-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EVZLkDwvqJrNfA/FlVHpHhvXsbLljLnbfGfNXOjIyizyrEDTzgabKnoH5H/tInKc i3+qbpsA+V2iG+uTccXtCg== 0000009984-97-000022.txt : 19970312 0000009984-97-000022.hdr.sgml : 19970312 ACCESSION NUMBER: 0000009984-97-000022 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970311 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARNES GROUP INC CENTRAL INDEX KEY: 0000009984 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 060247840 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04801 FILM NUMBER: 97554329 BUSINESS ADDRESS: STREET 1: 123 MAIN ST CITY: BRISTOL STATE: CT ZIP: 06011 BUSINESS PHONE: 2035837070 FORMER COMPANY: FORMER CONFORMED NAME: ASSOCIATED SPRING CORP DATE OF NAME CHANGE: 19760518 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR ----------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 123 Main St., Bristol, Connecticut 06011-0489 --------------------------------- -------------- (Address of Principal Executive Office) (Zip Code) Registrant's telephone number, including area code 860/583-7070 ------------ Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which ------------------- registered ------------------------------ Common Stock par value ---------------------- $1.00 per share New York Stock Exchange ---------------------- ----------------------- Securities registered pursuant to Section 12(g) of the Act: NONE. 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. [ ] The aggregate market value of the registrant's voting stock held by non-affiliates amounted to $406,297,958 as of February 4, 1997. The registrant had outstanding 6,669,471 shares of common stock as of February 4, 1997. Parts I and II incorporate information by reference from the registrant's 1996 Annual Report to Stockholders. Part III incorporates information by reference from the registrant's Proxy Statement dated March 4, 1997. Exhibit Index located at pages 15-18. EX-99 2 PART I Item 1. Business. --------- The Company was organized as a Delaware corporation in 1925. The Company is in three businesses: Bowman Distribution, a distributor of consumable repair and replacement products for industrial, heavy equipment, and transportation maintenance markets; Associated Spring, a manufacturer and distributor of custom-made springs and other close-tolerance engineered metal components; and Barnes Aerospace, a manufacturer of precision machined and fabricated assemblies for the aircraft and aerospace industries and a refurbisher of jet engine components.* Bowman Distribution. Bowman Distribution is ------------------- engaged in distributing in the United States, Canada, the United Kingdom and France a variety of replacement parts and other products, including fasteners and special purpose hardware, automotive parts, automotive specialties and accessories, general purpose electric and gas welding supplies, industrial maintenance supplies, and industrial aerosols such as adhesives, lubricants, and sealants. The products sold by Bowman Distribution are, for the most part, not manufactured by the Company, but are obtained from a number of outside suppliers. The vast majority of the products are repackaged and sold under Bowman's labels. Sales by Bowman Distribution in the United States and Canada are primarily to industrial and food processing plants, chemical and petrochemical process industries, contractors, new-car dealers, garages, service stations, operators of vehicle fleets, railroads, electric utilities, and airline ground maintenance facilities. In 1992, the Company sold substantially all of the assets of the Pioneer division of Bowman. Associated Spring. Associated Spring manufactures ----------------- and distributes a wide variety of custom metal parts for mechanical purposes. It is equipped to produce practically every type of spring requiring precision engineering, as well as an extensive ----------------------- *As used in this annual report, "Company" refers to the registrant and its consolidated subsidiaries except where the context requires otherwise, and "Associated Spring," "Barnes Aerospace," and "Bowman Distribution" refer to the above-defined businesses, but not to separate corporate entities. 1 variety of precision metal components and assemblies. Its products range in size from fine hairsprings for instruments to large springs for heavy machinery, and its output of a given metal part may vary in amount from a few units to several million. Associated Spring does not produce leaf springs or bed springs. Associated Spring's custom metal parts are sold in the United States and through the Company's foreign subsidiaries to manufacturers in many industries, chiefly for use as components in their own products. Custom metal parts are sold primarily through Associated Spring's sales employees. In view of the diversity of functions which Associated Spring's custom metal parts perform, Associated Spring's output is characterized by little standardization, with the major portion being manufactured to customer specifications. The automotive and automotive parts industries constitute Associated Spring's largest single custom metal parts market. Other important outlets include manufacturers of industrial and textile machinery, motors, generators, electronic equipment, aircraft, diesel and other internal combustion engines, household appliances and fixtures, hardware, office equipment, agricultural equipment, railroad equipment, general machinery, and scientific instruments. The Associated Spring Distribution division is engaged in the distribution of industrial products to the tool and die market, of which die springs manufactured primarily by Associated Spring are the principal item. It also distributes certain standard parts manufactured by Associated Spring consisting primarily of stock wire and flat springs which are sold under the Company's SPEC registered trademark. Associated Spring also has manufacturing operations in Brazil, Canada, Mexico, and Singapore, and distribution operations in the United Kingdom and France. In 1994, it closed its spring manufacturing plants in Gardena, California, and Monterrey, Mexico. The Company has retained a minority interest of 15% in its former subsidiary in Argentina. The Company is a partner in a joint venture corporation in the United States with NHK Spring Co., Ltd. of Japan. The joint venture corporation, NHK-Associated Spring Suspension Components Inc. ("NASCO"), has a manufacturing facility in Bowling Green, Kentucky. It manufactures and sells hot-wound coil springs for automotive suspension systems and counterbalance torque bars for trunk lids. Barnes Group owns a minority interest of 45% in NASCO. Barnes Aerospace. Barnes Aerospace is engaged in ---------------- the advanced fabrication and precision machining of components for jet engines and airframes as well as the repair and overhaul of jet engine components. Windsor Manufacturing, Windsor Airmotive, and Advanced Fabrications constitute the Barnes Aerospace Group. 2 Windsor Manufacturing manufactures machined and fabricated parts as well as assemblies. It specializes in the machining of difficult-to-process aircraft engine superalloys. Manufacturing processes include computer numerically controlled machining, electrical discharge machining, laser drilling, creep-feed grinding, and automated deburring. Customers include gas turbine engine manufacturers for commercial and military jets as well as land-based turbines. Windsor Airmotive specializes in refurbishing jet engine components. Electron beam welding and plasma spray are two of the major processes used in this division, and customers include approximately 30 airlines and engine overhaul businesses worldwide and the U.S. military. In 1995, Windsor Airmotive's Singapore operations moved into a larger facility. Advanced Fabrications, through its Jet Die and Flameco plants, specializes in hot forming and fabricating titanium and other high-temperature alloys such as hastelloy and inconel for use in precision details and assemblies for aircraft engine and airframe applications. It utilizes advanced manufacturing processes including superplastic forming and diffusion bonding. Segment Analysis. The analysis of the Company's ---------------- revenue from sales to unaffiliated customers, operating income, and identifiable assets by industry segments and geo- graphic areas appearing on pages 27 and 28 of the Company's 1996 Annual Report to Stockholders, included as Exhibit 13 to this report, is incorporated by reference. Competition. The Company competes with many other ----------- companies, large and small, engaged in the manufacture and sale of custom metal parts (including aerospace components). The Company believes Associated Spring is the largest domestic manufacturer of precision springs used for mechanical purposes. The Company also faces active competition in the products sold by Bowman Distribution. The principal methods of competition for the Company's three businesses include service, quality, price, reliability of supply, and also, in the case of Associated Spring and Barnes Aerospace, technology and design. Backlog. The backlog of the Company's orders ------- believed to be firm amounted to $151,142,000 at the end of 1996, as compared with $111,125,000 at the end of 1995. Of the 1996 year-end backlog, $103,357,000 is attributable to the Barnes Aerospace Group and all of the balance is attributable to the Associated Spring Group. $12,078,000 of Barnes Aerospace's backlog is not expected to be shipped in 1997. Substantially all of the remainder of the Company's backlog is expected to be shipped during 1997. 3 Raw Materials and Customers. None of the Company's --------------------------- divisions or groups are dependent upon any single source for any of their principal raw materials or products for resale, and all such materials and products are readily available. No one customer accounted for more than 10% of total sales in 1996. Automotive manufacturers and manufacturers of electronic products are important customers of Associated Spring. Sales by Barnes Aerospace to two domestic jet engine manufacturers accounted for approximately 50% of its business. Bowman Distribution is not dependent on any one or a few customers for a significant portion of its sales. Research and Development. Although most of the ------------------------ products manufactured by the Company are custom parts made to the customers' specifications, the Company is engaged in continuing efforts aimed at discovering and implementing new knowledge that is useful in developing new products or services or improving significantly an existing product or service. The Company spent approximately $3,957,000 on its research and development activities in 1996, as compared to expenditures of approximately $3,087,000 in 1995 and $2,640,000 in 1994. There were no significant customer- sponsored research and development activities. Patents and Trademarks. Patents, licenses, ---------------------- franchises and concessions are not material to any of the Company's businesses. Employees. As of the date of this report, the --------- Company employs approximately 3,800 persons. Environmental Laws. 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. Item 2. Properties. ---------- The Company and its Canadian subsidiary operate 12 manufacturing plants and 14 warehouses at various locations throughout the United States and Canada, of which all of the plants and 6 of the warehouses are owned in fee, and the others are leased. Of the properties which are owned, none is subject to any encumbrance. The Company's other foreign subsidiaries own or lease plant or warehouse facilities in the countries where their operations are conducted. The listing of the facility locations of each of the Company's businesses contained in the Directory of Operations on the inside front cover of the 1996 Annual Report to Stockholders, included as Exhibit 13 to this report, is incorporated by reference. 4 The Company believes that its owned and leased properties have been adequately maintained, are in satisfactory operating condition, are suitable and adequate for the business activities conducted therein, and have productive capacities sufficient to meet current needs. Item 3. Legal Proceedings. ----------------- 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 matter was submitted during the fourth quarter of 1996 to a vote of security holders. The following information is included in accordance with the provisions of Item 401(b) of Regulation S-K:
Executive Officers of the Company* -------------------------------- Age as of Executive Officer Position December 31, 1996 ----------------- -------- ----------------- Theodore E. Martin President and 57 Chief Executive Officer (since 1995) Thomas O. Barnes Chairman of the 47 Board of Directors (since 1995) and Senior Vice President- Administration (since 1993) Mary Louise Beardsley Associate General 42 Counsel and Secretary (since 1994) Francis C. Boyle, Jr. Vice President, 46 Controller (since 1997) Leonard M. Carlucci Vice President, 50 Barnes Group Inc. (since 1994) and President, Bowman Distribution (since 1995)
5
Age as of Executive Officer Position December 31, 1996 ----------------- -------- ----------------- Ali A. Fadel Vice President, 41 Barnes Group Inc. and President, Associated Spring (since 1994) William V. Grickis, Jr. Vice President, 46 General Counsel (since 1997) John J. Locher Vice President, 52 Treasurer (since 1992)
* All officers are elected by the Board of Directors and serve an indefinite term at the discretion of the Board. Except for Messrs. Barnes and Grickis, 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. Each officer holds office until his or her successor is chosen and qualified, or otherwise as provided in the By-Laws. No family relationships exist among the executive officers of the Company. Mr. Barnes was elected Senior Vice President- Administration effective December 16, 1993. From 1982 to 1993, Mr. Barnes was employed by The Olson Brothers Company as Executive Vice President and President, which position he held since 1983. Prior to joining Olson Brothers, Mr. Barnes held a variety of management positions with The Connecticut Bank and Trust Company, The S. Carpenter Construction Company, and the Company's Bowman Distribution division. Mr. Grickis joined the Company as Vice President, General Counsel on February 3, 1997. From 1981 to 1997, Mr. Grickis held various positions in the legal department of Loctite Corporation and for more than the past five years was its Corporate Counsel and Assistant Secretary. 6 PART II Item 5. Market for the Registrant's Common Stock and -------------------------------------------- Related Stockholder Matters. --------------------------- The information regarding the Company's common stock contained on pages 22 and 29 of the Company's 1996 Annual Report to Stockholders is incorporated by reference. As of February 4, 1997, the Company's common stock was held by 3,723 stockholders of record. The Company's common stock is traded on the New York Stock Exchange. Item 6. Selected Financial Data. ----------------------- The selected financial data for the last five years contained on pages 30 and 31 of the Company's 1996 Annual Report to Stockholders is incorporated by reference. Item 7. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations. ----------------------------------- The financial review and management's analysis thereof appearing on pages 11 through 13 of the Company's 1996 Annual Report to Stockholders are incorporated by reference. Item 8. Financial Statements and Supplementary Data. ------------------------------------------- The financial statements and report of independent accountants appearing on pages 14 through 29 of the Company's 1996 Annual Report to Stockholders are incorporated by reference. See also the report of independent accountants included on page 13 below pursuant to Item 302(a) of Regulation S-K. The material under "Quarterly Data" on page 29 of the Company's 1996 Annual Report to Stockholders is also incorporated by reference. Item 9. Changes and Disagreements with Accountants on --------------------------------------------- Accounting and Financial Disclosure. ----------------------------------- None. 7 PART III Item 10. Directors and Executive Officers of the Company. ----------------------------------------------- The material under "Election of Directors" on pages 1 through 4 of the Company's Proxy Statement dated March 4, 1997, is incorporated by reference. See also "Executive Officers of the Company," included above pursuant to Item 401(b) of Regulation S-K. Item 11. Executive Compensation. ---------------------- The material under "Compensation of Directors" appearing on page 4 and the information appearing on pages 7 through 14 of the Company's Proxy Statement dated March 4, 1997, is incorporated by reference. Item 12. Security Ownership of Certain Beneficial Owners and --------------------------------------------------- Management. ---------- The information concerning this item appearing on pages 5 and 6 of the Company's Proxy Statement dated March 4, 1997, is incorporated by reference. Item 13. Certain Relationships and Related Transactions. ---------------------------------------------- The information concerning this item appearing on page 10 of the Company's Proxy Statement dated March 4, 1997, is incorporated by reference. 8 PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports --------------------------------------------------- on Form 8-K. ----------- (a) The report of Price Waterhouse LLP, independent accountants, and the following financial statements and financial statement schedules are filed as part of this report: Reference ------------------------------------- Annual Report Form 10-K to Stockholders (page) (page) --------- --------------- Report of independent 13 29 accountants Consolidated balance 15 sheets at December 31, 1996 and 1995 Consolidated statements 14 of income for the years ended December 31, 1996, 1995 and 1994 Consolidated statements 17 of changes in stockholders' equity for the years ended December 31, 1996, 1995 and 1994 Consolidated statements 16 of cash flows for the years ended December 31, 1996, 1995 and 1994 Notes to consolidated 18 - 28 financial statements Supplementary information 29 Quarterly data (unaudited) Consolidated schedules for the years ended December 31, 1996, 1995 and 1994 VIII - Valuation and 14 qualifying accounts
