreement and the Existing Notes shall remain in full force and effect and the Consent, the Assumption, the Release and the Amendments and Restatements shall be of no force or effect.
 
1.9. Expenses.
 
(a) Generally. Whether or not the transactions contemplated hereby are consummated, Barnes shall promptly (and in any event within 30 days of receiving any statement or invoice therefor) pay all reasonable fees, expenses and costs incurred by the Noteholders in connection with such transactions, including, without limitation:
 
(i) the reasonable fees and the disbursements of Bingham McCutchen LLP, the Noteholders’ special counsel, and
 
(ii) the reasonable fees, expenses, costs and disbursements incurred in complying with each of the conditions set forth in Section 3 hereof.
 
(b) Counsel. Without limiting the generality of the foregoing, it is agreed and understood that Barnes will pay, on or before the Effective Date, the reasonable fees and the disbursements of the Noteholders’ special counsel pursuant to statements thereof presented prior to the Effective Date, and Barnes will also pay upon receipt of any statement thereof, any additional reasonable fees and additional disbursements of such special counsel pursuant to any statement thereof rendered after the Effective Date in
 
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connection with the issuance of the Notes and the other transactions contemplated hereby.
 
(c) Survival. The obligations of Barnes under this Section 1.9 shall survive the payment or prepayment of the Notes and the termination of this Assumption Agreement and the Amended Note Agreement.
 
2.	WARRANTIES AND REPRESENTATIONS.	
 
To induce the Noteholders to enter into this Assumption Agreement, Barnes warrants and represents to the Noteholders that, as of the Effective Date:
 
2.1. Organization; Power and Authority.
 
Each of Barnes and 3031786 is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Barnes has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Assumption Agreement and the Notes, and to perform the provisions of this Assumption Agreement, the Amended Note Agreement and the Notes. 3031786 has the corporate power and authority to execute and deliver this Assumption Agreement and to perform the provisions thereof. Each Subsidiary of 3031786 is also a Subsidiary of Barnes.
 
2.2. Authorization, etc.
 
(a) This Assumption Agreement, the Amended Note Agreement and the Notes have been duly authorized and duly executed and delivered by all necessary corporate action on the part of Barnes, and this Assumption Agreement and the Amended Note Agreement constitute, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of Barnes, enforceable against it in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
 
(b) This Assumption Agreement has been duly authorized and duly executed and delivered by all necessary corporate action on the part of 3031786, and this Assumption Agreement constitutes a legal, valid and binding obligation of 3031786, enforceable against it in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
 
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2.3. Disclosure
 
This Assumption Agreement, the documents, certificates or other writings delivered to the Noteholders by or on behalf of 3031786 or Barnes in connection with the transactions contemplated hereby, the financial statements most recently delivered to the Noteholders pursuant to Section 8.1 of the Existing Note Purchase Agreement, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of Barnes and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). Except as disclosed in this Assumption Agreement or in one of the documents, certificates or other writings identified therein, or in the financial statements most recently delivered to the Noteholders pursuant to Section 8.1 of the Existing Note Purchase Agreement, since December 31, 2004, there has been no change in the financial condition, operations, business, properties or prospects of Barnes or any Subsidiary, except changes that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. There is no fact known to Barnes or 3031786 that would reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the other documents, certificates and other writings delivered to the Noteholders by or on behalf of 3031786 or Barnes specifically for use in connection with the transactions contemplated hereby.
 
2.4. Compliance with Law, other Instruments, etc.
 
Neither (a) the execution, delivery and performance by 3031786 and Barnes of this Assumption Agreement, nor (b) the execution, delivery and performance by Barnes of the Amended Note Agreement or the Notes, will
 
(i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of Barnes or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which Barnes or any Subsidiary is bound or by which Barnes or any Subsidiary or any of their respective properties may be bound or affected,
 
(ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to Barnes or any Subsidiary, or
 
(iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to Barnes or any Subsidiary.
 
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2.5. Governmental Authorizations.
 
No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority or any non-governmental Person, including, without limitation, any creditor or stockholder of Barnes or any Subsidiary is required that has not been obtained in connection with (a) the execution, delivery and performance by 3031786 or Barnes of this Assumption Agreement, or (b) the execution, delivery and performance by Barnes of the Amended Note Agreement or the Notes.
 
2.6. Litigation.
 
(a) Except as disclosed on Schedule 2.6, there are no actions, suits or proceedings pending or, to the knowledge of 3031786 or Barnes, threatened against or affecting Barnes or any Subsidiary or any property of Barnes or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that if adversely determined, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
 
(b) Neither Barnes nor any Subsidiary is in violation in any respect of any term of any charter instrument or by-law and neither Barnes nor any Subsidiary is in default of any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
 
2.7. Existing Indebtedness.
 
Except as described therein, Schedule 2.7 hereto sets forth a complete and correct list of all outstanding Indebtedness of Barnes and its Restricted Subsidiaries as of June 30, 2005 (and specifying, as to each such Indebtedness, the collateral, if any, securing such Indebtedness), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of Barnes or its Restricted Subsidiaries. Neither Barnes nor any Restricted Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of Barnes or any Restricted Subsidiary and no event or condition exists with respect to any Indebtedness of Barnes or any Restricted Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment.
 
2.8. No Defaults.
 
No “Default” or “Event of Default” under, and as defined in, the Existing Note Purchase Agreement exists immediately prior to the Effective Date. Upon the effectiveness of this Assumption Agreement no “Default” or “Event of Default” under, and as defined in, the Amended Note Agreement will exist or occur.
 
18

2.9. Organization and Ownership of Shares of Subsidiaries.
 
(a) Schedule 2.9 is (except as noted therein) a complete and correct list of Barnes’s active Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by Barnes and each other Subsidiary.
 
(b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 2.9 as being owned by Barnes and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by Barnes or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 2.9).
 
(c) Each Subsidiary identified in Schedule 2.9 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.
 
2.10. Private Offering by Barnes.
 
Neither Barnes nor anyone acting on its behalf has offered the Notes or any similar Securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than the Noteholders, each of which has been offered the Notes at a private sale for investment. Neither Barnes nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act.
 
3.	CERTAIN CONDITIONS PRECEDENT.	
 
As provided in Section 1.6(a) hereof, your Consent is subject to the following conditions:
 
3.1. Representations and Warranties.
 
The representations and warranties of 3031786 and Barnes in this Assumption Agreement shall be correct on the Effective Date.
 
3.2. Performance; No Default.
 
3031786 and Barnes shall have performed and complied with all agreements and conditions contained in this Assumption Agreement required to be performed or complied with by each prior to or on the Effective Date and on the Effective Date, after giving effect to the transactions contemplated by this Assumption Agreement, no Default or Event of Default (as such terms are defined in the Amended Note Agreement) shall have occurred and be continuing.
 
19

3.3. Execution and Delivery of this Agreement.
 
3031786, Barnes and each of the Noteholders shall have executed and delivered a counterpart of this Assumption Agreement.
 
3.4. Compliance Certificates.
 
(a) Officers’ Certificate. Each of Barnes and 3031786 shall have delivered to the Noteholders an Officer’s Certificate, dated the Effective Date, certifying that the conditions specified in Sections 3.1, 3.2 and 3.10 have been fulfilled.
 
(b) 3031786 Secretary’s Certificate. 3031786 shall have delivered to the Noteholders a certificate of its Secretary or one of its Assistant Secretaries, dated the Effective Date, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of this Assumption Agreement.
 
(c) Barnes’ Secretary’s Certificate. Barnes shall have delivered to the Noteholders a certificate of its Secretary or one of its Assistant Secretaries, dated the Effective Date, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of this Assumption Agreement and the Notes.
 
3.5. Opinions of Counsel.
 
The Noteholders shall have received an opinion in form and substance satisfactory to them, dated the Effective Date, from Signe Gates, Esq., General Counsel for Barnes and from Stewart McKelvey Stirling Scales, special counsel to 3031786, substantially in the form set out in Exhibit 3.5, and covering such other matters incident to the transactions contemplated hereby as the Noteholders or their counsel may reasonably request (and 3031786 and Barnes hereby instruct such counsel to deliver such opinion to the Noteholders). The Noteholders shall have received an opinion from Bingham McCutchen, LLP, their special counsel, in form and substance satisfactory to them.
 
3.6. Exchange of Notes.
 
The substitution of Notes for the Existing Notes described in Section 1.6(b) shall have occurred between Barnes and each 1999 Noteholder.
 
3.7. Payment of Special Counsel Fees.
 
Without limiting the provisions of Section 1.5 of the Amended Note Agreement, Barnes shall have paid on or before the Effective Date the reasonable fees, charges and disbursements of the Noteholders’ special counsel to the extent reflected in a statement of such counsel rendered to Barnes at least one Business Day prior to the Effective Date.
 
20

3.8. Amendment Fee.
 
Barnes shall have paid to each of the 1999 Noteholders an amendment fee in connection with the execution and delivery of this Assumption Agreement, in an amount equal to the product of (i) the aggregate outstanding principal amount of the Existing Notes held by such 1999 Noteholder on the Effective Date multiplied by (ii) 0.10% (10 basis points) (the “ Amendment Fee ”). The Amendment Fee shall have been paid in immediately available funds to the account or accounts of such 1999 Noteholder as specified below such 1999 Noteholders’ name in Schedule A attached hereto.
 
3.9. Private Placement Numbers.
 
A Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each series of Notes.
 
3.10. Changes in Corporate Structure.
 
Except as disclosed in Schedule 3.10, (i) 3031786 shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements delivered pursuant to Section 8.1(b) of the Existing Note Purchase Agreement and (ii) Barnes shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the financial statements delivered pursuant to Section 2.3 of this Assumption Agreement.
 
3.11. Payment of Interest.
 
3031786 shall have paid to each Noteholder the interest accrued on the unpaid principal balance of the 7.66% Notes or the 7.80% Notes, as applicable, from May 12th, 2005 through and including August 25, 2005 (“ Interest Payment ”). The Interest Payment shall be paid in immediately available funds to the accounts of such 1999 Noteholder as specified below such 1999 Noteholders’ name in Schedule A attached hereto.
 
3.12. Proceedings Satisfactory.
 
All proceedings taken in connection with this Assumption Agreement and all documents and papers relating hereto shall be satisfactory to each of the Noteholders and their special counsel. Each of the Noteholders and their special counsel shall have received copies of such documents and papers (whether or not specifically referred to above in this Section 3) as they may reasonably request in connection therewith, in form and substance satisfactory to them.
 