All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or notes thereto. 9 The consolidated financial statements listed in the above index which are included in the Annual Report to Stockholders of Barnes Group Inc. for the year ended December 31, 1996, are hereby incorporated by reference. With the exception of the pages listed in the above index and in Items 1, 2, 5, 6, 7, and 8, the 1996 Annual Report to Stockholders is not to be deemed filed as part of this report. (b) One report on Form 8-K was filed on December 20, 1996, reporting on the adoption of a shareholder rights plan in Item 5. No financial statements were filed with the report. (c) The Exhibits required by Item 601 of Regulation S-K are filed as Exhibits to this Annual Report and indexed at pages 15 through 18 of this report. 10 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 21, 1997 BARNES GROUP INC. By /s/ Theodore E. Martin ----------------------------------------- Theodore E. Martin 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/ Theodore E. Martin --------------------------------------------------- Theodore E. Martin President and Chief Executive Officer (the principal executive officer) and Director /s/ John J. Locher --------------------------------------------------- John J. Locher Vice President, Treasurer (the principal financial officer) /s/ Francis C. Boyle, Jr. -------------------------------------------------- Francis C. Boyle, Jr. Vice President, Controller (the principal accounting officer) /s/ Thomas O. Barnes ------------------------------------------------- Thomas 0. Barnes Director 11 /s/ Gary G. Benanav ------------------------------------------------- Gary G. Benanav Director /s/ William S. Bristow, Jr. ------------------------------------------------- William S. Bristow, Jr. Director /s/ Robert J. Callander ------------------------------------------------- Robert J. Callander Director /s/ George T. Carpenter ------------------------------------------------- George T. Carpenter Director /s/ Donna R. Ecton ------------------------------------------------- Donna R. Ecton Director /s/ Marcel P. Joseph ------------------------------------------------- Marcel P. Joseph Director /s/ Juan M. Steta ------------------------------------------------- Juan M. Steta Director /s/ K. Grahame Walker ------------------------------------------------- K. Grahame Walker Director 12 CONFORMED COPY REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Barnes Group Inc. Our audits of the consolidated financial statements for the years ended December 31, 1996, 1995 and 1994 referred to in our report dated January 22, 1997, except as to Note 13, which is as of February 21, 1997, appearing on page 29 of the 1996 Annual Report to Stockholders of Barnes Group Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10- K) also included an audit of the Financial Statement Schedule for the years ended December 31, 1996, 1995 and 1994 listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP Hartford, Connecticut January 22, 1997, except as to Note 13, which is as of February 21, 1997 13 BARNES GROUP INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 1996, 1995 and 1994 (in thousands)
Provision Balance at charged to Balance beginning costs and at end of year expenses Deductions(1) of year ---------- --------- ------------- ------- 1996 Allowance for doubtful accounts $3,635 $ 545 $1,022 $3,158 1995 Allowance for doubtful accounts $3,222 $1,577 $1,164 $3,635 1994 Allowance for doubtful accounts $2,217 $1,523 $ 518 $3,222 (1) Write-offs, net of recoveries
14 EXHIBIT INDEX ------------- Barnes Group Inc. Annual Report on Form 10-K for year ended December 31, 1996 --------------------------------
Exhibit No. Description Reference ---------- ----------- --------- 3.1 Restated Certificate Incorporated by of Incorporation, reference to Exhibit as amended 3.1 to the Company's report on Form 10-K for the year ended December 31, 1992. 3.2 By-Laws. Incorporated by reference to Exhibit 3.2 to the Company's report on Form 10-K for the year ended December 31, 1995. 4.1 Revolving Credit Filed with this Agreement dated as report. of December 1, 1991 among the Company and several commercial banks. 4.2 First Amendment to Incorporated by Credit Agreement set reference to Exhibit forth in Exhibit 4.1 4.2 to the Company's dated as of December report on Form 10-K 1, 1992. for the year ended December 31, 1992. 4.3 Second Amendment to Incorporated by Credit Agreement set reference to Exhibit forth in Exhibit 4.1 4.3 to the Company's dated as of December report on Form 10-K 1, 1993. for the year ended December 31, 1993. 4.4 Third Amendment to Incorporated by Credit Agreement set reference to Exhibit forth in Exhibit 4.1 4.4 to the Company's dated as of report on Form 10-K December 1, 1994. for the year ended December 31, 1994.
15
Exhibit No. Description Reference ---------- ----------- --------- 4.5 Fourth Amendment to Incorporated by Credit Agreement set reference to Exhibit forth in Exhibit 4.1 4.5 to the Company's dated as of report on Form 10-K December 1, 1995. for the year ended December 31, 1995. 4.6 Fifth Amendment to Filed with this Credit Agreement set report. forth in Exhibit 4.1 dated as of December 1, 1996. 4.7 Rights Agreement Incorporated by dated as of December reference to Exhibit 10, 1996, between the 1 to the Company's Company and report on Form 8-A ChaseMellon Shareholder filed on December 20, Services L.L.C. 1996 4.8 Note Agreement dated Filed with this as of September 16, report. 1991, among the Company and several insurance companies. 4.9 Note Purchase Agreement Incorporated by dated as of December 1, reference to Exhibit 1995, between the 4.9 to the Company's Company and several report on Form 10-K insurance companies. for the year ended December 31, 1995. 10.1 The Company's Incorporated by Management Incentive reference to Exhibit Plan. 10.1 to the Company's report on Form 10-K for the year ended December 31, 1995. 10.2 The Company's Long Incorporated by Term Incentive Plan. reference to Exhibit 10.2 to the Company's report on Form 10-K for the year ended December 31, 1995.
16
Exhibit No. Description Reference ----------- ----------- --------- 10.3 The Company's Incorporated by Retirement Benefit reference to Exhibit Equalization Plan. 10.3 to the Company's report on Form 10-K for the year ended December 31, 1995. 10.4 The Company's Incorporated by Supplemental reference to Exhibit Executive 10.4 to the Company's Retirement Plan. report on Form 10-K for the year ended December 31, 1995. 10.5 The Company's 1981 Filed with this Stock Incentive Plan. report. 10.6 The Company's 1991 Filed with this Stock Incentive Plan, report. as amended February 21, 1997. 10.7 The Company's Non- Incorporated by Employee Director reference to Exhibit Deferred Stock Plan. 10.7 to the Company's report on Form 10-K for the year ended December 31, 1994. 10.8 The Company's Filed with this Amended and Restated report. Directors' Deferred Compensation Plan. 10.9 Consulting Agreement Incorporated by dated as of April 1, reference to Exhibit 1994 between the 10.9 to the Company's Company and Wallace report on Form 10-K Barnes. for the year ended December 31, 1994. 10.10 Addendum to Incorporated by Consulting Agreement reference to Exhibit set forth in Exhibit 10.10 to the Company's 10.9 dated as of report on Form 10-K for May 22, 1995. the year ended December 31, 1995.
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Exhibit No. Description Reference ---------- ----------- --------- 10.11 The Company's Officer Incorporated by Enhanced Life reference to Exhibit Insurance Program. 10.11 to the Company's report on Form 10-K for the year ended December 31, 1993. 10.12 The Company's Enhanced Incorporated by Life Insurance Program. reference to Exhibit 10.12 to the Company's report on Form 10-K for the year ended December 31, 1993. 10.13 The Company's Filed with this Supplemental Senior report. Officer Retirement Plan. 13 Portions of the 1996 Filed with this Annual Report to report. Stockholders. 21 List of Subsidiaries. Filed with this report. 23 Consent of Independent Filed with this Accountants. report.
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 Exhibit 13, which will be furnished free of charge, and Exhibits 21 and 23, which are included herein, copies of exhibits referred to above will be furnished at a cost of twenty cents per page to security holders who make a written request therefor to The Secretary, Barnes Group Inc., Executive Office, 123 Main Street, P.O. Box 489, Bristol, Connecticut 06011-0489. 18 EX-22 3 EXHIBIT 21 BARNES GROUP INC. LIST OF SUBSIDIARIES --------------------
Operating Subsidiaries of the Company: ------------------------------------- Jurisdiction of Name Incorporation ---- --------------- Associated Spring-Asia PTE. LTD. Singapore Associated Spring SPEC Limited United Kingdom Barnes Group (Bermuda) Limited Bermuda Barnes Group Canada Inc. Canada Barnes Group Holding B.V. Netherlands Bowman Distribution Europe Limited United Kingdom Bowman Distribution France S.A. France Resortes Mecanicos, S.A. Mexico Ressorts SPEC, EURL France Stumpp & Schuele do Brasil Industria e Brazil Comercio Limitada Windsor Airmotive Asia PTE. LTD. Singapore
Associated Spring SPEC Limited is wholly-owned by Bowman Distribution Europe Limited. Ressorts SPEC, EURL is wholly-owned by Bowman Distribution France S.A. Windsor Airmotive Asia PTE. LTD. is wholly-owned by Barnes Group Canada Inc. Associated Spring-Asia PTE. LTD., and Stumpp & Schuele do Brasil Industria e Comercio Limitada are wholly- owned by Barnes Group (Bermuda) Limited. Resortes Mecanicos, S.A. is owned by Barnes Group (Bermuda) Limited (20%), Barnes Group Canada Inc. (40%), and Associated Spring-Asia PTE. LTD. (40%). Barnes Group Canada Inc., Bowman Distribution Europe Limited, and Bowman Distribution France S.A. are wholly-owned by Barnes Group Holding B.V. Barnes Group (Bermuda) Limited and Barnes Group Holding B.V. are wholly-owned by Barnes Group Inc. The Company's consolidated financial statements include all of the above-named subsidiaries. For a statement of the principles of consolidation applicable to these subsidiaries, see Note 1 of the Notes to Consolidated Financial Statements on page 18 of the 1996 Annual Report to Stockholders. EX-23 4 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 2-56437, pertaining to the Employee Stock Purchase Plan, No. 2-91285, pertaining to the 1981 Stock Incentive Plan, Nos. 33-20932 and 33-30229, pertaining to the Guaranteed Stock Plan, and the registration statement filed on July 18, 1994, pertaining to the 1991 Stock Incentive Plan) of Barnes Group Inc. of our report dated January 22, 1997, except as to Note 13, which is as of February 21, 1997, appearing on page 29 of the Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 13 of this Form 10-K. /s/ PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP Hartford, Connecticut March 6, 1997 EX-4.8 5 EXHIBIT 4.8 BARNES GROUP INC, NOTE AGREEMENT Dated as of September 16, 1991 $40,000,000 9.47% SENIOR NOTES DUE 2001 TABLE OF CONTENTS
PAGE ---- SECTION 1. PURCHASE AND SALE OF NOTES .................................... 1 1.1 Issue of Notes ................................................ 1 1.2 The Closing ................................................... 2 1.3 Purchase for Investment ....................................... 2 1.4 Failure to Deliver ............................................ 2 1.5 Expenses; Issue Taxes ......................................... 2 1.6 Other Agreements .............................................. 3 SECTION 2. WARRANTIES AND REPRESENTATIONS ................................ 4 2.1 Subsidiaries .................................................. 4 2.2 Corporate Organization and Authority .......................... 4 2.3 Business, Property, Indebtedness and Liens .................... 5 2.4 Financial Statements .......................................... 5 2.5 Full Disclosure ............................................... 6 2.6 Pending Litigation; Compliance with Law ....................... 6 2.7 Title to Properties ........................................... 6 2.8 Patents and Trademarks ........................................ 7 2.9 Sale is Legal and Authorized .................................. 7 2.10 No Defaults ................................................... 7 2.11 Governmental Consent .......................................... 8 2.12 Taxes ......................................................... 8 2.13 Use of Proceeds ............................................... 8 2.14 Private Offering .............................................. 9 2.15 ERISA ......................................................... 9 SECTION 3. CLOSING CONDITIONS ............................................ 10 3.1 Opinions of Counsel ........................................... 10 3.2 Warranties and Representations True as of Closing Date ........ 10 3.3 Compliance with this Agreement ................................ 10 3.4 Officers' Certificate ......................................... 10 3.5 Proceedings Satisfactory ...................................... 11 3.6 Sales Under Other Agreements .................................. 11 3.7 Private Placement Number ...................................... 11 3.8 Legal Investment .............................................. 11 SECTION 4. DIRECT PAYMENT ................................................ 11 SECTION 5. PREPAYMENTS ................................................... 11 5.1 Required Prepayments .......................................... 11 5.2 Option to Prepay .............................................. 12 5.3 Notice of Optional Prepayment ................................. 12 5.4 Partial Payment Pro Rata ...................................... 13 SECTION 6. REGISTRATION; SUBSTITUTION OF NOTES ........................... 13 6.1 Registration of Notes ......................................... 13 6.2 Exchange of Notes ............................................. 13 6.3 Replacement of Notes .......................................... 13
-ii- SECTION 7. COMPANY BUSINESS COVENANTS .................................... 14 7.1 Payment of Taxes and Claims ................................... 14 7.2 Maintenance of Properties and Corporate Existence ............. 15 7.3 Maintenance of Office ......................................... 16 7.4 Sale of Assets or Merger ...................................... 16 7.5 Leases ........................................................ 17 7.6 Liens and Encumbrances ........................................ 17 7.7 Indebtedness .................................................. 19 7.8 Net Worth ..................................................... 19 7.9 ERISA Compliance .............................................. 20 7.10 Transactions with Affiliates .................................. 20 7.11 Tax Consolidation ............................................. 20 7.12 Acquisition of Notes .......................................... 20 7.13 Lines of Business ............................................. 21 SECTION 8. INFORMATION AS TO COMPANY ..................................... 21 8.1 Financial and Business Information ............................ 21 8.2 Officers' Certificates ........................................ 24 8.3 Accountants' Certificates ..................................... 24 8.4 Inspection .................................................... 25 SECTION 9. EVENTS OF DEFAULT ............................................. 25 9.1 Nature of Events .............................................. 25 9.2 Default Remedies .............................................. 27 9.3 Annulment of Acceleration of Notes ............................ 27 SECTION 10. INTERPRETATION OF THIS AGREEMENT ............................. 28 10.1 Terms Defined ................................................. 28 10.2 Accounting Principles ......................................... 32 10.3 Directly or Indirectly ........................................ 32 10.4 Governing Law ................................................. 32 SECTION 11. MISCELLANEOUS ................................................ 33 11.1 Notices ....................................................... 33 11.2 Reproduction of Documents ..................................... 33 11.3 Survival ...................................................... 33 11.4 Successors and Assigns ........................................ 34 11.5 Amendment and Waiver .......................................... 34 11.6 Duplicate Originals ........................................... 35
Exhibit A -- Principal Amounts, Payment Information and Addresses Exhibit B -- Form of 9.47% Senior Note Due September 15, 2001 Exhibit C -- List of Subsidiaries, Affiliates, Debt and Liens Exhibit D -- Description of Company Counsel's Closing Opinion Exhibit E -- Description of Special Counsel's Closing Opinion Exhibit F -- Certain Documents Furnished to Purchasers Schedule I -- Schedule of Leases BARNES GROUP INC. 123 MAIN STREET BRISTOL, CONNECTICUT 06010 NOTE AGREEMENT $40,000,000 9.47% Senior Notes due September 16, 2001 The Travelers Insurance Company One Tower Square Hartford, Connecticut 06115 Attn: Securities Department - Capital Finance Division, 9PB As of September 16, 1991 Dear Sirs: Barnes Group Inc. (the "Company"), a Delaware corporation, hereby agrees with you as follows: SECTION 1. PURCHASE AND SALE OF NOTES 1.1 Issue of Notes. The Company will issue $40,000,000 in aggregate principal amount of its 9.47% Senior Notes due September 16, 2001 (herein called the "Notes"). Each Note will bear interest on the unpaid principal balance thereof from the date of the Note at the rate of 9.47% per annum, payable semi-annually on the sixteenth day of March and the sixteenth day of September in each year, commencing with the payment date next succeeding the date of the Note, until the principal amount shall be due and payable, and will bear interest, payable on demand, on any overdue payment (including any overdue prepayment) of principal or premium and (to the extent permitted by law) on any overdue payment of interest at a fluctuating rate per annum, to be adjusted daily, equal to the greater of (a) the rate announced publicly by Citibank, N.A. in New York, New York from time to time as its prime rate and (b) 11.47% per annum (but in no event higher than the maximum rate permitted by law); and will mature on September 16, 2001. The Notes will be registered notes in the form set out in Exhibit B. -2- 1.2 The Closing. The Company agrees to sell to you and you agree to purchase from the Company, in accordance with the provisions of this Agreement, the principal amount of the Notes set forth opposite your name on Exhibit A hereto at 100% of the principal amount thereof. The closing of your purchase shall be held at 9:00 a.m. on September 16, 1991 ("Closing Date") at the office of Day, Berry & Howard, CityPlace I, 25th Floor, Hartford, Connecticut 06103-3499. At the closing the Company will deliver to you, unless you otherwise request, a single Note in the principal amount of your purchase, dated the Closing Date and payable to you, or your nominee, as set forth in Exhibit A, against payment in immediately available funds. 1.3 Purchase for Investment. You represent to the Company that you are purchasing the Notes for investment for your own account and the account of your affiliated entities and with no present intention of distributing or reselling the Notes or any part thereof to anyone other than an affiliated entity, but without prejudice, however, to your right at all times to sell or otherwise dispose of all or any part of the Notes under a registration under the Securities Act of 1933, as amended, or under a registration exemption available under that Act. It is understood that, in making the representations set out in Sections 2.9 and 2.11, the Company is relying, to the extent applicable, upon your representation as aforesaid. 1.4 Failure to Deliver. If, at the closing, the Company fails to tender to you the Notes to be purchased by you or if the conditions specified in Section 3 have not been fulfilled, you may thereupon elect to be relieved of all further obligations under this Agreement. Nothing in this Section shall operate to relieve the Company from any of its obligations hereunder or to waive any of your rights against the Company. 1.5 Expenses; Issue Taxes. Whether or not the Notes are sold, the Company will pay all expenses relating to this Agreement, including but not limited to: -3- (a) the cost of reproducing this Agreement and the Notes; (b) the reasonable fees and disbursements of your special counsel; (c) your out-of-pocket expenses; (d) the cost of delivering to or from your home office, insured to your satisfaction, the Notes purchased by you at the closing, any Note surrendered by you to the Company pursuant to this Agreement and any Note issued to you in substitution or replacement for a surrendered Note; (e) the cost of obtaining the Private Placement Number referred to in Section 3.7; (f) all expenses, including attorneys' fees, relating to any amendments or waivers pursuant to the provisions hereof; and (g) all costs and expenses, including attorneys' fees, incurred by the holder of any Note in enforcing any rights under this Agreement or the Notes or in responding to any subpoena or other legal process issued in connection with this Agreement or the transactions contemplated hereby, including without limitation, costs and expenses incurred in any bankruptcy case. The Company will pay all taxes in connection with the issuance and sale of the Notes and in connection with any modification of the Notes and will save you harmless against any and all liabilities with respect to such taxes. The obligations of the Company under this Section 1.5 shall survive the payment of the Notes and the termination of this Agreement. 1.6 Other Agreements. Simultaneously herewith the Company is executing separate agreements (the "Other Agreements") with the other purchasers named in Exhibit A (the "Other Purchasers") similar in all respects hereto, under which each of the Other Purchasers agrees to purchase from the Company Notes in the principal amount set forth opposite its name on Exhibit A and makes the same representations to the Company as you have made in Section 1.3. The purchase made by each purchaser is to be a separate purchase from the Company, and each sale and delivery of Notes to each -4- purchaser is to be a separate sale and delivery by the Company to such purchaser. SECTION 2. WARRANTIES AND REPRESENTATIONS The Company warrants and represents to you that: 2.1 Subsidiaries. Exhibit C to this Agreement correctly identifies (i) each of the Company's active Subsidiaries (indicating which Subsidiaries are Domestic Subsidiaries), its Jurisdiction of incorporation and the percentage of its Voting Stock owned by the Company and each other Subsidiary and (ii) each of the Company's Affiliates (other than Subsidiaries) which is a corporation or partnership or which is a holder of 5% or more of the Voting Stock of the Company and the nature of the affiliation. The Company and each Subsidiary is the legal and beneficial owner of all of the shares of Voting Stock it purports to own of each Subsidiary, free and clear in each case of any Lien. All such shares have been duly issued and are fully paid and non-assessable. 2.2 Corporate Organization and Authority. The Company, and each Subsidiary, (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (b) has all requisite power and authority and all necessary licenses, permits, franchises and other governmental authorizations to own and operate its Properties and to carry on its business as now conducted and as presently proposed to be conducted, and (c) has duly qualified and is authorized to do business and in good standing as a foreign corporation in each jurisdiction where the character of its Properties or the nature of its activities makes such qualification necessary and where the failure to be so qualified would have a material adverse effect on the Company's or Subsidiary's business or financial position. -5- 2.3 Business, Property, Indebtedness and Liens. (a) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 filed by the Company with the Securities and Exchange Commission and previously delivered to you correctly describes the general nature of the business and principal Properties of the Company and its Subsidiaries. (b) Exhibit C correctly lists all outstanding Indebtedness for borrowed money (including all Capitalized Leases) of, and all Liens (other than those (x) permitted by clauses (i) - (v) of Section 7.6(a) and (y) those on Property which individually does not have a fair market value in excess of $500,000 and which, when aggregated with other Property subject to Liens not included pursuant to this clause (y), does not have a fair market value in excess of $2,000,000) on Property of, the Company and its Subsidiaries. Neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its Property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 7.6(a). 2.4 Financial Statements. (a) The consolidated balance sheets of the Company and its Consolidated Subsidiaries as of December 31 in the years 1986, 1987, 1988, 1989, and 1990 and the related statements of income, retained earnings and changes in financial position or cash flows for the fiscal years ended on such dates, all accompanied by reports thereon containing opinions without qualification, except as therein noted, by Ernst & Young (or its predecessor, Arthur Young & Company), independent certified public accountants, and the consolidated balance sheets of the Company and its Consolidated Subsidiaries as of June 30, 1991 and the related statements of income, retained earnings and cash flows for the 6-month period then ended, certified by the Company's chief financial officer or chief accounting officer, have been prepared in accordance with generally accepted accounting principles consistently applied, and present fairly the financial position of the Company and its Consolidated Subsidiaries as of such dates and the results of their operations for such periods. (b) Since December 31, 1990 there have been no materially adverse changes in the Properties, business, prospects, profits or financial condition of the Company or the Company and its Subsidiaries taken as a whole. -6- 2.5 Full Disclosure. The financial statements referred to in Section 2.4 do not, nor does this Agreement or the Private Placement Memorandum contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not misleading. The descriptions set forth in Exhibit F of certain other written materials which may have been furnished to you by the Company is correct. There is no agreement, restriction or other factual matter which the Company has not disclosed to you in writing which so far as the Company can now reasonably foresee, will have a material adverse impact on the longterm financial condition or prospects of the Company and its Subsidiaries or the ability of the Company to perform this Agreement. 2.6 Pending Litigation; Compliance with Law. There are no proceedings or investigations pending, or to the knowledge of the Company threatened, against or affecting the Company or any Subsidiary in or before any court, governmental authority or agency or arbitration board or tribunal which, so far as the Company can now reasonably foresee, individually or in the aggregate, will have a material adverse impact on the longterm financial condition or prospects of the Company and its Subsidiaries, or would impair the ability of the Company to perform this Agreement. Neither the Company nor any Subsidiary is in default with respect to any order of any court, governmental authority or agency or arbitration board or tribunal or in violation of any laws or governmental rules or regulations where, so far as the Company can now reasonably foresee, such default or violation will have a material adverse impact on the longterm financial condition or prospects of the Company and its Subsidiaries, or the ability of the Company to perform this Agreement. 2.7 Title to Properties. Except where the failure to possess good and marketable title in fee simple or good title, as the case may be, would not have a material adverse impact on the Company or on the Company and its Subsidiaries taken as a whole, the Company, and each Subsidiary, has good and marketable title in fee simple (or its equivalent under applicable law) to all the real Property, and has good title to all the other Property, it purports to own, including that reflected in the most recent balance sheet referred to in Section 2.4 (except as sold or otherwise disposed of in the ordinary course of business), free from Liens not permitted by Section 7.6(a). -7- 2.8 Patents and Trademarks. The Company, and each Subsidiary, owns or possesses all the patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect to the foregoing necessary for the present and planned future conduct of its business, without any conflict with the rights of others known by Senior Management. 2.9 Sale is Legal and Authorized. The sale of the Notes by the Company and compliance by the Company and each Subsidiary with all of the provisions of this Agreement and of the Notes: (a) have been duly authorized and are within the corporate powers of the Company and each Subsidiary; and (b) are legal and will not conflict with, constitute a violation of, or result in the creation of any Lien upon any Property of the Company or any Subsidiary under the provisions of, any agreement, charter instrument, by-law or other instrument to which the Company or any Subsidiary is a party or by which any of them or their respective Properties may be bound. The Company is not a party to any agreement, or subject to any charter or other corporate restriction, which restricts its right or ability to incur Indebtedness, other than this Agreement and the agreements listed on Exhibit C. 2.10 No Defaults. No event has occurred and no condition exists which, upon the issue of the Notes, would constitute a Default or an Event of Default. The Company is not in violation (whether or not temporarily waived) of any term of any charter instrument or by-law and neither the Company nor any Subsidiary is in default under any agreement or other instrument with respect to borrowed money. Neither the Company nor any Subsidiary is in violation of any term of any other agreement or instrument to which it is a party or by which it or any of its Property may be bound which violation, individually or in the aggregate with other violations, will have a materially adverse impact on the longterm business or prospects of the Company or the Company and its Subsidiaries taken as a whole. -8- 2.11 Governmental Consent. Neither the nature of the Company or of any Subsidiary, or of any of their respective businesses or Properties, nor any relationship between the Company or any Subsidiary and any other Person, nor any circumstance in connection with the offer, issue, sale or delivery of the Notes or the execution, delivery and performance of this Agreement is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Company or any Subsidiary in connection with the execution, delivery and performance of this Agreement or the offer, issue, sale or delivery of the Notes. 2.12 Taxes. Consolidated Federal income tax returns for the Company and its Domestic Subsidiaries have been examined by the Internal Revenue Service for all years up to and including the year ended December 31, 1987. The Company and each of its Subsidiaries have filed or caused to be filed all Federal, state and local tax returns which, to the knowledge of Senior Management are required to be filed and have paid or caused to be paid all taxes as shown on such returns or on any assessment received by it or by any of them, to the extent that such taxes have become due, except any such tax or assessment the validity of which is being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as appropriate, has set aside on its books adequate reserves to the extent the Company or any Subsidiary and a nationally recognized independent certified public accountant believes such reserves are necessary. To the extent that the Company in good faith believes is necessary, the Company and its Subsidiaries have set up reserves which are believed by the Company to be adequate for the payment of additional taxes. All assessed deficiencies resulting from examinations by the Internal Revenue Service up to and including the year ended December 31, 1987 have been discharged, reserved against or will not impair the Company's ability to repay the Loans. 2.13 Use of Proceeds. The Company will apply the proceeds from the sale of the Notes to refinance outstanding Indebtedness for borrowed money. None of the transactions contemplated in this Agreement (including, without limitation thereof, the use of the proceeds from the sale of the Notes) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without -9- limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. 2.14 Private Offering. Neither the Company nor Chemical Bank (the only Person authorized or employed by the Company as agent, broker, dealer or otherwise in connection with the offering or sale of the Notes or any similar Security of the Company) has offered any of the Notes or any similar Security of the Company for sale to, or solicited offers to buy any thereof from, or otherwise approached or negotiated with respect thereto with, any prospective purchaser, other than the purchasers of the Notes and not more than twenty-five other institutional investors, each of whom was offered all or a portion of the Notes at private sale for investment. The Company agrees that neither the Company nor anyone acting on its behalf will offer the Notes or any part thereof or any similar Securities for issue or sale to, or solicit any offer to acquire any of the same from, anyone so as to bring the issuance and sale of the Notes within the provisions of Section 5 of the Securities Act of 1933, as amended. 