21

4.	INTERPRETATION OF THIS ASSUMPTION AGREEMENT.	
 
4.1. Terms Defined.
 
The terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Amended Note Agreement. As used in this Assumption Agreement, the following terms have the respective meanings specified below or set forth in the Section or other part hereof following such term (such definitions, unless otherwise provided, to be equally applicable to both the singular and the plural forms of the terms defined):
 
Amended Note Agreement — Section 1.4(a).
Notes — Section 1.4(b)(ii).
Amended 7.66% Notes — Section 1.4(b)(i).
Amended 7.80% Notes — Section 1.4(b)(ii).
Amendments and Restatements — Section 1.4(d).
Assumption — Section 1.3.
Assumption Agreement — means this Assumption and Amendment Agreement as it may from time to time be amended or supplemented.
Barnes — the introductory paragraph hereof.
Consent — Section 1.6(a).
Effective Date – August 26, 2005.
Existing Note Purchase Agreement — Section 1.1(a).
Existing Notes — Section 1.1(a)(ii).
Existing 7.66% Notes — Section 1.1(a)(i).
Existing 7.80% Notes — Section 1.1(a)(ii).
Interest Payment — Section 3.11.
3031786 — the introductory paragraph hereof.
Noteholders — Section 1.1(a).
Original Closing Date — November 12, 1999.
Release — Section 1.2(b).
2000 Note Agreement —Section 1.5.
 
4.2. Section Headings, etc.
 
The titles of the Sections appear as a matter of convenience only, do not constitute a part hereof and shall not affect the construction hereof. The words “herein,” “hereof,” “hereunder,” and “hereto” refer to this Assumption Agreement as a whole and not to any particular Section or other subdivision.
 
5.	MISCELLANEOUS.	
 
5.1. Effect of Amendments.
 
Except as expressly provided herein, (a) no terms or provisions of any agreement are modified or changed by this Assumption Agreement, (b) the terms of this Assumption Agreement shall not operate as a waiver by any Noteholder of, or otherwise prejudice any Noteholder’s rights, remedies or powers under, the Existing Note Purchase Agreement or under
 
22

any applicable law and (c) the terms and provisions of the Existing Note Purchase Agreement shall continue in full force and effect, as amended by this Assumption Agreement.
 
5.2. Successors and Assigns.
 
This Assumption Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. The provisions hereof are intended to be for the benefit of each of the Noteholders and shall be enforceable by any successor or assign of any such Noteholder, whether or not an express assignment of rights hereunder shall have been made by any Noteholder or its successors or assigns.
 
5.3. Governing Law.
 
THIS ASSUMPTION AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF CONNECTICUT EXCLUDING, TO THE EXTENT PERMITTED BY THE LAW OF SUCH STATE, CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
 
5.4. Waivers and Amendments.
 
Neither this Assumption Agreement nor any term hereof may be changed, waived, discharged or terminated orally, or by any action or inaction, but only by an instrument in writing signed by each of the parties signatory hereto. The terms and provisions of the respective Existing Note Purchase Agreement, as amended by or pursuant to the terms of this Assumption Agreement, may be further amended or modified in accordance with the provisions of the respective Amended Note Agreement.
 
5.5. Duplicate Originals, Execution in Counterpart.
 
Two or more originals of this Assumption Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Assumption Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts which, collectively, show execution by each party hereto shall constitute one duplicate original.
 
5.6. Survival of Representations and Warranties.
 
All representations and warranties contained herein shall survive the execution and delivery of this Assumption Agreement and the Notes, the transfer by the Noteholders of any Note (or any portion thereof or interest therein) and the payment of the Notes, and may be relied upon by any subsequent holder of an Note, regardless of any investigation made at any time by or on behalf of the Noteholders.
 
23

5.7. Entire Agreement.
 
This Assumption Agreement constitutes the final written expression of all of the terms hereof and is a complete and exclusive statement of those terms.
 
[Remainder of Page Intentionally Blank. Next Page is Signature Page.]
 
24

If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Assumption Agreement and return it to Barnes and 3031786, whereupon the foregoing shall become a binding agreement between you, Barnes and 3031786.

3031786 NOVA SCOTIA COMPANY	
		
By:	 	/s/    D AVID J. S INDER        	
Name:	 	David J. Sinder	
Title:	 	Treasurer	
	
BARNES GROUP INC.	
		
By:	 	/s/    L AWRENCE W. O’B RIEN        	
Name:	 	Lawrence W. O’Brien	
Title:	 	Vice President and Treasurer	
		
By:	 	/s/    D AVID J. S INDER        	
Name:	 	David J. Sinder	
Title:	 	Assistant Treasurer	

 
The foregoing is hereby agreed
to by each of the following
Noteholders as of the date hereof.

1999 Noteholders:	
	
ALLSTATE LIFE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
Title:	 	 	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
Title:	 	 	
	
Authorized Signatories	

ALLSTATE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
Title:	 	 	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
Title:	 	 	
	
Authorized Signatories	

 
			
PAN-AMERICAN LIFE INSURANCE COMPANY	
		
By:	 	/s/    L ISA B AUDOT        	
Name:	 	Lisa Baudot	
Title:	 	Vice President, Securities	

 
			
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY	
	
By: Babson Capital Management LLC, as Investment Advisor	
		
By:	 	/s/    E LISABETH A. P ERENICK        	
Name:	 	Elisabeth A. Perenick	
Title:	 	Managing Director	

 
			
STATE FARM LIFE INSURANCE COMPANY	
		
By:	 	/s/    J EFF A TTWOOD        	
Name:	 	Jeff Attwood	
Title:	 	Investment Officer	
		
By:	 	/s/    L ARRY R OTTUNDA        	
Name:	 	Larry Rottunda	
Title:	 	Assistant Secretary	

 
			
THE CANADA LIFE ASSURANCE COMPANY	
		
By:	 	/s/    T AD A NDERSON        	
Name:	 	Tad Anderson	
Title:	 	Assistant Vice President, Investments, U.S. Operations	
		
By:	 	/s/    E VE A. H AMPTON        	
Name:	 	Eve A. Hampton	
Title:	 	Vice President, Investments, U.S. Operations	

 
			
PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY	
	
By: Prudential Investment Management, Inc., as Investment Manager	
		
By:	 	/s/    P AUL M EIRING        	
Name:	 	Paul Meiring	
Title:	 	Vice President	

 
			
NATIONWIDE LIFE INSURANCE COMPANY	
		
By:	 	/s/    J OSEPH P. Y OUNG        	
Name:	 	Joseph P. Young	
Title:	 	Authorized Signatory	

 
			
2000 Noteholders:	
	
ALLSTATE LIFE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
Title:	 	 	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
Title:	 	 	
		
 	 	Authorized Signatories	

 
			
AMERICAN HERITAGE LIFE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
Title:	 	 	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
Title:	 	 	
		
 	 	Authorized Signatories	

 
			
NATIONWIDE LIFE INSURANCE COMPANY	
		
By:	 	/s/    J OSEPH P. Y OUNG        	
Name:	 	Joseph P. Young	
Title:	 	Authorized Signatory	
	
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY	
		
By:	 	/s/    J OSEPH P. Y OUNG        	
Name:	 	Joseph P. Young	
Title:	 	Authorized Signatory	
	
NATIONWIDE INDEMNITY COMPANY	
		
By:	 	/s/    J OSEPH P. Y OUNG        	
Name:	 	Joseph P. Young	
Title:	 	Authorized Signatory	

 
			
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA	
		
By:	 	/s/    P AUL M EIRING        	
Name:	 	Paul Meiring	
Title:	 	Vice President	
 
Signature Page to Assumption and Amendment Agreement

 
EXHIBIT B-1
 
[FORM OF AMENDED AND RESTATED 7.66% SENIOR NOTE]
 
BARNES GROUP INC.
 
7.66% Amended and Restated Senior Note due November 12, 2007

U.S. $______________	  	Hartford, Connecticut	
PPN: 067806 E* 6	  	[Date]	
 
FOR VALUE RECEIVED, BARNES GROUP INC. (together with any successors and assigns who become such in accordance herewith, the “ Company ”) a Delaware corporation, hereby promises to pay to [                                                               ] or registered assigns the principal sum of [                          ] [United States Dollars (U.S. $                      )] on November 12, 2007; and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid principal balance hereof from the date of this Note at the rate of 7.66% per annum, semi-annually on the 12th day of May and the 12th day of November in each year, commencing with the May 12 or November 12 next succeeding the date hereof, until the principal amount hereof shall become due and payable; and to pay on demand interest on any overdue principal (including any overdue prepayment of principal) and (b) premium, if any, and (to the extent permitted by applicable law) on any overdue payment of interest, at a fluctuating rate per annum, to be adjusted daily, equal to the greater of (i) the rate announced publicly by Citibank, N.A. in New York, New York from time to time as its prime rate, and (ii) 9.66% per annum (but in no event higher than the maximum rate permitted by law).
 
Payments of principal, premium, if any, and interest shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, by check mailed and addressed to the registered holder hereof at the address shown in the register maintained by the Company for such purpose, or, at the option of the holder hereof, in such manner and at such other place in the United States of America as the holder hereof shall have designated to the Company in writing.
 
This Note is one of an issue of 7.66% Senior Notes (herein called the “ Notes ”) of the Company issued in an aggregate principal amount limited to U.S. $24,500,000 pursuant to the Note Agreement dated as of November 12, 1999 by and between 3031786 Nova Scotia Company and the Purchasers listed on Schedule A thereto (as said Note Agreement has been amended pursuant to the Assumption and Amendment Agreement, dated as of August 26, 2005, and as may be further amended, modified or supplemented, the “ Amended Note Agreement ”), and is entitled to the benefits thereof. As provided in the Amended Note Agreement, this Note is subject to prepayment, in whole or in part, with a premium as specified in said Amended Note Agreement. Each holder of this Note will be deemed, by its acceptance hereof, to have made the representation set forth in Section 1.3 of the Amended Note Agreement.
 
Exhibit B-1-1

This Note is a registered Note and, as provided in the Amended Note Agreement, is transferable only by surrender thereof at the principal office of the Company in Bristol, Connecticut, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or his attorney duly authorized in writing. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner thereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
 
Under certain circumstances, as specified in said Amended Note Agreement, the principal of this Note may be declared due and payable in the manner and with the effect provided in said Amended Note Agreement.
 
This Note and the Amended Note Agreement are governed by and construed in accordance with Connecticut law.

BARNES GROUP INC.	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
 
Exhibit B-1-2

 
EXHIBIT B-2
 
[FORM OF AMENDED AND RESTATED 7.80% SENIOR NOTE]
 
BARNES GROUP INC.
 