2.15 ERISA. (a) Relationship of Vested Benefits to Pension Plan Assets. The present aggregate value of all benefits vested under all qualified "defined benefit pension plans", as such term is defined in Section 3 of ERISA, maintained by the Company and its Related Persons, or in which employees of the Company or any Related Person are entitled to participate, as from time to time in effect (herein called the "Pension Plans"), did not, as of January 1, 1990, the last annual valuation date, exceed the actuarial or market value of the assets of the Pension Plans allocable to such vested benefits. (b) Prohibited Transactions. Neither the Company or any Related Person nor any of the Pension Plans nor any trusts created thereunder, nor any trustee or administrator thereof, has engaged in a "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, which could subject the Company, any Related Person, any of the Pension Plans, any such trust, or any trustee or administrator thereof, or any party dealing with the Pension 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. (c) Reportable Events. Since December 31, 1986, neither any of the Pension Plans nor any such trusts have been terminated, nor have there been any "reportable events", as that -10- term is defined in Section 4043 of ERISA, since the effective date of ERISA. (d) Accumulated Funding Deficiency. Neither any of the Pension Plans nor any such trusts have incurred any "accumulated funding deficiency", as such term is defined in Section 302 of ERISA (whether or not waived), since the effective date of ERISA. SECTION 3. CLOSING CONDITIONS Your obligation to purchase and pay for the Notes to be delivered to you at the closing shall be subject to the following conditions precedent: 3.1 Opinions of Counsel. You shall have received from John E. Besser, Esq., General Counsel of the Company, and Day, Berry & Howard, your special counsel, the closing opinions described in Exhibits D and E. 3.2 Warranties and Representations True as of Closing Date. (a) The warranties and representations contained in Section 2 shall (except as affected by transactions contemplated by this Agreement) be true in all material respects on the Closing Date with the same effect as though made on and as of that date. (b) Neither the Company nor any Subsidiary shall have taken any action or permitted any condition to exist which would have been prohibited by Section 7 if such Section had been binding and effective at all times during the period from December 31, 1990 to and including the Closing Date. 3.3 Compliance with this Agreement. The Company shall have performed and complied with all agreements and conditions contained herein which are required to be performed or complied with by the Company before or at the closing. 3.4 Officers' Certificate. You shall have received a certificate dated the Closing Date and signed by the President or a Vice President and the Treasurer or an Assistant Treasurer of the Company, certifying that the conditions specified in Sections 3.2 and 3.3 have been fulfilled. -11- 3.5 Proceedings Satisfactory. All proceedings taken in connection with the sale of the Notes and all documents and papers relating thereto shall be satisfactory to you and your special counsel. You and your special counsel shall have received copies of such documents and papers as you or they may reasonably request in connection therewith or as a basis for your special counsel's closing opinion, all in form and substance satisfactory to you and your special counsel. 3.6 Sales Under Other Agreements. The Company shall have sold or shall simultaneously sell to the Other Purchasers pursuant to the terms and provisions of the Other Agreements (and shall have received or simultaneously receive the purchase price for) the remainder of the $40,000,000 aggregate principal amount of the Notes. 3.7 Private Placement Number. The Company shall have obtained from Standard & Poor's Corporation and provided to you a Private Placement Number for the Notes. 3.8 Legal Investment. Each Note to be purchased by you shall qualify as a legal investment for life insurance companies under the New York Insurance Law and any other law applicable to you (other than under any "basket" or leeway provisions thereof), and the Company shall have delivered to you such officer's certificates or other evidence as you may request to establish compliance with this condition. SECTION 4. DIRECT PAYMENT The Company agrees that, notwithstanding any provision in this Agreement or the Notes to the contrary, it will pay all sums becoming due to any institutional holder of Notes in the manner provided in Exhibit A or in any other reasonable manner as any institutional holder may designate to the Company in writing (without presentment of or notation on the Notes). SECTION 5. PREPAYMENTS 5.1 Required Prepayments. (a) In addition to paying the entire remaining principal amount and interest due on the Notes at -12- maturity, the Company will prepay, and there shall become due and payable, $3,076,923.08 principal amount of the Notes on March 16 and September 16 in each year beginning on September 16, 1995 and ending March 16, 2001, inclusive. Each such prepayment shall be at 100% of the principal amount to be prepaid, together with interest accrued thereon to the date of prepayment. (b) The acquisition of any Notes by the Company shall not reduce or otherwise affect its obligation to make any prepayment required by Section 5.1(a). Upon any exercise by the Company of the prepayment option in Section 5.2, each remaining scheduled payment of principal shall be reduced on a pro rata basis to reflect such reduction in outstanding principal amount. 5.2 Option to Prepay. The Company may make optional prepayments to prepay the Notes in whole or in part, in multiples of $1,000,000, at any time at a price equal to the greater of (i) the principal amount to be prepaid together with accrued interest on the principal amount so prepaid to the prepayment date, and (ii) the Makewhole Price applicable at such time with respect to the amount of the Notes being prepaid. 5.3 Notice of Optional Prepayment. The Company will give notice of any optional prepayment of the Notes to each holder of the Notes not less than 10 Business Days nor more than 60 days before the date fixed for prepayment, specifying (a) such date, (b) the section of this Agreement under which the prepayment is to be made, (c) the principal amount of the Notes and of such holder's Notes to be prepaid on such date, and (d) the accrued interest applicable to the prepayment, and setting forth a detailed calculation of what the Makewhole Price would be if the Notes were being prepaid on the date of such notice. Notice of prepayment having been so given, the principal amount of the Notes specified in such notice, together with the premium, if any, and accrued interest thereon, shall become due and payable on the prepayment date. The Company will provide a supplemental notice by courier or facsimile confirmed by telephone to be received by each holder of the Notes by 2:00 p.m., Hartford, Connecticut time, on the Business Day immediately preceding the date fixed for prepayment which will set forth a detailed calculation of the Makewhole Price. -13- 5.4 Partial Payment Pro Rata. If there is more than one Note outstanding at any time the aggregate principal amount of each required or optional partial payment of the Notes shall be allocated among the outstanding Notes in proportion, as nearly as practicable, to the respective unpaid principal amounts of the Notes. For the purpose of this Section 5.4 only, any Notes reacquired by the Company shall be deemed to be outstanding. SECTION 6. REGISTRATION; SUBSTITUTION OF NOTES 6.1 Registration of Notes. The Company will cause to be kept at its office maintained pursuant to Section 7.3, a register for the registration and transfer of the Notes. The names and addresses of the holders of the Notes, the transfer thereof and the names and addresses of the transferees of any of the Notes will be registered in the register. The Person in whose name any Note is registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement, and the Company shall not be affected by any notice or knowledge to the contrary. 6.2 Exchange of Notes. Upon surrender of any Note to the Company at its office maintained pursuant to Section 7.3, the Company, upon request, will execute and deliver, at its expense (except as provided below), new Notes in exchange therefor, in denominations of at least $100,000 (except as may be necessary to reflect any principal amount not evenly divisible by $100,000), in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note (a) shall be payable to such Person as the surrendering holder may request, and (b) shall be dated and bear interest from the date to which interest has been paid on the surrendered Note or dated the date of the surrendered Note if no interest has been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any transfer. 6.3 Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note and, -14- (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided, if the holder of the Note is an institutional investor, its own agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation of the Note, the Company at its expense will execute and deliver a new Note of like tenor, dated and bearing interest from the date to which interest has been paid on the lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest has been paid thereon. SECTION 7. COMPANY BUSINESS COVENANTS The Company covenants that on and after the date of this 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 the Company or the Company and its Subsidiaries taken as a whole, the Company, and each 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, 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 the Company and independent certified public accountants of recognized national standing to be adequate have been established with respect thereto; provided further that notwithstanding the foregoing provisions of this Section 7.1, the Company and each 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. -15- 7.2 Maintenance of Properties and Corporate Existence. (a) Except where the failure to do so would not have a material adverse impact on the Company or the Company and its Subsidiaries taken as a whole, the Company, and each Subsidiary, will: (i) Property -- maintain its Property in good condition and make all necessary renewals, replacements, additions, betterments and improvements thereto; (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 the Company 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 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 the Company may liquidate or sell any Subsidiary if the transaction is permitted by Section 7.4. -16- (b) Except where the failure to do so would not have a material adverse effect on the Company or any Subsidiary, the Company and each Subsidiary will not be in violation of any laws, ordinances, or governmental rules and regulations to which it is subject and will not fail to maintain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its Properties or to the conduct of its business. 7.3 Maintenance of Office. The Company will maintain an office in the State of Connecticut where notices, presentations and demands in respect of this Agreement or the Notes may be made upon it. Such office shall be maintained at 123 Main Street, Bristol, Connecticut 06010 until such time as the Company shall notify the holders of the Notes of a change of location. 7.4 Sale of Assets or Merger. (a) Sale of Assets -- The Company 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 the Company and its Subsidiaries in the then current fiscal year of the Company would exceed an amount equal to 10% of the book value (computed in accordance with GAAP) of all Property and assets of the Company and its Consolidated Subsidiaries at the end of the preceding fiscal year. (b) Consolidation, Merger -- The Company 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 the Company may be merged into the Company or another wholly-owned Subsidiary, (ii) the Company or any Subsidiary of the Company may merge or consolidate with another Person or business, if the Company or such Subsidiary, as the case may be, is the surviving corporation, (iii) the Company or any Subsidiary may consolidate with or merge with another Person or business in a transaction where the Company or Subsidiary is not the surviving entity if (1) the continuing or surviving entity shall assume in writing all of the obligations of the Company under this Agreement and the Notes, (2) the continuing or surviving entity shall not, immediately after such merger or consolidation, be in default of any of the -17- Company's obligations under this 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. The Company will not, nor will it 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 the Company 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 the Company and its Consolidated Subsidiaries at the end of the 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. The Company 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 workers' 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; -18- (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 the Company 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; and (vii) 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 the Company 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), the Company 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 owned by the Company, 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). -19- 7.7 Indebtedness. 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: (a) Indebtedness incurred by the Company under the Revolving Credit and Term Loan Agreement; (b) Indebtedness incurred by the Company under the Term Loan and Rollover Loan Agreement; (c) the Notes; (d) Indebtedness of the Company 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 (e) additional Indebtedness of the Company and its Subsidiaries; provided, however, that (i) the total Indebtedness of the Company's Subsidiaries shall not at any time exceed S50 million; (ii) total Indebtedness of the Company's 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 pre-existing indebtedness of a newly acquired Domestic Subsidiary for a period not exceeding 30 days after acquisition of such Domestic Subsidiary), and (iii) the aggregate amount of all Indebtedness of the Company and its Subsidiaries at any time outstanding shall not exceed an amount equal to 155% of Consolidated Net Worth at such time. 7.8 Net Worth. The Company will not permit Consolidated Net Worth of the Company and its Subsidiaries at any time to be less than $120 million plus 50% of Consolidated Net Income for each fiscal year beginning after December 31, 1991 (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, 1992 and as of the end of each subsequent fiscal year. -20- 7.9 ERISA Compliance. Neither the Company 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 the Company or any Subsidiary pursuant to Section 4068 of ERISA. 7.10 Transactions with Affiliates. Neither the Company nor any Subsidiary will enter into any transaction (except transactions which do not in any one calendar year involve in the 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 the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate. 7.11 Tax Consolidation. The Company 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 the Company nor any Subsidiary nor any Affiliate will, directly or indirectly, acquire or make any offer to acquire any Notes unless the Company or such Subsidiary or Affiliate has offered to acquire Notes, pro rata, from all holders of the Notes and upon the same terms. In case the Company -21- acquires any Notes, such Notes shall thereafter be cancelled and no Notes shall be issued in substitution therefor. 