7.80% Amended and Restated Senior Note due November 12, 2010

U.S. $______________	  	Hartford, Connecticut	
PPN: 067806 E@ 4	  	[Date]	
 
FOR VALUE RECEIVED, BARNES GROUP INC. (together with any successors and assigns who become such in accordance herewith, the “ Company ”) a Delaware corporation, hereby promises to pay to [                                                               ] or registered assigns the principal sum of [                          ] [United States Dollars (U.S. $                      )] on November 12, 2010; and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid principal balance hereof from the date of this Note at the rate of 7.80% per annum, semi-annually on the 12th day of May and the 12th day of November in each year, commencing with the May 12 or November 12 next succeeding the date hereof, until the principal amount hereof shall become due and payable; and to pay on demand interest on any overdue principal (including any overdue prepayment of principal) and (b) premium, if any, and (to the extent permitted by applicable law) on any overdue payment of interest, at a fluctuating rate per annum, to be adjusted daily, equal to the greater of (i) the rate announced publicly by Citibank, N.A. in New York, New York from time to time as its prime rate, and (ii) 9.80% per annum (but in no event higher than the maximum rate permitted by law). In addition to paying the entire remaining principal amount at maturity, the Company shall prepay, and there shall become due and payable, $U.S. 15,166,666.67 principal amount of the Notes on November 12, 2008 and on November 12, 2009.
 
Payments of principal, premium, if any, and interest shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, by check mailed and addressed to the registered holder hereof at the address shown in the register maintained by the Company for such purpose, or, at the option of the holder hereof, in such manner and at such other place in the United States of America as the holder hereof shall have designated to the Company in writing.
 
This Note is one of an issue of 7.80% Senior Notes (herein called the “ Notes ”) of the Company issued in an aggregate principal amount limited to U.S. $45,500,000 pursuant to the Note Agreement dated as of November 12, 1999 by and between 3031786 Nova Scotia Company and the Purchasers listed on Schedule A thereto (as said Note Agreement has been amended pursuant to the Assumption and Amendment Agreement, dated as of August 26, 2005, and as may be further amended, modified or supplemented, the “ Amended Note Agreement ”), and is entitled to the benefits thereof. As provided in the Amended Note Agreement, this Note is subject to prepayment, in whole or in part, with a premium as specified in said Amended Note
 
Exhibit B-2-1

Agreement. Each holder of this Note will be deemed, by its acceptance hereof, to have made the representation set forth in Section 1.3 of the Amended Note Agreement.
 
This Note is a registered Note and, as provided in the Amended Note Agreement, is transferable only by surrender thereof at the principal office of the Company in Bristol, Connecticut, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or his attorney duly authorized in writing. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner thereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
 
Under certain circumstances, as specified in said Amended Note Agreement, the principal of this Note may be declared due and payable in the manner and with the effect provided in said Amended Note Agreement.
 
This Note and the Amended Note Agreement are governed by and construed in accordance with Connecticut law.

BARNES GROUP INC.	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
		
By:	 	 	
Name:	 	 	
Title:	 	 	
 
Exhibit B-2-2

 
EXHIBIT 3.5
 
FORM OF OPINION OF GENERAL COUNSEL FOR BARNES AND 3031786
 
Exhibit 3.5-1
 
Exhibit 4.3(iv)
 
BARNES GROUP INC.
 
AMENDMENT NO. 3 TO NOTE AGREEMENT
 
As of January 11, 2006
 
To each of the Current Noteholders
Named in Annex 1 hereto
 
Ladies and Gentlemen:
 
Barnes Group Inc. , a Delaware corporation (hereinafter, the “ Company ”), together with its successors and assigns, agrees with you as follows:
 
1.	PRELIMINARY STATEMENTS.	
 
 	1.1	Note Issuance, etc.	
 
3031786 Nova Scotia Company (“ 3031786 ”) issued and sold (i) US$24,500,000 aggregate principal amount of its 7.66% Senior Notes due November 12, 2007 (as may be amended, restated or otherwise modified from time to time, the “ 7.66% Notes ”) and (ii) US$45,500,000 aggregate principal amount of its 7.80% Senior Notes due November 12, 2010 (as may be amended, restated or otherwise modified from time to time, the “ 7.80% Notes ” and together with the 7.66% Notes, the “ Notes ”) pursuant to separate Note Agreements, each dated as of November 12, 1999, entered into by and among 3031786, the Company, as Guarantor and each of the Purchasers listed on Schedule A attached thereto, as amended by Amendment No. 1 to Note Agreement, dated as of February 5, 2003, by and among 3031786, the Company and each of the Purchasers listed on Annex 1 attached thereto, and by the Assumption and Amendment Agreement, dated as of August 26, 2005, by and among 3031786, the Company and each of the Persons identified on Schedule A and Schedule B attached thereto, whereby the Company assumed the obligations of 30301786 under the said Note Agreement and the Notes (the “ Existing Note Agreement ” and, as amended by this Amendment No. 3 to Note Agreement (this “ Amendment Agreement ”), the “ Note Agreement ”). The register for the registration and transfer of the Notes indicates that the Persons named in Annex 1 hereto (collectively, the “ Current Noteholders ”) are currently the holders of the outstanding principal amount of the Notes as set forth next to such holder’s name on Annex 1.
 
2.	DEFINED TERMS.	
 
Capitalized terms used herein and not otherwise defined herein have the meanings ascribed to them in the Note Agreement.

3.	AMENDMENT.	
 
Subject to Section 5, the Existing Note Agreement is amended as provided for by this Amendment Agreement in the manner specified in Exhibit A (the “ Amendment ”).
 
4.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.	
 
To induce you to enter into this Amendment Agreement and to consent to the Amendment, the Company represents and warrants as follows:
 
 	4.1.	Organization, Power and Authority, etc.	
 
The Company is a corporation duly incorporated and validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to enter into and perform its obligations under this Amendment Agreement.
 
 	4.2.	Legal Validity.	
 
The execution and delivery of this Amendment Agreement by the Company and compliance by the Company with its obligations hereunder: (a) are within the corporate powers of the Company; and (b) are legal and do not conflict with, result in any breach of, constitute a default under, or result in the creation of any Lien upon any Property of the Company under the provisions of: (i) any charter instrument or bylaw to which the Company is a party or by which the Company or any of its Properties may be bound; (ii) any order, judgment, decree or ruling of any court, arbitrator or governmental authority applicable to either the Company or any of its Properties; or (iii) any agreement or instrument to which the Company is a party or by which the Company or any of its Properties may be bound or any statute or other rule or regulation of any governmental authority applicable to the Company or any of its Properties.
 
This Amendment Agreement has been duly authorized by all necessary action on the part of the Company, has been executed and delivered by a duly authorized officer of the Company, and constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except that enforceability may be limited by applicable bankruptcy, reorganization, arrangement, insolvency, moratorium, or other similar laws affecting the enforceability of creditors’ rights generally and subject to the availability of equitable remedies.
 
 	4.3.	No Defaults.	
 
No event has occurred and no condition exists that, upon the execution and delivery of this Amendment Agreement, would constitute a Default or an Event of Default.
 
5.	EFFECTIVENESS OF AMENDMENT.	
 
The Amendment shall become effective as of the first date written above (the “ Effective Date ”) upon:
 
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(a) execution and delivery of a counterpart of this Amendment Agreement by the Company and by holders of 66-2/3% of aggregate outstanding principal amount of Notes;
 
(b) delivery by the Company of a fully executed copy of the Sharing Agreement, dated the date hereof, by and among the banks listed on the signature pages thereto, Bank of America, N.A., as agent, the Current Noteholders and holders of the notes issued under the 2000 Note Agreement; in form and substance satisfactory to the Current Noteholders;
 
(c) delivery by the Company to the Current Noteholders’ counsel of a fully executed copy of the Second Amended and Restated $175,000,000 Senior Unsecured Revolving Credit Agreement, dated as of January 11, 2006, by and among Bank of America, N.A., as administrative agent, the lenders listed on Schedule 1 attached thereto, the Company, Barnes Switzerland, Banc of America Securities LLC, as arranger, Keybank National Association, as syndication agent and HSBC Bank USA and Webster Bank, National Association, as co-documentation agents, in form and substance satisfactory to the Current Noteholders;
 
(d) delivery by the Company to the Current Noteholders’ counsel of a fully executed copy of an amendment, dated the date hereof to those separate Note Agreements, each dated as of November 21, 2000, (as amended by Amendment No. 1 to Note Agreement, dated as of February 21, 2002 and Amendment No. 2, dated as of February 5, 2003) and entered into by and among the Company and each of the Purchasers listed on Exhibit A attached thereto (the “ 2000 Note Agreement ”);
 
(e) delivery by the Company to the Current Noteholders’ counsel of an Officer’s Certificate, dated the Effective Date, certifying that the conditions specified in Sections 4.1 and 4.2 have been fulfilled;
 
(f) delivery by the Company to the Current Noteholders’ counsel of a certificate of its Secretary or one of its Assistant Secretaries, dated the Effective Date, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of this Amendment Agreement;
 
(g) the Company shall have paid the fees and expenses of the Current Noteholders’ special counsel and the amendment fee as provided in Section 6; and
 
(h) all proceedings taken in connection with this Amendment Agreement and all documents and papers relating thereto shall be satisfactory to the Current Noteholders and their counsel, and the Current Noteholders and their counsel shall have received copies of such other documents and papers as the Current Noteholders or their counsel may reasonably request in connection herewith.
 
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6.	EXPENSES.	
 
 	6.1	Payment of Special Counsel Fees.	
 
Whether or not the Amendment becomes effective, the Company will promptly (and in any event within thirty days of receiving any statement or invoice therefor) pay all fees, expenses and costs relating to this Amendment Agreement, including, but not limited to, the reasonable fees of your special counsel, Bingham McCutchen LLP, incurred in connection with the preparation, negotiation and delivery of this Amendment Agreement and any other documents related thereto. Notwithstanding the foregoing, the Company will on the Effective Date, pay the fees and expense of Bingham McCutchen LLP incurred through the Effective Date. Nothing in this Section shall limit the Company’s obligations pursuant to Section 1.5 of the Existing Note Agreement.
 
 	6.2	Amendment Fee.	
 
The Company shall have paid to each of the Current Noteholders an amendment fee in connection with the execution and delivery of this Amendment Agreement, in an amount equal to the product of (i) the aggregate outstanding principal amount of the Existing Notes held by such Current Noteholder on the Effective Date multiplied by (ii) 0.07% (7 basis points) (the “ Amendment Fee ”). The Amendment Fee shall have been paid in immediately available funds to the account or accounts of such Current Noteholder as specified below such Current Noteholders’ name in Schedule A attached hereto.
 
7.	MISCELLANEOUS.	
 
 	7.1.	Part of Existing Note Agreement; Future References, etc.	
 
This Amendment Agreement shall be construed in connection with and as a part of the Existing Note Agreement and, except as expressly amended by this Amendment Agreement, all terms, conditions and covenants contained in the Existing Note Agreement are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Amendment Agreement may refer to the Existing Note Agreement without making specific reference to this Amendment Agreement, but nevertheless all such references shall include this Amendment Agreement unless the context otherwise requires.
 
 	7.2.	Counterparts; Effectiveness.	
 
This Amendment Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Delivery of an executed signature page by facsimile transmission or e-mail transmission of an adobe file format document (also known as a PDF file) shall be effective as delivery of a manually signed counterpart of this Amendment Agreement.
 
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 	7.3.	Governing Law.	
 
THIS AMENDMENT AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF CONNECTICUT EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN CONNECTICUT.
 
[Remainder of page intentionally left blank; next page is signature page.]
 
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If you are in agreement with the foregoing, please so indicate by signing the acceptance below on the accompanying counterpart of this Amendment Agreement and returning it to the Company, whereupon it will become a binding agreement among each of you and the Company.

BARNES GROUP INC.	
		
By:	 	/s/    L AWRENCE W. O’B RIEN        	
Name:	 	Lawrence W. O’Brien	
Title:	 	Vice President and Treasurer	
		
By:	 	/s/    W ILLIAM C. D ENNINGER        	
Name:	 	William C. Denninger	
Title:	 	Senior Vice President and Chief Financial Officer	

The foregoing Amendment Agreement is hereby accepted as of the date first above written.

ALLSTATE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
		
 	 	Authorized Signatories	

ALLSTATE LIFE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
		
 	 	Authorized Signatories	

STATE FARM LIFE INSURANCE COMPANY	
		
By:	 	/s/    J EFF A TTWOOD        	
Name:	 	Jeff Attwood	
Title:	 	Investment Officer	
		
By:	 	/s/    L ARRY R OTTUNDA        	
Name:	 	Larry Rottunda	
Title:	 	Assistant Secretary	

			
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY	
		
By:	 	Babson Capital Management LLC as Investment Adviser	
		
By:	 	/s/    M ICHAEL H ERMSEN        	
Name:	 	Michael Hermsen	
Title:	 	Managing Director	
	
PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY	
		
By:	 	Prudential Investment Management,
Inc., as Investment Manager	
		
By:	 	/s/    P AUL M EIRING        	
Name:	 	Paul Meiring	
Title:	 	Vice President	
	
NATIONWIDE LIFE INSURANCE
COMPANY	
		
By:	 	/s/    W AYNE T. F RISBEE        	
Name:	 	Wayne T. Frisbee	
Title:	 	Vice President-Portfolio Management	
	
THE CANADA LIFE ASSURANCE COMPANY	
		
By:	 	/s/    T AD A NDERSON        	
Name:	 	Tad Anderson	
Title:	 	Assistant Vice President, Investments, U.S. Operations	
		
By:	 	/s/    E VE H AMPTON        	
Name:	 	Eve Hampton	
Title:	 	Vice President, Investments, U.S. Operations	

			
PAN-AMERICAN LIFE INSURANCE COMPANY	
		
By:	 	/s/    L ISA B AUDOT        	
Name:	 	Lisa Baudot	
Title:	 	Vice President, Securities	

 
Annex 1
 
CURRENT NOTEHOLDERS AND
CURRENT OUTSTANDING PRINCIPAL AMOUNT

Current Noteholders:
	  	Outstanding Principal Amount of Notes
	
	  	7.66% Notes
	  	7.80% Notes
	
Allstate Insurance Company	  	$	5,000,000	  	 	n/a	
Allstate Life Insurance Company	  	$	12,500,000	  	 	n/a	
State Farm Life Insurance Company	  	$	7,000,000	  	$	7,000,000	
Massachusetts Mutual Life Insurance Company	  	 	n/a	  	$	14,000,000	
Connecticut General Life Insurance Company	  	 	n/a	  	$	10,500,000	
Nationwide Life Insurance Company	  	 	n/a	  	$	7,000,000	
The Canada Life Assurance Company	  	 	n/a	  	$	3,500,000	
Pan-American Life Insurance Company	  	 	n/a	  	$	3,500,000	
TOTALS	  	$	24,500,000	  	$	45,500,000	
 
Annex 1

 
Exhibit A
 
AMENDMENT
 
1. Section 7.4 (Sale of Assets or Merger) of the Existing Note Agreement is hereby amended by adding a new subsection (c) at the end of such Section to read as follows:
 
“(c) Acquisitions — Barnes may purchase or otherwise acquire all or substantially all of the assets or stock or other equity interests of any other Person provided , that :
 
(i) Barnes is in current compliance with and, after giving effect to the proposed acquisition (including any borrowings made or to be made in connection therewith), will continue to be in compliance with all of the covenants in Section 7 hereof as if the transaction occurred on the first day of the period of measurement; provided , the holders of Notes shall have received a certificate of the Chief Financial Officer or a Vice President and the Treasurer or an Assistant Treasurer certifying compliance with the requirements of Section 7 on a pro forma historical basis as if the transaction occurred on the first day of the period of measurement and the related documentation showing the estimated calculations (subject to any adjustments) made in determination thereof;
 
(ii) at the time of such acquisition, no Default or Event of Default has occurred and is continuing, and such acquisition will not otherwise create a Default or an Event of Default hereunder;
 
(iii) the business to be acquired is similar to the business conducted by Barnes or businesses reasonably related or incidental thereto;
 
(iv) not later than seven (7) days prior to the proposed acquisition date, notice of any proposed acquisition with an aggregate consideration (including assumption of indebtedness) of more than $30,000,000, together with all information reasonably requested by the holders of Notes with respect to such acquisition (including, without limitation, historical financial statements and due diligence summaries) shall have been furnished to the holders.
 
(v) the board of directors and (if required by applicable law) the shareholders, or the equivalent thereof, of the business to be acquired has approved such acquisition;
 
(vi) if such acquisition is made by a merger, Barnes (or a wholly-owned Subsidiary of Barnes) shall have complied with the provisions of Section 7.4(b); and
 
(vii) the total consideration to be paid in connection with any acquisition or series of related acquisitions, in the form of cash and assumption of debt with respect to any such acquisition or series of related acquisitions, shall not exceed $200,000,000 without the consent of the holders of 66-2/3% of the aggregate outstanding principal amount of the Notes.”
 
Exhibit A-1

2. Section 7.6(a)(viii) (Negative Pledge) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows:
 
“(viii) other liens, that in the aggregate, when combined with all Indebtedness of Subsidiaries permitted to exist by Section 7.7(b) would not, at any time, exceed 15% of Consolidated Assets determined as of the end of the then most recently completed fiscal year of Barnes.”
 
3. Section 7.7 (Indebtedness) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows:
 
“7.7 Indebtedness.
 
(a) Barnes will not, nor will it permit any of its Subsidiaries to, directly or indirectly incur, create, assume or permit to exist any Indebtedness other than (i) Indebtedness incurred by Barnes and Barnes Switzerland under the Revolving Credit Agreement so long as such Indebtedness of Barnes Switzerland is subject to the Sharing Agreement; (ii) Indebtedness outstanding on the date of Amendment No. 3 under (1) the Notes or (2) Barnes’ $60,000,000, 8.59% Senior Notes due November 21, 2008 and Indebtedness which constitutes extensions, renewals or replacements of such Indebtedness so long as such Indebtedness is on substantially the same terms and conditions and does not increase the amount of outstanding of (1) and (2); total Indebtedness of Barnes’ Domestic Subsidiaries not to exceed at any time $10,000,000; (iii) Indebtedness of Barnes’ Foreign Subsidiaries not to exceed in the aggregate at any time for all such Foreign Subsidiaries, 10% of Consolidated Assets and $50,000,000 in the aggregate for any Foreign Subsidiary, provided, however that the Indebtedness of Foreign Subsidiaries all of whose lenders are party to the Sharing Agreement shall be excluded from this calculation and (iv) additional Indebtedness of Barnes and its Subsidiaries provided that the aggregate amount of all such Indebtedness at any time outstanding shall not exceed an amount equal to 135% of Consolidated Net Worth at such time; and
 
(b) (i) Notwithstanding the foregoing, Barnes will not permit any of its Subsidiaries to, directly or indirectly incur, create, assume or permit to exist any Indebtedness unless (1) all Indebtedness, plus the aggregate liquidation preference or redemption value of all Preferred Stock, of Subsidiaries (other than Indebtedness owing to, or Preferred Stock held by, Barnes or other Subsidiaries) plus (2) all Indebtedness of Barnes secured by Liens permitted to exist by Section 7.6(a)(viii), shall not at any time exceed 15% of Consolidated Assets determined as of the end of the most recently completed fiscal year of Barnes.
 
4. Section 7.14 (Restricted Payments and Restricted Investments) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows:
 
“7.14 Restricted Investments.
 
Exhibit A-2

Barnes will not, nor will it permit any Subsidiary to, at any time make or permit to exist any loans or advances to, or purchase any stock, other securities or evidences of indebtedness of, or make or permit to exist any investment or acquire any interest whatsoever in, any other Person, except
 
(a) investments of its cash by Barnes or any Subsidiary in (i) marketable direct obligations of, or marketable obligations guaranteed by, the United States of America or Canada, or marketable obligations of any instrumentality or agency thereof, the payment of the principal and interest of which is unconditionally guaranteed by the United States of America or Canada, (ii) certificates of deposit or other obligations issued by, or bankers’ acceptances of, any bank or trust company organized under the laws of Brazil, Singapore, the Federal Republic of Germany, France, the United Kingdom, Japan, Canada or the United States of America or any state thereof (including foreign branches of any such bank or trust company) and having capital, surplus and undivided profits in excess of $100,000,000, (iii) open market commercial paper with a maturity not in excess of 270 days from date of acquisition thereof and having at the time of purchase been rated and the ratings for which are not less than “P 2” if rated by Moody’s Investors Service, Inc. and not less than “A 2” if rated by Standard & Poor’s Corporation, or (iv) in the case of any foreign Subsidiary of Barnes in a country in which a Subsidiary exists as of the date of Amendment No. 3, such investments of a comparable quality and term to the other investments permitted by this clause (a) as are usually made in the jurisdiction or jurisdictions in which the business of such Foreign Subsidiary is principally conducted by prudent corporate investors in like circumstances;
 
(b) Investments (including debt obligations and capital stock) received in connection with the bankruptcy or reorganization of suppliers and customers in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;
 
(c) Investments existing on the date of Amendment No. 3 in Subsidiaries’ and other Investments as set forth on Schedule 7.14 attached hereto;
 
(d) Investments by Barnes in Subsidiaries, including such Investments existing on the date of Amendment No. 3, not to exceed in the aggregate 15% of Consolidated Assets; provided that the above limitation shall not apply with respect to (x) Investments made in order to effect transactions permitted under Section 7.4 or (y) Investments in Barnes Switzerland so long as the lenders of Barnes Switzerland are party to the Sharing Agreement; and provided further that notwithstanding any provision set forth in this Section 7.14 to the contrary, (I) Investments in the Barnes Group Gibraltar Limited shall be limited to $100,000, and (II) Investments in Barnes Group Luxembourg (No. 1) S.A. and Barnes Group Luxembourg (No. 2) S.A., other than amounts being held for application to the account of Barnes, shall be limited to $100,000;
 
(e) Investments consisting of permitted acquisitions under Section 7.4(c);
 
Exhibit A-3

(f) (i) Investments by any Subsidiaries of Barnes in Barnes, provided that any Investment by such Subsidiary must be an equity Investment or expressly subordinated to the prior payment in full in cash of all obligations under the Note Agreement and the Notes on terms disclosed to and reasonably acceptable to the holders of Notes prior to the incurrence thereof; and (ii) Investments by Subsidiaries of Barnes in other Subsidiaries of Barnes;
 
(g) Investments consisting of loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed at any time, an aggregate of $2,000,000 and (h) Investments in joint ventures; provided that the operation to be invested in is in a similar or related business and provided further that after giving effect to such joint venture, Barnes shall be in compliance, on a pro forma basis, with all financial covenants.”
 