7.13 Lines of Business. Neither the Company nor any Subsidiary will engage in any line of business if as a result thereof the business of the Company and its Subsidiaries taken as a whole would be substantially different from what it was at December 31, 1990 as described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990. SECTION 8. INFORMATION AS TO COMPANY 8.1 Financial and Business Information. The Company will deliver to you, if at the time you or your nominee holds any Notes (or if you are obligated to purchase any Notes), and to each other institutional holder of outstanding Notes: (a) Quarterly Statements - within 60 days after the end of each of the first three quarterly fiscal periods in each fiscal year of the Company, two copies of: (i) a consolidated balance sheet of the Company and its Consolidated Subsidiaries as at the end of that quarter, and (ii) consolidated statements of income, retained earnings and cash flows of the Company and its Consolidated Subsidiaries, for that quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with that quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail and certified by a principal financial officer of the Company as presenting fairly the financial condition of the companies being reported upon and as having been prepared in accordance with generally accepted accounting principles for interim statements consistently applied; (b) Annual Statements - within 90 days after the end of each fiscal year of the Company, two copies of: -22- (i) a consolidated balance sheet of the Company and its Consolidated Subsidiaries, as at the end of that year, and (ii) consolidated statements of income, retained earnings and cash flows of the Company and its Consolidated Subsidiaries, for that year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by an opinion of independent certified public accountants of recognized national standing stating that such financial statements fairly present the financial condition of the companies being reported upon and have been prepared in accordance with generally accepted accounting principles consistently applied (except for changes in application in which such accountants concur), and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and which independent auditors' report shall not identify either (A) any departure from the consistent application of generally accepted accounting principles (except for identified changes in application in which such accountants concur), or (B) any tests of the accounting records or other auditing procedures which were considered necessary in the circumstances and which were not performed; (c) Audit Reports - promptly upon receipt thereof, one copy of each other report submitted to the Company or any Subsidiary by independent accountants in connection with any material interim or special audit made by them of the books of the Company or any material Subsidiary; (d) SEC and Other Reports - promptly upon their becoming available one copy of each report, notice or proxy statement sent by the Company to stockholders generally, and of each periodic report and any registration statement, filed by the Company with any securities exchange or the Securities and Exchange Commission or any successor agency; (e) ERISA - as soon as practicable, but in no event later than five days, after a member of Senior Management becoming aware of the occurrence of any -23- (i) "reportable event" as such term is defined in Section 4043 of ERISA, or (ii) "accumulated funding deficiency" as such term is defined in Section 302 of ERISA, or (iii) "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, in connection with any Pension Plan or any trust created thereunder, a notice specifying the nature thereof, what action the Company or a Related Person is taking or proposes to take with respect thereto, and, when known, any action taken by the Internal Revenue Service with respect thereto; (f) Notice of Default or Event of Default - immediately upon becoming aware of the existence of any Default or Event of Default a notice describing its nature and the action the Company is taking with respect thereto; (g) Notice of Claimed Default - immediately upon becoming aware that the holder of any Note or of any Indebtedness or Security of the Company or any Subsidiary has given notice or taken any other action with respect to a claimed Default or Event of Default, a notice specifying the notice given or action taken by such holder, the nature of the claimed Default or Event of Default and the action the Company is taking with respect thereto; (h) Report on Proceedings - The Company and each Subsidiary will give each holder of the Notes (a) notice, promptly, of any action, suit or proceeding at law or in equity or by or before any court or other governmental instrumentality or agency (i) which is not fully covered by insurance without the applicability of any co-insurance provisions or with respect to which insurance coverage is being contested and which has not been bonded and in which either the aggregate specified dollar amount of all claims (either as set forth in the complaint, demand letters or other written communications by or on behalf of the plaintiff or as otherwise determined in good faith by the Company or its counsel) against the Company and its Subsidiaries taken as a whole, exceeds the amount of any applicable insurance coverage by (x) $1,000,000 for any single proceeding or (y) $5,000,000 in the aggregate during any fiscal year of the Company; provided, however, that after -24- giving notice of such claims aggregating at least $5,000,000, notice is only required of subsequent claims made during the same fiscal year which exceed insurance coverage by $500,000 for any single proceeding, or (ii) if the results thereof may have a material adverse effect on the business or condition of the Company or any Subsidiary of the Company, and (b) with respect to any such action, suit or proceeding such documentation as the holder of any Note reasonably requests. (i) Requested Information - with reasonable promptness, such data and information as from time to time may be reasonably requested. 8.2 Officers' Certificates. Each set of financial statements delivered pursuant to Section 8.1(a) or 8.1(b) will be accompanied by a certificate of the President or a Vice President and the Treasurer or an Assistant Treasurer of the Company setting forth: (a) Covenant Compliance - the information required in order to establish compliance with the requirements of Section 7 during the period covered by the income statements being furnished; and (b) Event of Default - that the signers have reviewed the relevant terms of this Agreement and have made, or caused to be made, under their supervision, a review of the transactions and condition of the Company and its Subsidiaries from the beginning of the period covered by the income statements being furnished and that the review has not disclosed the existence during such period of any Default or Event of Default or, if any such Default or Event of Default existed or exists, describing its nature and the action the Company has taken with respect thereto. 8.3 Accountants' Certificates. Each set of annual financial statements delivered pursuant to Section 8.1(b) will be accompanied by a certificate of the accountants who certify such financial statements, stating that they have reviewed this Agreement and whether, in making the examination necessary for their certification of such statements, they have become aware of any Default or Event of Default, and, if any Default or Event of Default then exists, describing its nature. -25- 8.4 Inspection. The Company will permit your representatives, while you or your nominee holds any Note, or the representatives of any other institutional holder of the Notes, at your or such holder's expense, to visit and inspect any of the Properties of the Company or any Subsidiary, to examine and make copies and abstracts of all their books of account, records, and other papers, and to discuss their respective affairs, finances and accounts with their respective officers, employees designated by said officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the finances and affairs of the Company and its Subsidiaries) all at reasonable times, upon notice to a member of Senior Management (unless there shall exist a Default or an Event of Default), and as often as may be reasonably requested. Any visit or inspection made pursuant to this Section 8.4 shall be at the expense of the holder requesting the same unless, at the time of such visit or inspection, there shall exist a Default or Event of Default, in which event the Company shall bear the cost thereof. SECTION 9. EVENTS OF DEFAULT. 9.1 Nature of Events. An "Event of Default" shall exist if any of the following occurs and is continuing: (a) Principal Payments - failure to pay principal on any Note on or before the date such payment is due; (b) Interest Payments - failure to pay interest on any Note on or before the fifth Business Day following the date such payment is due; (c) Other Defaults - failure to comply with any other provision of this Agreement, which continues for more than 30 days after it first becomes known to any member of Senior Management of the Company; (d) Warranties or Representations - any warranty or representation by or on behalf of the Company contained in this Agreement or in any instrument delivered under or in reference to this Agreement is false or misleading in any material respect; (e) Default on Other Indebtedness - a default or defaults shall have occurred under any other -26- Indebtedness or Securities of the Company having a principal or face amount, individually or in the aggregate, in excess of $5,000,000; or any event shall occur or any condition shall exist, the effect of which is to cause (or permit any holder of such Indebtedness or Securities having a principal or face amount, individually or in the aggregate, in excess of $5,000,000, or a trustee to cause) such Indebtedness or Security, or a portion thereof, to become due prior to its stated maturity or prior to its regularly scheduled dates of payment; (f) Involuntary Bankruptcy Proceedings - a custodian receiver, liquidator or trustee of the Company or of any of its Property, is appointed or takes possession and such appointment or possession remains in effect for more than 30 days; or the Company is adjudicated bankrupt or insolvent; or an order for relief is entered under the Federal Bankruptcy Code against the Company; or any of the Property of the Company is sequestered by court order and the order remains in effect for more than 30 days; or a petition is filed against the Company under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and is not dismissed within 30 days after filing; (g) Voluntary Petitions - the Company files a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or consents to the filing of any petition against it under any such law; (h) Assignments for Benefit of Creditors, etc. - the Company makes an assignment for the benefit of its creditors, or generally fails to pay its debts as they become due, or consents to the appointment of or taking possession by a custodian, receiver, liquidator or trustee of the Company or of all or any part of the Property of the Company; or (i) Undischarged Final Judgments - final judgment or judgments which are not subject to appeal for the payment of money aggregating in excess of -27- $5,000,000 is or are outstanding against one or more of the Company and its Subsidiaries and any one of such Judgments (x) has not been stayed or paid on the date it is finally due and payable or (y) has resulted in the attachment of a Lien on any Property of the Company or any Subsidiary. 9.2 Default Remedies. (a) If an Event of Default described in Section 9.1(f) or 9.1(g) occurs, the entire outstanding principal amount of the Notes shall automatically become due and payable, without the taking of any action on the part of any holder of the Notes or any other Person and without the giving of any notice with respect thereto. If an Event of Default described in Section 9.1(a) or 9.1(b) exists, any holder of Notes may, at its option, exercise any right, power or remedy permitted by law, including but not limited to the right by notice to the Company to declare the Notes held by such holder to be immediately due and payable. If any other Event of Default exists, the holder or holders of at least 51% in outstanding principal amount of the Notes (exclusive of Notes owned by the Company, Subsidiaries and Affiliates) may exercise any right, power or remedy permitted by law, including but not limited to the right by notice to the Company to declare all the outstanding Notes immediately due and payable. Upon any such acceleration the principal of the Notes declared due or automatically becoming due shall be immediately payable together with all interest accrued thereon without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and the Company will immediately pay the greater of (x) the principal of and interest accrued on such Notes and (y) the Makewhole Price applicable at such time to such Notes; provided that the Makewhole Price shall not be applicable upon any such declaration if the only Event of Default existing at such time is the Event of Default described in Section 9.1(f). (b) No course of dealing or delay or failure on the part of any holder of the Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Company will pay or reimburse the holders of the Notes, to the extent permitted by law, for all costs and expenses, including but not limited to reasonable attorneys' fees, incurred by them in collecting any sums due on the Notes or in otherwise enforcing any of their rights. 9.3 Annulment of Acceleration of Notes. If a declaration is made pursuant to Section 9.2(a), the holders of at least 51% of the outstanding principal amount -28- of the Notes may annul such declaration and the consequences thereof if no judgment or decree has been entered for the payment of any monies due pursuant to such declaration and if all sums payable under the Notes and this Agreement (except principal, interest or premium which has become due solely by reason of such declaration) have been duly paid. No such annulment shall extend to or waive any subsequent Default or Event of Default. SECTION 10. INTERPRETATION OF THIS AGREEMENT 10.1 Terms Defined. As used in this Agreement (including Exhibits), the following terms have the respective meanings set forth below or in the Section indicated: Affiliate - a Person other than a Subsidiary (1) which directly or indirectly controls, or is controlled by, or is under common control with, the Company, (2) which owns 5% or more of the Voting Stock of the Company or (3) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is owned by the Company or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Business Day - any day other than a Saturday, Sunday or a national, Connecticut or New York holiday. Capitalized Lease - any lease which is shown or is required to be shown in accordance with GAAP as a liability on a balance sheet of the lessee thereunder. Closing Date - Section 1.2 Consolidated Net Income - the consolidated net income of the Company and its Subsidiaries for any period as determined in accordance with GAAP. Consolidated Net Worth - shall mean the assets of the Company and its Subsidiaries less the liabilities of the Company and its Subsidiaries, each as shown on a consolidated balance sheet of the Company and its Subsidiaries in accordance with GAAP, plus any negative (less any positive) foreign currency translation adjustments shown in the equity section of such a consolidated balance sheet pursuant to FAS 52, plus any amount shown on such a consolidated balance sheet in the equity contra account arising from the Guaranty. -29- Consolidated Subsidiary - shall mean any Subsidiary the accounts of which shall at the time in question be consolidated with the Company. Default - an event or condition which will, with the lapse of time or the giving of notice or both, become an Event of Default. Domestic Subsidiary - shall mean a Subsidiary incorporated in the United States. ERISA - means the Employee Retirement Income Security Act of 1974, as amended from time to time. Event of Default - Section 9.1 GAAP - means generally accepted accounting principles which are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors; provided, however, that such principles shall be applied without giving effect to FAS 106. Guaranty - means the Company's obligations as guarantor under a certain Guaranty Agreement, effective as of July 28, 1989, from the Company to The Connecticut National Bank and National Bank of Detroit. Indebtedness - with respect to any Person, means, without duplication, (a) all debt 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 the Company or any Subsidiary or acquired by the Company or any Subsidiary subject thereto, whether or not the Indebtedness secured thereby shall have been assumed; (c) all guarantees, endorsements and other contingent obligations, in respect of Indebtedness of others, including (x) any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase Indebtedness, or to assure 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 and (y) any obligation of any partnership in which the Company or any Subsidiary is a general partner; and (d) the obligations to reimburse the issuer in respect of any letters of credit. Indebtedness shall not include the indebtedness of (i) a Subsidiary of the Company to the Company or to another Subsidiary of the Company, or (ii) the Company to a Subsidiary of the -30- Company; provided, however, that in the case of debt of a Subsidiary not wholly owned by the Company and/or another Subsidiary, Indebtedness shall include a percentage of such indebtedness equal to the percentage of the total minority ownership. Lien - any mortgage, lien, charge, security interest or other encumbrance of any kind upon any Property or assets of any character, or upon the income or profits therefrom, any conditional sale or other title retention agreement, device or arrangement (including Capitalized Leases), or any sale assignment, pledge or other transfer for security of any accounts, general intangibles or chattel paper, with or without recourse. Makewhole Price - with respect to full or partial optional prepayments of the Notes pursuant to Section 5.2 or repayment of Notes which have become or been declared immediately due and payable pursuant to Section 9.2, the present value of all scheduled payments of principal and interest in respect of the Notes (or portions thereof being prepaid) which, but for such optional prepayment or required repayment, would be required to be made following the date of the proposed prepayment or the date on which such Notes became or are declared due and payable, determined by discounting (on a semi-annual basis), at a rate which is equal to the Treasury Constant Yield at such time plus .50%, the amount of each such payment (or portion thereof) from the date such payment would be required to be made to the prepayment or repayment date. Notes - Section 1.1. Other Agreements - Section 1.6. Other Purchasers - Section 1.6. Pension Plans - Section 2.15(a). Person - shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. Property - any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. Related Person - any Person (whether or not incorporated) which is under common control with the Company -31- within the meaning of Section 414(c) of the Internal Revenue Code of 1986, as amended, or of Section 4001(b) of ERISA. Revolving Credit and Term Loan Agreement - means the $100,000,000 Revolving Credit and Term Loan Agreement dated as of December 15, 1988 among the Company, The Connecticut Bank and Trust Company, N.A., as Agent, and the banks signatory thereto. Security - shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. Senior Management - shall mean any of the following officers of the Company: President, any Group Vice President, Chief Financial Officer, Treasurer or General Counsel. Subsidiary - of a Person shall mean any corporation, association or other business entity of which more than 50% of the outstanding stock having by its terms ordinary voting power to elect a majority of the board of directors of such corporation, or other business entity (irrespective of whether at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned directly or indirectly by such Person. Term Loan and Rollover Loan Agreement - means the Term Loan Agreement dated October 17, 1986 between the Company and Mellon Bank, N.A. Treasury Constant Yield - at any time with respect to any optional prepayment of the Notes pursuant to Section 5.2 or repayment of Notes which have been declared or become immediately due and payable pursuant to Section 9.2, means the yield to maturity at such time of United States Treasury obligations with a remaining life to maturity (as compiled by and published in the most recently published issue of the United States Federal Reserve Bulletin or its successor publication) most nearly equal to the Weighted Average Life to Maturity of the Notes (or portions thereof) to be prepaid or repaid at the time. If there are United States Treasury obligations listed in such publication with a remaining life to maturity equal to the Weighted Average Life to Maturity of the Notes (or portions thereof), then the yield on such Treasury obligations shall be the Treasury Constant Yield. If no such Treasury obligation exists, then the Treasury obligation with the remaining life to maturity closest to and greater than the Weighted Average Life to Maturity of the Notes (or portions thereof) to be prepaid or repaid shall be used, along with the Treasury obligation with a remaining life to maturity closest to and less than the Weighted Average Life to Maturity of such Notes being prepaid or repaid -32- (or portions thereof) in order to calculate the Treasury Constant Yield. In this event these two Treasury obligations will be examined together and the Treasury Constant Yield will be calculated through interpolation of the yields on such Treasury obligations. Weighted Average Life to Maturity - of the Notes or any portion thereof, at the time of the determination thereof, means the number of years obtained by dividing the then Remaining Dollar-years of such Notes or portion thereof by the then outstanding principal amount of such Notes or portion thereof. The term "Remaining Dollar-years" of any indebtedness for borrowed money means the amount obtained by (1) multiplying (A) the amount of each then remaining required repayment or redemption (including repayment or redemption at final maturity) by (B) the number of years (calculated at the nearest one-twelfth) which will elapse between the date as of which the calculation is made and the date that such required repayment is due and (2) totaling all the products obtained in (1). 