5. Section 7 (Barnes’ Business Covenants) of the Existing Note Agreement is hereby amended by adding a new section 7.16 immediately following section 7.15 to read as follows:
 
“7.16. Consolidated Leverage Ratio.
 
Barnes will not permit the Consolidated Leverage Ratio to exceed 1.35 to 1 at any time.”
 
6. The definition of “Kar Guaranty” appearing in Section 10.1 (Terms Defined) of the Existing Note Agreement is hereby deleted in its entirety.
 
7. The definition of “Revolving Credit Agreement” appearing in Section 10.1 (Terms Defined) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows:
 
Revolving Credit Agreement - means the Second Amended and Restated $175,000,000 Senior Unsecured Revolving Credit Agreement, dated as of January 11, 2006, by and among Barnes, Barnes Switzerland, Bank of America, N.A., as administrative agent, the lenders listed on Schedule 1 thereto, Bank of America Securities LLC, as arranger, Keybank National Association, as syndication agent and HSBC Bank USA and Webster Bank, National Association, as co-documentation agents.
 
8. The following definitions are hereby added to Section 10.1 (Terms Defined) of the Existing Note Agreement in the appropriate alphabetical order thereof to read as follows:
 
Amendment No. 3 - means that certain Amendment No. 3 to Note Agreement, dated January 11, 2006 by and among Barnes and each of the holders of Notes a party thereto.
 
Barnes Switzerland - means Barnes Group Switzerland GmbH, a corporation organized under the laws of Switzerland and an indirect, wholly-owned Subsidiary of Barnes.
 
Exhibit A-4

Consolidated Leverage Ratio - means, at any time, the ratio of (a) the aggregate amount of all Indebtedness of Barnes and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, outstanding at such time to (b) Consolidated Net Worth determined at such time.
 
Preferred Stock - means capital stock of any class of Person which is preferred as to the payment of dividends, or the payment of distributions upon liquidation of such Person, to any other class of capital stock of such Person.
 
Sharing Agreement - means that certain Sharing Agreement, dated as of January 11, 2006, by and among the banks listed on the signature pages thereto, Bank of America, N.A., as agent, the Current Noteholders and holders of the notes issued under those separate Note Agreements, each dated as of November 21, 2000, (as amended by Amendment No. 1 to Note Agreement, dated as of February 21, 2002 and Amendment No. 2, dated as of February 5, 2003) and entered into by and among Barnes and each of the Purchasers listed in Exhibit A attached thereto, as it may from time to time, be amended or supplemented.”
 
9. Schedule 7.14 is hereby added in its entirety to the Existing Note Agreement to read as set forth on Exhibit B attached hereto.
 
Exhibit A-5

 
Exhibit B
 
Schedule 7.14
 
None.
 
Exhibit B
 
Exhibit 4.4(iv)
 
BARNES GROUP INC.
 
AMENDMENT NO. 3 TO NOTE AGREEMENT
 
As of January 11, 2006
 
To each of the Current Noteholders
Named in Annex 1 hereto
 
Ladies and Gentlemen:
 
Barnes Group Inc. , a Delaware corporation (hereinafter, the “ Company ”), together with its successors and assigns, agrees with you as follows:
 
1.	PRELIMINARY STATEMENTS.	
 
 	1.1	Note Issuance, etc.	
 
The Company issued and sold $60,000,000 aggregate principal amount of its 8.59% Senior Notes due November 21, 2008 (as may be amended, restated or otherwise modified from time to time, the “ Notes ”) pursuant to separate Note Agreements, each dated as of November 21, 2000, entered into by and among the Company and each of the Purchasers listed on Exhibit A attached thereto, as amended by Amendment No. 1 to Note Agreement, dated as of February 21, 2002 between the Company and each of the Persons identified on Annex 1 attached thereto, and Amendment No. 2, dated as of February 5, 2003 between the Company and each of the Persons identified on Annex 1 attached thereto (the “ Existing Note Agreement ” and, as amended by this Amendment No. 3 to Note Agreement (this “ Amendment Agreement ”), the “ Note Agreement ”). The register for the registration and transfer of the Notes indicates that the Persons named in Annex 1 hereto (collectively, the “ Current Noteholders ”) are currently the holders of the outstanding principal amount of the Notes as set forth next to such holder’s name on Annex 1.
 
2.	DEFINED TERMS.	
 
Capitalized terms used herein and not otherwise defined herein have the meanings ascribed to them in the Note Agreement.
 
3.	AMENDMENT.	
 
Subject to Section 5, the Existing Note Agreement is amended as provided for by this Amendment Agreement in the manner specified in Exhibit A (the “ Amendment ”).

4.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.	
 
To induce you to enter into this Amendment Agreement and to consent to the Amendment, the Company represents and warrants as follows:
 
 	4.1.	Organization, Power and Authority, etc.	
 
The Company is a corporation duly incorporated and validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to enter into and perform its obligations under this Amendment Agreement.
 
 	4.2.	Legal Validity.	
 
The execution and delivery of this Amendment Agreement by the Company and compliance by the Company with its obligations hereunder: (a) are within the corporate powers of the Company; and (b) are legal and do not conflict with, result in any breach of, constitute a default under, or result in the creation of any Lien upon any Property of the Company under the provisions of: (i) any charter instrument or bylaw to which the Company is a party or by which the Company or any of its Properties may be bound; (ii) any order, judgment, decree or ruling of any court, arbitrator or governmental authority applicable to either the Company or any of its Properties; or (iii) any agreement or instrument to which the Company is a party or by which the Company or any of its Properties may be bound or any statute or other rule or regulation of any governmental authority applicable to the Company or any of its Properties.
 
This Amendment Agreement has been duly authorized by all necessary action on the part of the Company, has been executed and delivered by a duly authorized officer of the Company, and constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except that enforceability may be limited by applicable bankruptcy, reorganization, arrangement, insolvency, moratorium, or other similar laws affecting the enforceability of creditors’ rights generally and subject to the availability of equitable remedies.
 
 	4.3.	No Defaults.	
 
No event has occurred and no condition exists that, upon the execution and delivery of this Amendment Agreement, would constitute a Default or an Event of Default.
 
5.	EFFECTIVENESS OF AMENDMENT.	
 
The Amendment shall become effective as of the first date written above (the “ Effective Date ”) upon:
 
(a) execution and delivery of a counterpart of this Amendment Agreement by the Company and by holders of 66-2/3% of aggregate outstanding principal amount of Notes;
 
(b) delivery by the Company of a fully executed copy of the Sharing Agreement, dated the date hereof, by and among the banks listed on the signature pages thereto, Bank of
 
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America, N.A., as agent, the Current Noteholders and holders of the notes issued under the 2000 Note Agreement; in form and substance satisfactory to the Current Noteholders;
 
(c) delivery by the Company to the Current Noteholders’ counsel of a fully executed copy of the Second Amended and Restated $175,000,000 Senior Unsecured Revolving Credit Agreement, dated as of January 11, 2006, by and among Bank of America, N.A., as administrative agent, the lenders listed on Schedule 1 attached thereto, the Company, Barnes Switzerland, Banc of America Securities LLC, as arranger, Keybank National Association, as syndication agent and HSBC Bank USA and Webster Bank, National Association, as co-documentation agents, in form and substance satisfactory to the Current Noteholders;
 
(d) delivery by the Company to the Current Noteholders’ counsel of a fully executed copy of an amendment, dated the date hereof to those separate Note Agreements, each dated as of November 12, 1999, (as amended by Amendment No. 1 to Note Agreement, dated as of February 5, 2003 entered into by and among 3031786 Nova Scotia Company (“ 3031786 ”) and each of the Purchasers listed on Schedule A attached thereto and by the Assumption and Amendment Agreement, dated as of August 26, 2005, by and among 3031786, the Company and each the Persons identified on Schedule A and Schedule B attached thereto, whereby the Company assumed the obligations of 3031786 under the said 1999 Note Agreement and the Nova Scotia Notes) (the “ 1999 Note Agreement ”);
 
(e) delivery by the Company to the Current Noteholders’ counsel of an Officer’s Certificate, dated the Effective Date, certifying that the conditions specified in Sections 4.1 and 4.2 have been fulfilled;
 
(f) delivery by the Company to the Current Noteholders’ counsel of a certificate of its Secretary or one of its Assistant Secretaries, dated the Effective Date, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of this Amendment Agreement;
 
(g) the Company shall have paid the fees and expenses of the Current Noteholders’ special counsel and the amendment fee as provided in Section 6; and
 
(h) all proceedings taken in connection with this Amendment Agreement and all documents and papers relating thereto shall be satisfactory to the Current Noteholders and their counsel, and the Current Noteholders and their counsel shall have received copies of such other documents and papers as the Current Noteholders or their counsel may reasonably request in connection herewith.
 
6.	EXPENSES.	
 
6.1 Payment of Special Counsel Fees.
 
Whether or not the Amendment becomes effective, the Company will promptly (and in any event within thirty days of receiving any statement or invoice therefor) pay all fees, expenses and costs relating to this Amendment Agreement, including, but not limited to, the reasonable
 
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fees of your special counsel, Bingham McCutchen LLP, incurred in connection with the preparation, negotiation and delivery of this Amendment Agreement and any other documents related thereto. Notwithstanding the foregoing, the Company will on the Effective Date, pay the fees and expense of Bingham McCutchen LLP incurred through the Effective Date. Nothing in this Section shall limit the Company’s obligations pursuant to Section 1.5 of the Existing Note Agreement.
 
 	6.2	Amendment Fee.	
 
The Company shall have paid to each of the Current Noteholders an amendment fee in connection with the execution and delivery of this Amendment Agreement, in an amount equal to the product of (i) the aggregate outstanding principal amount of the Existing Notes held by such Current Noteholder on the Effective Date multiplied by (ii) 0.07% (7 basis points) (the “ Amendment Fee ”). The Amendment Fee shall have been paid in immediately available funds to the account or accounts of such Current Noteholder as specified below such Current Noteholders’ name in Schedule A attached hereto.
 