10.2 Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made under this Agreement, this shall be done in accordance with GAAP. 10.3 Directly or Indirectly. Where any provision in this Agreement refers to any action which a Person is prohibited from taking, the provision shall be applicable whether such action is taken directly or indirectly by such Person, including actions taken by or on behalf of any partnership in which such Person is a general partner and all liabilities of such partnerships shall be considered liabilities of such Person for purposes of this Agreement. 10.4 Governing Law. This Agreement and the Notes shall be governed by and construed in accordance with Connecticut law. -33- SECTION 11. MISCELLANEOUS 11.1 Notices. (a) All notices or other communications under this Agreement or the Notes shall be in writing and shall be mailed by first class mail, postage prepaid, (i) if to you, in the manner provided in Exhibit A to this Agreement, or in any other manner as you may have advised the Company in writing, or (ii) if to the Company, at its address shown at the beginning of this Agreement, or at such other address as it may have furnished in writing to you and all other holders of the Notes. (b) Any notice so addressed and mailed by registered or certified mail shall be deemed to be given when so mailed. 11.2 Reproduction of Documents. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications which may hereafter be executed, (b) documents received by you at the closing of your purchase of the Notes (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that any such reproduction shall, to the extent permitted by applicable law, be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 11.3 Survival. All warranties, representations, and covenants made by the Company herein or on any certificate or other instrument delivered by it or on its behalf pursuant to the terms of this Agreement shall be considered to have been relied upon by you and shall survive the delivery to you of the Notes regardless of any investigation made by you or on your behalf. All statements -34- in any such certificate or other instrument shall constitute warranties and representations by the Company hereunder. 11.4 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, except that the Company's right to require you to purchase the Notes in accordance with Section 1.2 shall be personal to the Company and shall not be assignable or transferable to any other Person (including successors at law) whether voluntarily or involuntarily. The provisions of this Agreement are intended to be for the benefit of all holders, from time to time, of the Notes, and shall be enforceable by any holder, whether or not an express assignment to such holder of rights under this Agreement has been made by you or your successor or assign. 11.5 Amendment and Waiver. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the Company and the holders of at least 66-2/3% of the outstanding principal amount of the Notes (exclusive of Notes owned by the Company, Subsidiaries and Affiliates); provided that no such amendment or waiver of any of the provisions of Sections 1 through 4 shall be effective as to you unless consented to by you in writing; and provided further, that no such amendment or waiver shall, without the written consent of the holders of all the outstanding Notes, (i) subject to Section 9.3, change the amount or time of any prepayment or payment of principal or premium or the rate or time of payment of interest, (ii) amend Section 9, or (iii) amend this Section 11.5. Executed or true and correct copies of any amendment or waiver effected pursuant to the provisions of this Section 11.5 shall be delivered by the Company to each holder of outstanding Notes promptly following the date on which the same shall become effective. No such amendment or waiver shall extend to or affect any provision or obligation not expressly amended or waived. 11.6 Duplicate Originals. Two or more duplicate originals of this 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. If this Agreement is satisfactory to you, please so indicate by signing the acceptance at the foot of a counterpart of this Agreement and return such counterpart to the Company, whereupon this Agreement will become binding between us in accordance with its terms. Very truly yours, BARNES GROUP INC. By /s/ A. S. Wells ---------------------------- Accepted: THE TRAVELERS INSURANCE COMPANY By /s/ Robert M. Mills --------------------------------- Title: Assistant Investment Officer EXHIBIT A PAGE 1 of 6 This Exhibit to the foregoing Agreement sets forth registration, money transfer and notice instructions for each purchaser. Purchaser Registration Principal Amount - --------- ------------ ---------------- The Travelers Insurance TRAL & CO. $20,500,000 Company In the case of all payments on account of the Notes in accordance with Section 4.1, by: (a) crediting (in the form of federal funds bank wire transfer): The Travelers Insurance Company - Consolidated Private Placement Account No. 910-2-587434 The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza New York, New York 10081 ABA No. 021000021 and (b) providing sufficient information with such wire transfer to identify the source and application of such funds including the Company's name, the maturity date of the Notes, the applicable interest rate and identification of the amounts to be applied to the payment of principal, premium and interest, respectively; with a notice of any such payment (and all other notices in respect of payment) to: The Travelers Insurance Company One Tower Square Hartford, Connecticut 06183-2030 Attn: Securities Department - Cashier, 6 PB In the case of all other communications: The Travelers Insurance Company One Tower Square Hartford, Connecticut 06115 Attn: Securities Department - Capital Finance Division, 9 PB EXHIBIT A PAGE 2 of 6 Purchaser Registration Principal Amount - --------- ------------ ---------------- The Travelers Indemnity DUBY & CO. $4,000,000 Company In the case of all payments on account of the Notes in accordance with Section 4.1, by: (a) crediting (in the form of federal funds bank wire transfer): The Travelers Insurance Company - Consolidated Private Placement Account No. 910-2-587434 The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza New York, New York 10081 ABA No. 021000021 and (b) providing sufficient information with such wire transfer to identify the source and application of such funds including the Company's name, the maturity date of the Notes, the applicable interest rate and identification of the amounts to be applied to the payment of principal, premium and interest, respectively; with a notice of any such payment (and all other notices in respect of payment) to: The Travelers Indemnity Company One Tower Square Hartford, Connecticut 06183-2030 Attn: Securities Department - Cashier, 6 PB In the case of all other communications: The Travelers Indemnity Company One Tower Square Hartford, Connecticut 06115 Attn: Securities Department - Capital Finance Division, 9 PB EXHIBIT A PAGE 3 of 6 Purchaser Registration Principal Amount - --------- ------------ ---------------- The Travelers Indemnity EFAM & CO. $500,000 Company of Rhode Island In the case of all payments on account of the Notes in accordance with Section 4.1, by: (a) crediting (in the form of federal funds bank wire transfer): The Travelers Insurance Company - Consolidated Private Placement Account No. 910-2-587434 The Chase Manhattan Bank, N.A. One Chase Manhattan Plaza New York, New York 10081 ABA No. 021000021 and (b) providing sufficient information with such wire transfer to identify the source and application of such funds including the Company's name, the maturity date of the Notes, the applicable interest rate and identification of the amounts to be applied to the payment of principal, premium and interest, respectively; with a notice of any such payment (and all other notices in respect of payment) to: The Travelers Indemnity Company of Rhode Island One Tower Square Hartford, Connecticut 06183-2030 Attn: Securities Department - Cashier, 6 PB In the case of all other communications: The Travelers Indemnity Company of Rhode Island One Tower Square Hartford, Connecticut 06115 Attn: Securities Department - Capital Finance Division, 9 PB EXHIBIT A PAGE 4 of 6 Purchaser Registration Principal Amount - --------- ------------ ---------------- Allstate Life Allstate Life Insurance Company Insurance Company $5,000,000 In the case of all payments on account of the Notes in accordance with Section 4.1, by: (a) crediting (in the form of federal funds bank wire transfer): Allstate Life Insurance Company - Custody Account No. 23-80524 Harris Trust and Savings Bank (ABA No. 0710-0028-8) Chicago, IL 60690 Attention: Trust Collection Department - 5C and (b) providing sufficient information with such wire transfer to identify the source and application of such funds including the Company's name, the private placement number, the maturity date of the Notes, the applicable interest rate and identification of the amounts to be applied to the payment of principal, premium and interest, respectively; with a notice of any such payment (and all other notices in respect of payment) to: Allstate Life Insurance Company Allstate Plaza West Northbrook, IL 60062 Attention: Investment Department -- Private Placements Division J2A (c) deliver securities to: Harris Trust and Savings Bank 111 West Monroe Street Master Trust Department, 5W Chicago, IL 60690 Attention: Timothy Cummins for Allstate Life Insurance Company Custody Account No. 23-80524 In the case of all other communications: Allstate Life Insurance Company Allstate Plaza West Northbrook, IL 60062 Attention: Investment Department -- Private Placements Division J2A EXHIBIT A PAGE 5 of 6 Purchaser Registration Principal Amount - --------- ------------ ---------------- Allstate Life Allstate Life Insurance Company Insurance Company $5,000,000 In the case of all payments on account of the Notes in accordance with Section 4.1, by: (a) crediting (in the form of federal funds bank wire transfer): Allstate Life Insurance Company - Custody Account No. 23-83531 Harris Trust and Savings Bank (ABA No. 0710-0028-8) Chicago, IL 60690 Attention: Trust Collection Department - 5C and (b) providing sufficient information with such wire transfer to identify the source and application of such funds including the Company's name, the private placement number, the maturity date of the Notes, the applicable interest rate and identification of the amounts to be applied to the payment of principal, premium and interest, respectively; with a notice of any such payment (and all other notices in respect of payment) to: Allstate Life Insurance Company Allstate Plaza West Northbrook, IL 60062 Attention: Investment Department -- Private Placements Division J2A (c) deliver securities to: Harris Trust and Savings Bank 111 West Monroe Street Master Trust Department, 5W Chicago, IL 60690 Attention: Timothy Cummins for Allstate Life Insurance Company Custody Account No. 23-83531 In the case of all other communications: Allstate Life Insurance Company Allstate Plaza West Northbrook, IL 60062 Attention: Investment Department -- Private Placements Division J2A EXHIBIT A PAGE 6 of 6 Purchaser Registration Principal Amount - --------- ------------ ---------------- Aid Association Aid Association $5,000,000 for Lutherans for Lutherans In the case of all payments on account of the Notes in accordance with Section 4.1, by: (a) crediting (in the form of federal funds bank wire transfer): Aid Association for Lutherans Account No. 164-096-0 Harris Trust and Savings Bank 111 West Monroe Street Chicago, IL 60690 ABA No. 071 000 288 and (b) providing sufficient information with such wire transfer to identify the source and application of such funds including the Company's name, the maturity date of the Notes, the applicable interest rate and identification of the amounts to be applied to the payment of principal, premium and interest, respectively; with a notice of any such payment (and all other notices in respect of payment) to: Aid Association for Lutherans 4321 North Ballard Road Appleton, WI 54919 Attention: Investment Accounting In the case of all other communications: Aid Association for Lutherans 4321 North Ballard Road Appleton, WI 54919 Attention: Investment Department EXHIBIT B BARNES GROUP INC. 9.47% Senior Note due September 16, 2001 $ Hartford, Connecticut , 19 Barnes Group Inc. (the "Company"), a Delaware corporation, for value received, hereby promises to pay to or registered assigns the principal sum of ______ Dollars ($______) on September 16, 2001; and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid principal balance hereof from the date of this Note at the rate of 9.47% per annum, semi-annually on the sixteenth day of March and the sixteenth day of September in each year, commencing with the payment date 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 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 (a) the rate announced publicly by Citibank, N.A. in New York, New York from time to time as its prime rate and (b) 11.47% 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 Senior Notes of the Company issued in an aggregate principal amount limited to $40,000,000 pursuant to the Company's Note Agreements with The Travelers Insurance Company, The Travelers Indemnity Company, The Travelers Indemnity Company of Rhode Island, Allstate Life Insurance Company and Aid Association for Lutherans, respectively dated as of September 16, 1991, and is entitled to the benefits thereof. As provided in such Agreements, this Note is subject to prepayment, in whole or in part, in certain cases without premium and in other cases with a premium as specified in said Agreements. The Company agrees to make required prepayments on -2- account of said Notes in accordance with the provisions of said Agreements. This Note is a registered Note and 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. Under certain circumstances, as specified in said Agreement, the principal of this Note may be declared due and payable in the manner and with the effect provided in said Agreements. This Note and said Agreements are governed by and construed in accordance with Connecticut law. BARNES GROUP INC. (Corporate Seal) By__________________ EXHIBIT C I. THE COMPANY'S ACTIVE SUBSIDIARIES, EACH OF WHICH HAS ONLY A SINGLE CLASS OF STOCK OUTSTANDING, ARE AS FOLLOWS:
Percentage of Voting Stock* Owned by Company Jurisdiction of and each other Name of Subsidiary Incorporation Subsidiary** ------------------ ------------- ----------------------- Associated Spring- Singapore 100% Asia PTE. LTD. Associated Spring United Kingdom Note 1 SPEC Limited Autoliaisons France France 100% S.A. Barnes Group Canada Canada 100% Inc. Motalink Limited United Kingdom 100% Resortes Industriales Mexico 100% del Norte, S.A. Resortes Mecanicos, Mexico 100% S.A. Stumpp & Scheule Brazil 100% Distribuidora Ltda. Stumpp & Scheule do Brazil 100% Brasil Industria e Comercio Limitada Windsor Airmotive Asia Singapore Note 2 PTD. LTD.