7.	MISCELLANEOUS.	
 
7.1. Part of Existing Note Agreement; Future References, etc.
 
This Amendment Agreement shall be construed in connection with and as a part of the Existing Note Agreement and, except as expressly amended by this Amendment Agreement, all terms, conditions and covenants contained in the Existing Note Agreement are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Amendment Agreement may refer to the Existing Note Agreement without making specific reference to this Amendment Agreement, but nevertheless all such references shall include this Amendment Agreement unless the context otherwise requires.
 
 	7.2.	Counterparts; Effectiveness.	
 
This Amendment Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Delivery of an executed signature page by facsimile transmission or e-mail transmission of an adobe file format document (also known as a PDF file) shall be effective as delivery of a manually signed counterpart of this Amendment Agreement.
 
 	7.3.	Governing Law.	
 
THIS AMENDMENT AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF CONNECTICUT EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD
 
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REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN CONNECTICUT.
 
[Remainder of page intentionally left blank; next page is signature page.]
 
5

If you are in agreement with the foregoing, please so indicate by signing the acceptance below on the accompanying counterpart of this Amendment Agreement and returning it to the Company, whereupon it will become a binding agreement among each of you and the Company.

BARNES GROUP INC.	
		
By:	 	/s/    L AWRENCE W. O’B RIEN        	
Name:	 	Lawrence W. O’Brien	
Title:	 	Vice President and Treasurer	
		
By:	 	/s/    W ILLIAM C. D ENNINGER        	
Name:	 	William C. Denninger	
Title:	 	Senior Vice President and Chief Financial Officer	
 
[Signature Page to Amendment No. 3]

The foregoing Amendment Agreement is hereby accepted as of the date first above written.

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA	
		
By:	 	/s/    P AUL M EIRING        	
Name:	 	Paul Meiring	
Title:	 	Vice President	
	
ALLSTATE LIFE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
Title:	 	Authorized Signatory	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
Title:	 	Authorized Signatory	
		
 	 	Authorized Signatories	
	
AMERICAN HERITAGE LIFE INSURANCE COMPANY	
		
By:	 	/s/    R OBERT B. B ODETT        	
Name:	 	Robert B. Bodett	
Title:	 	Authorized Signatory	
		
By:	 	/s/    J ERRY D. Z INKULA        	
Name:	 	Jerry D. Zinkula	
Title:	 	Authorized Signatory	

			
NATIONWIDE LIFE INSURANCE COMPANY	
		
By:	 	/s/    W AYNE T. F RISBEE        	
Name:	 	Wayne T. Frisbee	
Title:	 	Vice President-Portfolio Management	
	
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY	
		
By:	 	/s/    W AYNE T. F RISBEE        	
Name:	 	Wayne T. Frisbee	
Title:	 	Vice President-Portfolio Management	
	
NATIONWIDE INDEMNITY COMPANY	
		
By:	 	/s/    W AYNE T. F RISBEE        	
Name:	 	Wayne T. Frisbee	
Title:	 	Vice President-Portfolio Management	

 
Annex 1
 
CURRENT NOTEHOLDERS AND
CURRENT OUTSTANDING PRINCIPAL AMOUNT

Current Noteholders
	  	Outstanding Principal
Amount of Notes
	
The Prudential Insurance Company of America	  	$	35,000,000	
Allstate Life Insurance Company	  	$	10,000,000	
American Heritage Life Insurance Company	  	$	5,000,000	
Nationwide Life Insurance Company	  	$	4,000,000	
Nationwide Life and Annuity Insurance Company	  	$	2,000,000	
Nationwide Indemnity Company	  	$	4,000,000	
TOTAL	  	$	60,000,000	
 
Annex 1

 
Exhibit A
 
AMENDMENT
 
1. Section 7.4 ( Sale of Assets or Merger ) of the Existing Note Agreement is hereby amended by adding a new subsection (c) at the end of such Section to read as follows:
 
“(c) Acquisitions — The Company may purchase or otherwise acquire all or substantially all of the assets or stock or other equity interests of any other Person provided, that:
 
(i) the Company is in current compliance with and, after giving effect to the proposed acquisition (including any borrowings made or to be made in connection therewith), will continue to be in compliance with all of the covenants in Section 7 hereof as if the transaction occurred on the first day of the period of measurement; provided, the holders of Notes shall have received a certificate of the Chief Financial Officer or a Vice President and the Treasurer or an Assistant Treasurer certifying compliance with the requirements of Section 7 on a pro forma historical basis as if the transaction occurred on the first day of the period of measurement and the related documentation showing the estimated calculations (subject to any adjustments) made in determination thereof;
 
(ii) at the time of such acquisition, no Default or Event of Default has occurred and is continuing, and such acquisition will not otherwise create a Default or an Event of Default hereunder;
 
(iii) the business to be acquired is similar to the business conducted by the Company or businesses reasonably related or incidental thereto;
 
(iv) not later than seven (7) days prior to the proposed acquisition date, notice of any proposed acquisition with an aggregate consideration (including assumption of indebtedness) of more than $30,000,000, together with all information reasonably requested by the holders of Notes with respect to such acquisition (including, without limitation, historical financial statements and due diligence summaries) shall have been furnished to the holders.
 
(v) the board of directors and (if required by applicable law) the shareholders, or the equivalent thereof, of the business to be acquired has approved such acquisition;
 
(vi) if such acquisition is made by a merger, the Company (or a wholly-owned Subsidiary of the Company) shall have complied with the provisions of Section 7.4(b); and
 
(vii) the total consideration to be paid in connection with any acquisition or series of related acquisitions, in the form of cash and assumption of debt with respect to any such acquisition or series of related acquisitions, shall not exceed $200,000,000 without the consent of the holders of 66-2/3% of the aggregate outstanding principal amount of the Notes.”
 
Exhibit A-1

2. Section 7.6(a)(viii) ( Negative Pledge ) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows:
 
“(viii) other liens, that in the aggregate, when combined with all Indebtedness of Subsidiaries permitted to exist by Section 7.7(b) would not, at any time, exceed 15% of Consolidated Assets determined as of the end of the then most recently completed fiscal year of the Company.”
 
3. Section 7.7 ( Indebtedness ) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows:
 
“Section 7.7 Indebtedness.
 
(a) The Company will not, nor will it permit any of its Subsidiaries to, directly or indirectly incur, create, assume or permit to exist any Indebtedness other than (i) Indebtedness incurred by the Company and Barnes Switzerland under the Revolving Credit Agreement so long as such Indebtedness of Barnes Switzerland is subject to the Sharing Agreement; (ii) Indebtedness outstanding on the date of Amendment No. 3 under (1) the Notes or (2) the Nova Scotia Notes and Indebtedness which constitutes extensions, renewals or replacements of such Indebtedness so long as such Indebtedness is on substantially the same terms and conditions and does not increase the amount of outstanding of (1) and (2); total Indebtedness of the Company’s Domestic Subsidiaries not to exceed at any time $10,000,000; (iii) Indebtedness of the Company’s Foreign Subsidiaries not to exceed in the aggregate at any time for all such Foreign Subsidiaries, 10% of Consolidated Assets and $50,000,000 in the aggregate for any Foreign Subsidiary, provided, however that the Indebtedness of Foreign Subsidiaries all of whose lenders are party to the Sharing Agreement shall be excluded from this calculation and (iv) additional Indebtedness of the Company and its Subsidiaries provided that the aggregate amount of all such Indebtedness at any time outstanding shall not exceed an amount equal to 135% of Consolidated Net Worth at such time; and
 
(b) (i) Notwithstanding the foregoing, the Company will not permit any of its Subsidiaries to, directly or indirectly incur, create, assume or permit to exist any Indebtedness unless (1) all Indebtedness, plus the aggregate liquidation preference or redemption value of all Preferred Stock, of Subsidiaries (other than Indebtedness owing to, or Preferred Stock held by, the Company or other Subsidiaries) plus (2) all Indebtedness of the Company secured by Liens permitted to exist by Section 7.6(a)(vii), shall not at any time exceed 15% of Consolidated Assets determined as of the end of the most recently completed fiscal year of the Company.
 
4. Section 7.10 ( Consolidated Leverage Ratio ) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows:
 
“ 7.10. Consolidated Leverage Ratio. The Company will not permit the Consolidated Leverage Ratio to exceed 1.35 to 1 at any time.”
 
Exhibit A-2

5. Section 7.16 ( Restricted Payments and Restricted Investments ) of the Existing Note Agreement is hereby amended and restated in its entirety to read as follows:
 
“ Section 7.16 Restricted Investments . The Company will not, nor will it permit any Subsidiary to, at any time make or permit to exist any loans or advances to, or purchase any stock, other securities or evidences of indebtedness of, or make or permit to exist any investment or acquire any interest whatsoever in, any other Person, except
 
(a) investments of its cash by the Company or any Subsidiary in (i) marketable direct obligations of, or marketable obligations guaranteed by, the United States of America or Canada, or marketable obligations of any instrumentality or agency thereof, the payment of the principal and interest of which is unconditionally guaranteed by the United States of America or Canada, (ii) certificates of deposit or other obligations issued by, or bankers’ acceptances of, any bank or trust company organized under the laws of Brazil, Singapore, the Federal Republic of Germany, France, the United Kingdom, Japan, Canada or the United States of America or any state thereof (including foreign branches of any such bank or trust company) and having capital, surplus and undivided profits in excess of $100,000,000, (iii) open market commercial paper with a maturity not in excess of 270 days from date of acquisition thereof and having at the time of purchase been rated and the ratings for which are not less than “P 2” if rated by Moody’s Investors Service, Inc. and not less than “A 2” if rated by Standard & Poor’s Corporation, or (iv) in the case of any foreign Subsidiary of the Company in a country in which a Subsidiary exists as of the date of Amendment No. 3, such investments of a comparable quality and term to the other investments permitted by this clause (a) as are usually made in the jurisdiction or jurisdictions in which the business of such Foreign Subsidiary is principally conducted by prudent corporate investors in like circumstances;
 
(b) Investments (including debt obligations and capital stock) received in connection with the bankruptcy or reorganization of suppliers and customers in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;
 
(c) Investments existing on the date of Amendment No. 3 in Subsidiaries’ and other Investments as set forth on Schedule 7.16 attached hereto;
 
(d) Investments by the Company in Subsidiaries, including such Investments existing on the date of Amendment No. 3, not to exceed in the aggregate 15% of Consolidated Assets; provided that the above limitation shall not apply with respect to (x) Investments made in order to effect transactions permitted under Section 7.4 or (y) Investments in Barnes Switzerland so long as the lenders of Barnes Switzerland are party to the Sharing Agreement; and provided further that notwithstanding any provision set forth in this Section 7.16 to the contrary, (I) Investments in the Barnes Group Gibraltar Limited shall be limited to $100,000, and (II) Investments in Barnes Group Luxembourg (No. 1) S.A. and Barnes Group Luxembourg (No. 2) S.A., other than amounts being held for application to the account of the Company, shall be limited to $100,000;
 
Exhibit A-3

(e) Investments consisting of permitted acquisitions under Section 7.4(c);
 
(f) (i) Investments by any Subsidiaries of the Company in the Company, provided that any Investment by such Subsidiary must be an equity Investment or expressly subordinated to the prior payment in full in cash of all obligations under the Note Agreement and the Notes on terms disclosed to and reasonably acceptable to the holders of Notes prior to the incurrence thereof; and (ii) Investments by Subsidiaries of the Company in other Subsidiaries of the Company;
 
(g) Investments consisting of loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed at any time, an aggregate of $2,000,000 and
 
(h) Investments in joint ventures; provided that the operation to be invested in is in a similar or related business and provided further that after giving effect to such joint venture, the Company shall be in compliance, on a pro forma basis, with all financial covenants.”
 
6. The definition of “ Kar Guaranty ” appearing in Section 10.1 ( Terms Defined ) of the Existing Note Agreement is hereby deleted in its entirety.
 
7. The definitions of “ Nova Scotia Notes ” and “ Revolving Credit Agreement ” appearing in Section 10.1 ( Terms Defined ) of the Existing Note Agreement are hereby amended and restated in their entirety to read as follows:
 
“ Nova Scotia Notes ” - means the amended and restated 7.66% Senior Notes due November 12, 2007 and the amended and restated 7.80% Senior Notes due November 12, 2010 issued by the Company, and any extensions or renewals thereof, provided that the principal amount of Indebtedness evidenced thereby is not increased.
 
“ Revolving Credit Agreement” - means the Second Amended and Restated $175,000,000 Senior Unsecured Revolving Credit Agreement, dated as of January 11, 2006, by and among the Company, Barnes Switzerland, Bank of America, N.A., as administrative agent, the lenders listed on Schedule 1 thereto, Bank of America Securities LLC, as arranger, Keybank National Association, as syndication agent and HSBC Bank USA and Webster Bank, National Association, as co-documentation agents.
 
8. The following definitions are hereby added to Section 10.1 ( Terms Defined ) of the Existing Note Agreement in the appropriate alphabetical order thereof to read as follows:
 
“ Amendment No. 3” - means that certain Amendment No. 3 to Note Agreement, dated January 11, 2006 by and among the Company and each of the holders of Notes a party thereto.
 
Exhibit A-4

“Barnes Switzerland” - means Barnes Group Switzerland GmbH, a corporation organized under the laws of Switzerland and an indirect, wholly-owned Subsidiary of the Company.
 
“Sharing Agreement” - means that certain Sharing Agreement, dated as of January 11, 2006, by and among the banks listed on the signature pages thereto, Bank of America, N.A., as agent, the Current Noteholders and holders of the notes issued under those separate Note Agreements, each dated as of November 21, 2000, (as amended by Amendment No. 1 to Note Agreement, dated as of February 21, 2002 and Amendment No. 2, dated as of February 5, 2003) and entered into by and among the Company and each of the Purchasers listed in Exhibit A attached thereto, as it may from time to time, be amended or supplemented.”
 
9. Schedule 7.16 is hereby added in its entirety to the Existing Note Agreement to read as set forth on Exhibit B attached hereto.
 
Exhibit A-5

 
Exhibit B
 
Schedule 7.16
 
None.
Exhibit B
 
Exhibit 10.6
 
BARNES GROUP INC.
 
NON-EMPLOYEE DIRECTOR DEFERRED STOCK PLAN
as Further Amended
 
Section 1: Establishment of Plan
 
The purpose of this Plan is to provide a means through which Directors of the Company may share in its long-term growth by acquiring a common stock ownership in the Company.
 
Section 2: Definitions
 
When used in this Plan, the following terms shall have the definitions set forth in this section:
 
2.1 “AAA” shall have the meaning set forth in Section 6 hereof.
 
2.2 “Board of Directors” shall mean the Board of Directors of Barnes Group Inc.
 
2.3 “Change-in-Control” shall have the meaning set forth in the Barnes Group Inc. Employee Stock And Ownership Program, as amended and in effect from time to time.
 
2.4 “Committee” shall have the meaning set forth in Section 3.4 hereof.
 
2.5 “Company” shall mean Barnes Group Inc.
 
2.6 “Delivery Date” shall have the meaning set forth in Section 4.1 hereof.
 
2.7 “Director” shall mean a member of the Board of Directors who is not an executive officer of the Company.
 
2.8 “Disability” shall have the meaning set forth in the Company’s long-term disability plan.
 
2.9 “Grant Date” shall have the meaning set forth in Section 3.1 hereof.
 
2.10 “Shares” shall have the meaning set forth in Section 3.1 hereof.
 
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Section 3: Deferred Stock Grant
 
3.1 Each Director shall be granted as of the date of election to the Board of Directors (the “Grant Date”) the right to receive, without payment to the Company and at the applicable time or times provided by Section 4 hereof, 6,000 shares of the common stock of the Company (the “Shares”). A Director shall have no rights as a stockholder of the Company with respect to any of the Shares until the Shares are delivered to the Director pursuant to Section 4 hereof.
 
3.2 If the number of outstanding shares of common stock of the Company is changed as a result of a stock dividend, stock split, reverse stock split or the like without additional consideration to the Company, the number of Shares shall be adjusted to correspond to the change in the outstanding shares of common stock; and in the case of any reorganization or recapitalization of the Company (by reclassification of its outstanding common stock or otherwise), or its consolidation or merger with or into another corporation, or the sale, conveyance, lease or other transfer by the Company of all or substantially all of its property, pursuant to any of which events the then outstanding shares of common stock are combined, or are changed into or become exchangeable for other shares of stock or property, the Director shall be entitled to receive, in lieu of the Shares that s/he would otherwise be entitled to receive and without any payment, the shares of stock or property which the Director would have received upon such reorganization, recapitalization, consolidation, merger, sale or other transfer, if immediately prior thereto s/he had owned the Shares that s/he would otherwise be entitled to receive pursuant to this Plan and had exchanged such Shares in accordance with the terms of such reorganization, recapitalization, consolidation, merger, sale or other transfer.
 
3.3 In no event (a) may the Director sell, exchange, transfer, assign, pledge, hypothecate, mortgage or dispose of the right to receive the Shares or any interest therein, nor (b) shall the right to receive the Shares or any interest therein be subject to anticipation, attachment, garnishment, levy, encumbrance or charge of any nature, voluntary or involuntary, by operation of law or otherwise. Any attempt, whether voluntary or involuntary, to sell, exchange, transfer, assign, pledge, hypothecate, mortgage, dispose, anticipate, attach, garnish, levy upon, encumber or charge the right to receive the Shares or any interest therein shall be null and void and the other party to the transaction shall not obtain any rights to or interest in the Shares. The foregoing sentences in this Section 3.3 shall not prevent the assignment or transfer of the right to receive the Shares and any interest therein by will or applicable laws of descent and distribution, or prevent the Director from designating one or more beneficiaries to receive the Shares in the event of his or her death; provided, that such designation shall have been received in writing by the Company before such death and the last such designation shall be controlling.
 
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3.4 Notwithstanding Section 3.1, if the Director’s service as a director of the Company continues until the date on which a Change-in-Control occurs, the Director shall have the right immediately to receive the Shares. However, if such Change-in-Control occurs less than six months after the Grant Date and the Compensation and Management Development Committee of the Board of Directors (the “Committee”) (other than the Director, if s/he is a member thereof) requests in writing before the date of such Change-in-Control that the Director agree in writing to remain a director of the Company through the date which is six months after the Grant Date with substantially the same title, duties, authority, compensation and indemnification as on the day immediately preceding the Change-in-Control, then in that event the Director shall have the right to receive the Shares pursuant to this Section 3.4 only if the Director executes such written agreement and delivers it to the Company not later than one week after the date of such Change-in-Control, in which case the Director shall have the right to receive the Shares when the Director delivers such written agreement or, if later, on the date on which such Change-in-Control occurs.
 
3.5 If the Director, at any time before the Shares are delivered: (i) directly or indirectly, whether as an owner, partner, shareholder, consultant, agent, employee, investor or in any other capacity, accepts employment with, renders services to or otherwise assists any other business which competes with the business conducted by the Company or any of its subsidiaries, during the Director’s last two years with the Company or any of its subsidiaries; (ii) directly or indirectly, hires or solicits or arranges for the hiring or solicitation of any employee of the Company or any of its subsidiaries on behalf of any business or enterprise other than the Company or a subsidiary, or encourages any such employee to leave such employment; (iii) uses, discloses, misappropriates or transfers confidential or proprietary information concerning the Company or any of its subsidiaries (except as required by the Director’s work responsibilities with the Company or any of its subsidiaries); (iv) is convicted of a crime against the Company or any of its subsidiaries; or (v) engages in any activity in violation of the policies of the Company or any of its subsidiaries, including without limitation the Company’s Code of Business Ethics and Conduct, or, at any time, engages in conduct adverse to the best interests of the Company or any of its subsidiaries; then should any of the foregoing events occur, the right to receive the Shares and any interest therein and any future dividend equivalents shall be forfeited unless the Committee (other than the Director, if s/he is a member thereof), in its sole discretion, elects otherwise. The provisions of this Section 3.5 are in addition to any other agreements related to non-competition, non-solicitation and preservation of Company confidential and proprietary information entered into between the Director and the Company, and nothing herein is intended to waive, modify, alter or amend the terms of any such other agreement.
 
Section 4: Delivery of the Shares
 
4.1 The Shares shall be delivered to each Director by, at the Director’s election, issuance of a stock certificate for the Shares or entry of a credit for the Shares in a book
 
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entry account in the Director’s name either on the first business day of the month immediately following his/her termination as a Director (the “Delivery Date”) or, at the election of the Director, on the fifth anniversary of the Delivery Date (or if such date is not a business day, on the first business day thereafter) or in five annual installments (as equal as practical, rounded to the nearest whole share, and not more in the aggregate than the total number of Shares that the Director is entitled to receive) commencing on the Delivery Date. The aforesaid election shall be made by a newly elected Director within thirty days after election to the Board of Directors.
 
4.2 A Director who is first elected after July 16, 2003 shall meet a minimum service requirement of three continuous years as a member of the Board of Directors, beginning on the Grant Date and ending on the third anniversary thereof, in order to receive 6,000 Shares. If such Director’s service is terminated due to a reason other than death or Disability, before the expiration of such minimum service period, then a prorata portion of the Shares, based on the Director’s period of service and rounded to the nearest number of whole shares, shall be delivered in accordance with this Section 4. Such prorata portion shall be the number of Shares equal to 6,000 multiplied by a fraction which shall not exceed the number one (1), the numerator of which shall be the number of months elapsed from the Grant Date until the date of such termination of service and the denominator of which fraction shall be the number 36.
 
4.3 In the event of the death of a Director prior to earning 6,000 Shares, 6,000 Shares shall be delivered to the beneficiary designated by the Director or, in the absence of such designation, to the Director’s estate. In the event of the Disability of a Director prior to earning 6,000 Shares, 6,000 Shares shall be delivered to such Director.
 
4.4 Regardless of any election by a Director to defer delivery of the Shares, the Committee may in its sole discretion deliver to the Director all of the Shares that the Director is entitled to receive at any time on or after the Delivery Date.
 
4.5 The Shares shall be Treasury shares.
 
Section 5: Dividend Equivalents
 
5.1 The grant of the right to receive the Shares shall also entitle the Director to receive Dividend Equivalents. On each date on which a dividend (other than a common stock dividend) is paid to the holders of common stock the record date of which falls during the period commencing on the Grant Date and ending on the date when the Shares are delivered pursuant to Section 4 hereof, the Company shall pay the Director an amount of money determined by multiplying (a) the number of the Shares that the Director is entitled to receive, times (b) the dividend per share paid on such dividend payment date. However, if the dividend is paid in property other than cash or common stock, the amount of money to be paid to the Director in respect of such dividend shall
 
4

be determined by multiplying (i) the number of the Shares that the Director is entitled to receive, times (ii) the fair market value on such dividend payment date of the property that was paid per share of common stock as a dividend on such dividend payment date. Notwithstanding anything to the contrary herein, the Director shall not be required to reimburse the Company for any dividend equivalents previously paid to the Director with respect to Shares that are not delivered to the Director pursuant to Section 4.2 hereof.
 
5.2 At the election of a Director, which election may be changed from time to time, the Dividend Equivalents may be paid in cash or invested in the Company’s common stock through an arrangement similar to the Company’s plan for dividend investment.
 
5.3 A Director who subsequently becomes an employee of the Company before the Delivery Date shall be entitled to continue to receive Dividend Equivalents.
 
Section 6: Interpretation
 
The Committee (other than the Director, if s/he is a member thereof) shall interpret and construe this Plan and make all determinations thereunder, and any such interpretation, construction or determination by the Committee shall be binding and conclusive on the Company and the Director and on any person or entity claiming under or through either of them.
 
Any claim, demand or controversy arising from such interpretation, construction or determination by the Committee shall be submitted first to a mediator in accordance with the rules of the American Arbitration Association (“AAA”) by submitting a mediation request to the Corporate Secretary of the Company within thirty (30) days of the date of the Committee’s interpretation or construction. The mediation process shall conclude upon the earlier of: (a) the resolution of the dispute; (b) a determination by either the mediator or one or more of the parties that all settlement possibilities have been exhausted and there is no possibility of resolution; or (c) thirty (30) days have passed since the filing of a request to mediate with the AAA. A party who has previously submitted a dispute to mediation, and which dispute has not been resolved, may submit such dispute to binding arbitration pursuant to the rules of the AAA. Any arbitration proceeding for such dispute must be initiated within fourteen (14) days from the date that the mediation process has concluded. The prevailing party shall recover its costs and reasonable attorney’s fees incurred in such arbitration proceeding. The Director and the Company specifically understand and agree that the failure of a party to timely initiate a proceeding hereunder shall bar the party from any relief or other proceeding and any such dispute shall be deemed to have been finally and completely resolved. All mediation and arbitration proceedings shall be conducted in Bristol, Connecticut or such other location as the Company may determine and the Director agrees that no objection shall be made to such jurisdiction or venue, as a forum non conveniens or otherwise. The arbitrator’s authority shall be limited to resolution of the 
 
5

legal disputes between the parties and the arbitrator shall not have authority to modify or amend this Plan or the Committee’s interpretation or construction thereof, or abridge or enlarge rights available under applicable law. Any court with jurisdiction over the parties may enforce any award made hereunder. 
 
Section 7: Amendment and Termination; Term
 
7.1 The Committee may at any time terminate this Plan and it may, at any time, or from time to time, amend or suspend and, if suspended, reinstate, this Plan in whole or in part; provided, that any such amendment of this Plan shall be contingent on obtaining the approval of the stockholders of the Company if the Committee determines that such approval is necessary to comply with any requirement of law, including the rules of any stock exchange, stock market or automated quotation system on which the Company’s equity securities are traded or quoted.
 
7.2 The expiration of this Plan, after which no rights to Shares may be granted hereunder, shall be December 15, 2005; provided, that the administration of this Plan shall continue in effect until all matters have been settled relating to the delivery of Shares for which rights have been previously granted.
 
Section 8: General
 
8.1 The Company will make reasonable efforts to comply with all applicable federal and state securities laws. However, the Company will not issue any Shares pursuant to this Plan if their issuance would result in a violation of any such law. If at any time the Committee (other than the Director, if s/he is a member thereof) shall determine, in its discretion, that the listing, registration or qualification of any Shares subject to this Plan upon any securities exchange or under any state or Federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of rights under this Plan or the issue of the Shares, no rights under the Plan may be exercised and the Shares may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee and any delay caused thereby shall in no way affect the minimum service requirement described in Section 4.2.
 
8.2 By accepting the right to receive the Shares and Dividend Equivalents, the Director recognizes and agrees that the Company, its stockholders and its subsidiaries, and each of their officers, directors, agents and employees, including but not limited to the Board and the Committee, in their oversight or conduct of the business and affairs of the Company and its subsidiaries, or, in the exercise by the Company’s stockholders of their voting rights, may in good faith act or omit to act, or cause the Company and/or a subsidiary to act or omit to act, in a manner that will, directly or indirectly, prevent all or part of the Shares or Dividend Equivalents from becoming deliverable. No provision
 
6

of this Plan shall be interpreted or construed to impose any liability upon the Company, any stockholder of the Company, any subsidiary, or any officer, director, agent or employee of the Company or any subsidiary, or the Board or the Committee, for any forfeiture of the Shares or Dividend Equivalents or any interest therein that may result, directly or indirectly, from any such action or omission, or shall be interpreted or construed to impose any obligation on the part of any such entity or person to refrain from any such action or omission.
 
8.3 This Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of laws thereof.
 
Adopted by the Board of Directors
on 5/18/1989
Amended on 2/18/1994 and 7/16/2003
 
Amended by the Board of Directors: 2/16/06
 
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EXHIBIT 21
 
BARNES GROUP INC.
 
CONSOLIDATED SUBSIDIARIES
as of December 31, 2005

Name
	  	Jurisdiction of
Incorporation
	
Associated Spring-Asia Pte. Ltd.	  	Singapore	
Associated Spring do Brasil Ltda.	  	Brazil	
Associated Spring Mexico, S.A.	  	Mexico	
Associated Spring (Tianjin) Company, Ltd.	  	China	
Associated Spring (U.K.) Ltd.	  	United Kingdom	
AS Monterrey S. de R.L. de C.V.	  	Mexico	
AS Troy, LLC	  	Delaware	
Barnes Financing Delaware LLC	  	Delaware	
Barnes Group (Bermuda) Limited	  	Bermuda	
Barnes Group Canada Corp.	  	Canada	
Barnes Group Canada Holding Corp.	  	Canada	
Barnes Group (Delaware) LLC	  	Delaware	
Barnes Group France S.A.	  	France	
Barnes Group Finance Company (Bermuda) Limited	  	Bermuda	
Barnes Group Finance Company (Delaware)	  	Delaware	
Barnes Group (Germany) GmbH	  	Germany	
Barnes Group Gibraltar Limited	  	Gibraltar	
Barnes Group Holding LLC	  	Delaware	
Barnes Group Luxembourg (No.1) S.A.	  	Luxembourg	
Barnes Group Luxembourg (No.2) S.A.	  	Luxembourg	
Barnes Group Spain SRL	  	Spain	
Barnes Group Switzerland GmbH	  	Switzerland	
Barnes Group (Thailand) Ltd.	  	Thailand	
Barnes Group Trading Ltd.	  	Bermuda	
Barnes Group (U.K.) Limited	  	United Kingdom	
Barnes Sweden Holding Company AB	  	Sweden	
Raymond Distribution (Ireland) Limited	  	Ireland	
Raymond Distribution-Mexico, S.A. de C.V.	  	Mexico	
Ressorts SPEC, SARL	  	France	
Seeger-Orbis GmbH & Co. OHG	  	Germany	
Spectrum Plastics Molding Resources, Inc.	  	Connecticut	
Stromsholmen AB	  	Sweden	
The Wallace Barnes Company	  	Connecticut	
Windsor Airmotive Asia Pte. Ltd.	  	Singapore	
 
The foregoing does not constitute a complete list of all subsidiaries of the registrant. The subsidiaries that have been omitted do not, if considered in the aggregate as a single subsidiary, constitute a “Significant Subsidiary” as defined by the Securities and Exchange Commission.
 
EXHIBIT 23
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-104242 and 333-129079) and Form S-8 (Nos. 2-56437, 2-91285, 33-20932, 33-30229, 33-91758, 33-27339, 333-41398, 333-88518, 333-57658, 333-112869 and 333-115333) of Barnes Group Inc. of our report dated February 24, 2006 relating to the consolidated financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/    P RICEWATERHOUSE C OOPERS LLP	
PricewaterhouseCoopers LLP
Hartford, Connecticut
February 24, 2006	
 
EXHIBIT 31.1
 
CERTIFICATION
 
I, Edmund M. Carpenter, certify that:
 
1.	I have reviewed this annual report on Form 10-K for the period ended December 31, 2005 of Barnes Group 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(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 
 	(c)	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	
 
 	(d)	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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) 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 control 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: February 27, 2006

/s/ E DMUND M. C ARPENTER	
Edmund M. Carpenter	
President and Chief Executive Officer	
 
EXHIBIT 31.2
 
CERTIFICATION
 
I, William C. Denninger, certify that:
 
1.	I have reviewed this annual report on Form 10-K for the period ended December 31, 2005 of Barnes Group 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(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 
 	(c)	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	
 
 	(d)	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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) 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 control 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: February 27, 2006

/s/ W ILLIAM C. D ENNINGER	
William C. Denninger	
Chief Financial Officer	
 
EXHIBIT 32
 
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 Annual Report of Barnes Group Inc. (the “Company”) on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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/ E DMUND M. C ARPENTER	 	 	 	/s/ W ILLIAM C. D ENNINGER	
Edmund M. Carpenter
President and Chief Executive Officer
February 27, 2006	 	 	 	William C. Denninger
Chief Financial Officer
February 27, 2006	
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Barnes Group Inc. and will be retained by Barnes Group Inc. and furnished to the Securities and Exchange Commission or its staff upon request.