Note 1 - Associated Spring SPEC Limited is wholly owned by Motalink Limited. Note 2 - Windsor Airmotive Asia PET. LTD. is wholly owned by Barnes Group Canada Inc. *Other than directors' qualifying shares. **If Subsidiary, specify name and extent of ownership. -2- II. AFFILIATES The Company's Affiliates, other than Subsidiaries, are as follows: Jurisdiction of Nature and Extent Name of Affiliate Incorporation of Affiliation a) NHK-Associated Spring Delaware 45% of Voting Suspension Components Inc. Stock Owned by Company b) Carlyle F. Barnes Have beneficial Wallace Barnes ownership of more than Fleet Bank of Connecticut 5% of the Company's State Street Bank & Trust Company stock as determined (in its capacity as Trustee for the under Rule 13d-3 of Company's Guaranteed Stock Plan) the Securities Exchange Act of 1934. -3- III. DESCRIPTION OF INDEBTEDNESS (A) The Indebtedness for borrowed money (including Financing Leases) of the Company and its Subsidiaries as of June 30, 1991 is as follows:
Description Amount ----------- ------ 1) Term Loan Agreement Mellon Bank, N.A. $ 20,000,000.00 2) Revolving Credit and Fleet Bank, N.A. $ 50,000,000.00 Term Loan Agreement as agent 3) Industrial Revenue Comerica Bank, N.A. $ 7,000,000.00 Bond, Saline, MI Trustee 4) Industrial Revenue Mellon Bank, N.A. $ 2,000,000.00 Bond, Meridian, MS Trustee 5) Short Term Credit Line Various $ 33,000,0O0.00 6) Bank Overdraft Various $ 481,000.00 7) Guaranty Agreement Mellon Bank, N.A. $ 2,000,000.00 8) Letter of Credit Fuji Bank, Ltd. $ 7,394,000.00 9) NASCO Guaranty LTCB Trust Co. $ 3,780,000.00 10) NASCO Guaranty Tohlease Corp. $ 3,891,000.00 11) NASCO Guaranty LTCB Trust Co. $ 5,930,000.00 12) NASCO Guaranty LTCB Trust Co. $ 1,350,000.00 13) ESOP Guaranty Ct. National Bank $ 18,403,000.00 Nat. Bank Detroit 14) Standby L/C Connecticut National $ 5,694,000.00 (Insurance) Bank 15) Commercial L/C Fleet Bank, N.A. $ 400,000.00 16) Company Guaranty Various $ 100,000.00 17) Standby L/C (Gardena) Connecticut National $ 347,000.00 Bank
Total Debt: $152,770,000. Total excludes duplication items listed: #3) Industrial Revenue Bond, Saline, $7,000,000.00. #7) Guaranty Agreement, Meridian, $2,000,000.00. -4- (B) Agreement Restricting the Company's Ability to Incur Indebtedness 1. Term Loan Agreement, Mellon Bank, N.A., dated October 17, 1986; 2. Revolving Credit and Term Loan Agreement, Fleet Bank N.A., agent, dated December 15, 1988; 3. Reimbursement Agreement, Fuji Bank Limited, New York Branch, dated February 1, 1986; 4. Guarantee Agreement, Connecticut National Bank and National Bank of Detroit, dated July 28, 1989; 5. Interest Rate Swap Agreement, Fleet Bank, N.A., dated August 28, 1989; 6. Interest Rate Swap Agreement, Chemical Bank, N.A., dated September 16, 1991; 7. Interest Rate Exchange Agreement, Mellon Bank, N.A., dated October 17, 1986; 8. Barnes Group Inc. Company Resolution, Barnes Group Inc., dated April 14, 1990. IV. LIENS ON PROPERTY Liens existing as of September 16, 1991 (other than Liens of the types permitted by clauses (i) through (v) of Section 7.6(a)) on any Property of the Company and its Subsidiaries which has a cost or market value greater than $500,000 are as follows: a. Capitalized lease between Barnes Group and City of Meridian, Mississippi, dated as of July 1, 1985. EXHIBIT D DESCRIPTION OF COMPANY COUNSEL'S CLOSING OPINION The closing opinion of John E. Besser, Esq., Counsel of the Company, which is called for by Section 3.1, shall be dated the Closing Date and addressed to you, shall be satisfactory in form and substance to you, and shall be to the effect that: (1) Organization, Standing, etc. of the Company--the Company is a duly incorporated and validly existing corporation in good standing under the laws of the State of Delaware and has all requisite power and authority to issue, sell and deliver the Notes and to carry on its business and own its Property; (2) Organization, Standing, etc. of Subsidiaries--each Subsidiary is a duly incorporated and validly existing corporation in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to carry on its business and own its Property; (3) Authority to Conduct Business--the Company, and each Subsidiary, is duly authorized to conduct its business in each jurisdiction in which it operates and has duly qualified and is in good standing as a foreign corporation in each jurisdiction where the character of its Properties or the nature of its activities makes such qualification necessary or desirable; (4) Agreement, Notes--the Agreement and the Notes being delivered to you at the closing have been duly authorized by all necessary corporate action on the part of the Company (no action by the stockholders of the Company being required by law, by the Certificate of Incorporation or By-Laws of the Company or otherwise), have been duly executed and delivered by the Company, and are legal, valid and binding obligations of the Company enforceable in accordance with their terms except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by general equitable principles; (5) No Conflict with Charter, By-Laws or Other Agreements--the issue and sale of the Notes and compliance by the Company with the terms of the Notes and the Agreement will not conflict with, or result in any breach of any of the provisions of, or constitute a default under, or result in the creation or imposition of any Lien upon any of the Property of the Company pursuant to the provisions of, the Certificate of Incorporation or By-Laws of the Company, or any agreement or other instrument to which the Company is a party or by which it is bound; -2- (6) Title to Stock of Subsidiaries--the Company is the legal and beneficial owner of all of the shares it purports to own of the capital stock of each Subsidiary, free and clear in each case of any Lien and all such shares have been duly issued and are fully paid and non-assessable; (7) Governmental Consent, etc.--all consents, approvals or authorizations, if any, of any governmental authority required on the part of the Company in connection with the execution and delivery of the Agreement or the offer, issue, sale or delivery of the Notes to you have been duly obtained, and the Company has complied with any applicable provisions of law requiring any designation, declaration, filing, registration or qualification with any governmental authority in connection with such offer, issue, sale or delivery; (8) Margin Requirements--none of the transactions contemplated in the Agreement (including, without limitation thereof, the use of the proceeds from the sale of the Notes) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II; and (9) Exempted Offering--the issuance, sale and delivery of the Notes under the circumstances contemplated by the Agreement are exempted transactions under the registration provisions of the Securities Act of 1933, as amended, and do not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or qualification of an indenture under the Trust Indenture Act of 1939. (10) Litigation--there is no action, suit or proceeding at law or in equity or any investigation pending, or to the best knowledge of such counsel threatened, against or affecting the Company or any Subsidiary in or before any court, governmental authority or agency or arbitration board or tribunal which, individually or in the aggregate will have a material adverse impact on the longterm financial condition or prospects of the Company and its Subsidiaries, or the ability of the Company to perform the Agreement. Such opinion shall also cover such other matters incident to the transactions contemplated hereby as you or your special counsel may reasonably request. EXHIBIT E DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION The closing opinion of Day, Berry & Howard, special counsel for you, which is called for by Section 3.1 of the Agreement, shall be dated the Closing Date and addressed to you, shall be satisfactory in form and substance to you, and shall cover the matters referred to in paragraphs 1 (as to incorporation and good standing only), and 4, 5 (as to Certificate of Incorporation and By-Laws only), 7, 8 and 9 of Exhibit D. Such opinion shall also state that based on such due investigation and inquiry as deemed relevant and appropriate, the closing opinion of Company counsel delivered pursuant to Section 3.1 is satisfactory in scope and form to special counsel and that in their opinion you are justified in relying thereon, and shall cover such other matters relating to the sale of the Notes as you may reasonably request. EXHIBIT F CERTAIN DOCUMENTS FURNISHED TO PURCHASERS 1. Estimated Operation By Business Segment for Three Months and Six Months Ended June 30, 1990 and June 30, 1991 dated September 13, 1991. Segment sales are accurate in all material respects. Numerous adjustments to interim operating income data by business segments are made at year-end. The data set forth in the above document reflects reasonable estimates of operating income by segments for the periods shown. 2. The Investment Policy - Surplus Cash accurately states said policy as of the date of the Agreement. 3. The List of certain competitors and customers of Bowman Distribution was prepared in February, 1991 and furnished to the Company's directors as part of a briefing book prepared for the Annual Meeting of Stockholders in April, 1991. 4. The document reflecting 1990 sales distribution of the Aerospace Components Group is, taken as a whole, reasonably accurate in all material respects. 5. Sales and Operating Income by Segment 1981-1991. The data for the years 1981-1990 are taken from the Company's Annual Report. See discussion in item 1 above relating to the date for the first six months of 1991. In addition, the numbers referenced in item 1 should be substituted for those shown on this document. EX-4.6 6 EXHIBIT 4.6 BARNES GROUP INC. Revolving Credit Note $35,000,000 New York, New York December 6, 1996 FOR VALUE RECEIVED, the undersigned, BARNES GROUP INC., a Delaware corporation (the "Borrower"), promises to pay to the order of FLEET NATIONAL BANK (the "Lender") on or before the Revolving Credit Maturity Date, and at such earlier dates as may be required by the Agreement (as defined below), the lesser of (i) the principal sum of THIRTY FIVE MILLION DOLLARS ($35,000,000) or (ii) the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the Borrower from time to time pursuant to the Agreement. The Borrower further promises to pay to the order of the Lender interest on the unpaid principal amount hereof from time to time outstanding at the rate or rates per annum determined pursuant to the Agreement, payable on the dates set forth in the Agreement. This Note is one of the "Revolving Credit Notes" as referred to in, and is entitled to the benefits of, the Revolving Credit Agreement, dated as of December 1, 1991, by and among the Borrower, the Lenders parties thereto from time to time, and Mellon Bank, N.A., as Agent (as the same may be amended, modified or supplemented from time to time, the "Agreement"), which among other things provides for the acceleration of the maturity hereof upon the occurrence of certain events and for prepayments in certain circumstances and upon certain terms and conditions. Terms defined in the Agreement have the same meanings herein. Except as otherwise set forth in the Agreement, the Borrower hereby expressly 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 the Agreement, and an action for amounts due hereunder or thereunder shall immediately accrue. This Note shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to principles of choice of law. BARNES GROUP INC. By /s/ J. Locher -------------------------- Title: V.P. Treasurer FIFTH AMENDMENT TO CREDIT AGREEMENT THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of December 1, 1996, by and between BARNES GROUP, INC. the "Borrower"), the Lenders parties to the Credit Agreement (as defined below) from time to time (the "Lenders"), and MELLON BANK, N.A., a national banking association, as Agent (in such capacity, the "agent"). WHEREAS, the Agent, the Lenders and the Borrower are parties to a certain Credit Agreement dated as of December 1, 1991 (as amended, the "Credit Agreement"); and WHEREAS, the Borrower has requested that the Lenders extend the Revolving Credit Maturity Date for a period of one year; WHEREAS, the parties desire to add The First National Bank of Boston as a Lender under the Credit Agreement, as amended hereby; WHEREAS, the Agent, the Lenders and the Borrower desire to amend the Credit Agreement as set forth herein; and WHEREAS, all words and terms used in this Amendment which are defined in the Credit Agreement are used herein with the same meanings unless otherwise defined herein or required by the context; NOW, THEREFORE, in consideration of the foregoing premises and intending to be legally bound, the Agent, the Lenders and the Borrower hereby agree as follows: Section 1. Extension of Revolving Credit Maturity Date. Pursuant to Section 2.03 of the Credit Agreement and as requested by the Borrower in a letter to the Agent dated October 15, 1996, the Lenders and the Agent hereby agree to extend the Revolving Credit Maturity Date for a period of one year. On and after December 6, 1996 (the "Effective Date"), as provided in Section 2.03 of the Credit Agreement, the Revolving Credit Maturity Date shall be December 6, 2001, as such date may be further extended by the Lenders pursuant to Section 2.03 of the Credit Agreement. Section 2. Amendments to Credit Agreement. The Credit Agreement is hereby amended as follows: (a) Section 1.01 is amended as follows: The term "Reference Banks" is amended to substitute The First National Bank of Chicago" for "NBD Bank, N.A." (b) Section 2.01(a) is hereby amended by substituting the figure "$150,000,000" for the figure "$100,000,000" in the last sentence thereof. (c) The Revolving Credit Committed Amount of each Lender shall be increased such that the Total Revolving Credit Committed Amount for each Lender shall be as follows: Mellon Bank, N.A. $35,000,000 Fleet National Bank 35,000,000 The Chase Manhattan Bank 20,000,000 The First National Bank of Chicago 20,000,000 KeyBank 20,000,000 The First National Bank of Boston 20,000,000 (d) From and after the Effective Date of this Amendment, the Commitment Percentage for each Lender shall be as follows: Mellon Bank, N.A. 23.3334% Fleet National Bank 23.3334% The Chase Manhattan Bank 13.3333% The First National Bank of Chicago 13.3333% KeyBank 13.3333% The First National Bank of Boston 13.3333% (e) Section 2.02(a) is hereby amended by deleting the first sentence in its entirety and substituting the following therefor: "The Borrower shall pay to the Agent for the account of each Lender a commitment fee (the "Commitment Fee") equal to (x) 0.115% per annum if the Borrower's Consolidated Leverage Ratio is less than 1.15:1, (y) 0.150% per annum if the Borrower's Consolidated Leverage Ratio is equal to or greater than l.15:1 but less than or equal to 1.40:1 and (z) 0.180% per annum if the Borrower's Consolidated Leverage Ratio is greater than 1.40:1 (based on a year of 365 or 366 days and actual days elapsed), for each day from and including the Effective Date and to but not including the Revolving Credit Maturity Date, of the amount (not less than zero) equal to (i) such Lender's Revolving Credit Committed Amount on such day, minus (ii) such Lender's Revolving Credit Loans outstanding on such day. -2- (f) Section 2.06(b) is hereby deleted and the following substituted therefor: "(b) Applicable Margins. The Applicable Margins and interest rate option for any day shall mean the percentages set forth below: (i) the Applicable Margin for each day on which the Borrower's Consolidated Leverage Ratio is less than 1.15:1 shall mean the percentage set forth below: Interest Rate Option Applicable Margin Base Rate Option O.000% CD Rate Option 0.425% Euro-Rate Option 0.300% (ii) the Applicable Margin for each day on which the Borrower's Consolidated Leverage Ratio is equal to or greater than 1.15:1 but less than or equal to 1.40:1 shall mean the percentage set forth below: Interest Rate Option Applicable Margin Base Rate Option O.000% CD Rate Option 0.475% Euro-Rate Option 0.350% and (iii) the Applicable Margin for each day on which the Borrower's Consolidated Leverage Ratio is greater than 1.40:1 shall mean the percentage set forth below: Interest Rate Option Applicable Margin Base Rate Option 0.075% CD Rate Option 0.600% Euro-Rate Option 0.500%" Section 3. Conditions. The obligation of the Agent and the Lenders to extend the Revolving Credit Maturity Date shall be subject to satisfaction by the Borrower of the following conditions precedent: (a) The Agent shall have received (with a copy for each Lender) the following documents dated as of the date of the issuance of the Amendment (the "Closing Date") and in form and substance satisfactory to the Lenders: (i) An executed counterpart of this Amendment; -3- (ii) Executed original Revolving Credit Notes, payable to the order of each Lender in the face amount of such Lender's Revolving Credit Committed Amount, as set forth herein, in substantially the form attached as Exhibit A to the Credit Agreement with the blanks appropriately filled; and (iii) A certificate signed by a duly authorized officer of the Borrower stating that (A) the representations and warranties contained in Article III of the Credit Agreement (except for Section 3.06 which continues to be true as of the date set forth therein) are correct on and as of the Closing Date and as though made on and as of the Closing Date and (B) no Event of Default and no event, act or omission which, with the giving of notice or the lapse of time or both, would constitute such an Event of Default has occurred and is continuing or would result from the execution and delivery of the Amendment. (b) The Agent shall have received (with a copy for each Lender) such other approvals, certificates, opinions or documents, in form and substance satisfactory to the Lenders, as the Lenders may reasonably request. Section 4. Effect of Amendment. The Credit Agreement, as amended by this Amendment, is in all respects ratified, approved and confirmed and shall, as so amended, remain in full force and effect. From and after the date hereof, all references in any document or instrument to the Credit Agreement shall mean and include the Credit Agreement, as amended by this Amendment. Section 5. Governing Law. This Amendment shall be governed by and shall be interpreted and enforced in accordance with the laws of the State of New York. Section 6. Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute but one and the same Amendment. Section 7. Expenses. The Borrower shall reimburse the Lenders for all costs and expenses (including fees and expenses of counsel to the Agent) incurred in connection with this Amendment. -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized. BARNES GROUP, INC. By /s/ J. Locher --------------------------- Title Vice President, Treasurer MELLON BANK, N.A., individually and as Agent By ------------------------- Title ------------------------ FLEET NATIONAL BANK By ------------------------- Title ------------------------ THE CHASE MANHATTAN BANK By ------------------------- Title ------------------------ THE FIRST NATIONAL BANK OF CHICAGO By ------------------------- Title ------------------------ -5- KEYBANK By ------------------------- Title ------------------------ THE FIRST NATIONAL BANK OF BOSTON By ------------------------- Title ------------------------ -6- EX-10.5 7 EXHIBIT 10.5 APPENDIX ================================================================================ BARNES GROUP INC. STOCK INCENTIVE PLAN 1. PURPOSE The purpose of the Plan is to authorize the grant to Senior Executives of the Company or any Subsidiary of (i) nonqualified options to purchase shares of Common Stock, (ii) Stock Appreciation Rights, (iii) Incentive Stock Rights and (iv) Performance Unit Awards, and thus benefit the Company by giving such employees a greater personal interest in the success of the enterprise and an added incentive to continue and advance in their employment. 2. DEFINITIONS The following terms, when used in the Plan, shall mean: 1966 PLAN: The Company's 1966 Stock Option Plan as in effect immediately prior to its expiration. BOARD: The Board of Directors of the Company. COMMITTEE: Such committee as shall be appointed by the Board pursuant to the provisions of section 11. COMMON STOCK: The Common Stock of the Company, par value $1 per share, or such other class of shares or other securities as may be applicable pursuant to the provisions of section 9. COMPANY: Barnes Group Inc. DISABILITY: Inability to perform the services normally rendered by the employee due to any physical or mental impairment that can be expected either to be of indefinite duration or to result in death, as determined by the Committee on the basis of appropriate medical evidence. EARLY RETIREMENT: Termination of employment with the Company or a Subsidiary with the Company's consent after the employee has attained age 55 and prior to his Normal Retirement Date. FAIR MARKET VALUE: As applied to the Common Stock on any day, the closing market price of such stock as reported in the New York Stock Exchange-Composite Transactions Index for such day, or if the Common Stock was not traded on such day, for the last preceding day on which the Common Stock was traded. INCENTIVE: An incentive granted under the Plan in one of the forms provided for in section 3. INCENTIVE STOCK RIGHT: Incentive stock units credited pursuant to section 7 as additional compensation for services to the Company or a Subsidiary. NORMAL RETIREMENT DATE: The last day of the month following the employee's 65th birthday except that if such birthday occurs on the last day of the month, his Normal Retirement Date shall be the date of such birthday. OPTION: An option to purchase shares of Common Stock. PERFORMANCE UNIT AWARD: Performance units credited to a Senior Executive pursuant to section 8 as additional compensation for services to the Company or a Subsidiary. PLAN: The Barnes Group Inc. Stock Incentive Plan herein set forth, as amended from time to time. SENIOR EXECUTIVE: An employee of the Company or of a Subsidiary, including an officer or director who is an employee, who in the Committee's judgment can contribute significantly to the growth and successful operations of the Company or a Subsidiary. STOCK APPRECIATION RIGHT: A right to receive an amount, payable in shares of Common Stock or, at the election of the Committee as to all or any part of such amount, in cash, equal to the increase in the Fair Market Value of the number of shares of Common Stock subject to such right, as set forth in section 6. SUBSIDIARY: A corporation at least 50% of whose outstanding voting stock is owned, directly or indirectly, by the Company. 15 ================================================================================ 3. GRANTS OF INCENTIVES (a) Subject to the provisions of the Plan, the Committee may at any time, or from time to time, grant Incentives under the Plan to, and only to, Senior Executives. (b) Incentives may be in the following forms: (i) an Option, in accordance with section 5, (ii) a Stock Appreciation Right, in accordance with section 6, (iii) an Incentive Stock Right, in accordance with section 7, (iv) a Performance Unit Award, in accordance with section 8, or (v) a combination of two or more of the foregoing. 4. STOCK SUBJECT TO THE PLAN (a) Subject to adjustment as provided in section 9, the aggregate number of shares of Common Stock which may be made the subject of Incentives granted under the Plan shall not exceed the sum of (i) 500,000 shares, (ii) the number of shares of such stock available for the granting of options under the 1966 Plan immediately prior to its expiration, and (iii) the number of shares of such stock covered by outstanding options (or installments thereof) granted under the 1966 Plan which, after its expiration, shall terminate or expire in whole or in part without being exercised. Charges against such aggregate number are governed by the provisions of paragraph (c) of this section 4, paragraph (h) of section 5, paragraph (e) of section 6, paragraph (c) of section 7 and paragraph (e) of section 8. Subject to said provisions and to adjustment as provided in section 9, the maximum number of shares that may be charged under the Plan on account of any one individual may not exceed 75,000. (b) Such shares may be either authorized but unissued shares or shares issued and thereafter acquired by the Company. (c) If any shares subject to an Incentive shall cease to be subject thereto because of the termination without exercise or payment, in whole or in part, of such Incentive, the shares as to which the Incentive was not exercised or paid shall no longer be charged against the aggregate and individual limitations in paragraph (a) of this section 4 and may again be made subject to Incentives. (d) The Committee may permit the voluntary surrender of all or a portion of any Incentive granted under this Plan to be conditioned upon the granting to the employee of a new Incentive for the same or a different number of shares or amount of other payment as the Incentive surrendered, or may require such voluntary surrender as a condition to a grant of a new Incentive to such employee. Such new Incentive shall be exercisable at the price, during the period, and in accordance with any other terms or conditions specified by the Committee at the time the new Incentive is granted, all determined in accordance with the provisions of this Plan without regard to the price, period of exercise, or any other terms or conditions of the Incentive surrendered. 5. OPTIONS Incentives in the form of Options shall be subject to the following provisions: (a) The Option price per share shall not be less than 85% of the Fair Market Value at the time of the grant of the Option. In no event shall the Option price be less than the par value of the stock. (b) Subject to the provisions of paragraphs (c) and (f) of this section 5 and the provisions of paragraph (a) of section 12 relating to absence on leave, an Option granted under the Plan may not be exercised unless, at the time of such exercise, the optionee shall be in the employ of the Company or a Subsidiary and shall have completed at least 12 months of continuous employment with the Company or a Subsidiary or both, from the date of the grant of his Option. (c) Each Option shall expire at such time as the Committee may determine at the time the Option shall be granted but not later than ten years from the date such Option shall have been granted or, if earlier, one year following the optionee's Normal Retirement Date. (d) Any Option granted under the Plan may be exercised solely by the person to whom granted (or by his guardian or legal representative) except as provided in paragraph (f) (i) of this section 5 in the case of such person's death. (e) After completion of the required period of employment specified in the Option grant, the Option may be exercised, in whole or in part, at any time or from time to time during the balance of the term of the Option, except as limited by provisions contained in the Option (including provisions regarding exercise in installments). 16 ================================================================================ (f) The Option shall terminate if and when the optionee shall terminate employment with the Company and its Subsidiaries, except as follows: (i) If the optionee shall die while employed by the Company or a Subsidiary or within 90 days after termination of such employment, the Option theretofore granted to him may only be exercised by his legal representative within the period of one year following his death, and in no event after the date of expiration of his Option, and then only as and to the extent that he was entitled to exercise it at the date of his death; however, in the case of any Option exercisable in installments, if the optionee shall die while employed by the Company or a Subsidiary or within 90 days after terminating employment by Early Retirement or by retiring on or after his Normal Retirement Date, such Option may be exercised as to any or all shares which would have been purchasable in the following installment period if the optionee had not died. (ii) If the optionee elects Early Retirement, he may exercise his Option on, or any time within one year following the date of such Early Retirement (but in no event after the date of expiration of his Option) as to any or all shares purchasable on such date and also, in the case of any Option exercisable in installments, as to any or all shares which would have been purchasable in the following installment period if such retirement had not occurred. (iii) If the optionee terminates employment by retiring on or after his Normal Retirement Date, he may exercise his Option on, or at any time within one year following, his Normal Retirement Date (but in no event after the date of expiration of his Option) as to any or all shares purchasable on the date of exercise. (iv) If the optionee terminates employment prior to his Normal Retirement Date for any reason other than by death or Early Retirement, he may exercise his Option, on the date of such termination or any time within 90 days following such termination (but in no event after the date of expiration of his Option), as to any or all shares purchasable on the date of his termination of employment. (g) Shares purchased upon exercise of an Option shall be paid for in full at the time of exercise in cash or, with the consent of the Committee, in whole or in part in shares of Common Stock (based on their Fair Market Value on the date of exercise). (h) The forms of Option authorized by the Plan may contain such other provisions as the Committee shall deem advisable. Without limiting the foregoing and if so authorized by the Committee, the Company may, with the consent of the optionee, and at any time or from time to time, cancel all or a portion of any Option granted under the Plan then subject to exercise and discharge its obligation in respect of the Option either by payment to the optionee of an amount of cash equal to the excess, if any, of the Fair Market Value, at such time, of the shares subject to the portion of the Option so cancelled over the aggregate purchase price of such shares, or by issuance or transfer to the optionee of shares of Common Stock with a Fair Market Value, at such time, equal to any such excess, or by a combination of cash and shares. Upon any exercise of an Option or upon any such payment of money or issuance of shares, (i) there shall be charged against the aggregate and individual limitations in paragraph (a) of section 4 a number of shares equal to (A) the number of shares so issued plus (B) the number of shares purchasable with the amount of any cash paid to the optionee on the basis of the Fair Market Value as of the date of payment; and (ii) the number of shares subject to the portion of the Option so cancelled, less the number of shares so charged against such limitations, shall thereafter be available for other grants of Incentives and shall no longer be charged against the individual's maximum limitation. 6. STOCK APPRECIATION RIGHTS (a) A Stock Appreciation Right may be granted (i) in connection with any Option granted under the Plan, either at the time of the grant of such Option or at any time thereafter during the term of the Option, (ii) in connection with any Option theretofore granted under the 1966 Plan, or (iii) independently of the grant of an Option. (b) A Stock Appreciation Right shall entitle the holder thereof, upon exercise of the Stock Appreciation Right, to receive a number of shares of Common Stock, or cash or a combination of cash and shares (as the Committee in its discretion may elect), determined pursuant to paragraph (d) of this section 6. 17 ================================================================================ (c) A Stock Appreciation Right shall be subject to the following terms and conditions and to such other terms and conditions not inconsistent with the Plan as shall from time to time be approved by the Committee: (i) If granted in connection with an Option, a Stock Appreciation Right shall be exercisable at such time or times and by such person or persons and to the extent, but only to the extent, that the Option to which it relates shall be exercisable; provided, however, that such Right (A) shall not be exercisable during the first six months following the date of its grant and (B) shall be exercisable only during the ten-day periods (the "Exercise Periods") beginning on the third business day following the date of release of a summary statement of the Company's quarterly or annual sales and earnings and ending on the twelfth business day following such date of release. (ii) If granted independently of an Option, a Stock Appreciation Right shall be subject to the following provisions: (A) Subject to the provisions of subparagraph (E) of this paragraph (c) (ii) and the provisions of paragraph (a) of section 12 relating to absence on leave, such Stock Appreciation Right may not be exercised unless, at the time of such exercise, the grantee shall be in the employ of the Company or a Subsidiary and shall have completed at least 12 months of continuous employment with the Company or a Subsidiary or both, from the date of the grant of such Right. (B) Such Stock Appreciation Right shall expire at such time as the Committee may determine at the time the Right shall be granted but not later than ten years from the date such Right shall have been granted or, if earlier, one year following the employee's Normal Retirement Date. (C) Any such Stock Appreciation Right granted under the Plan may be exercised solely by the person to whom granted (or by his guardian or legal representative) except as provided in subparagraph (E) (1) of this paragraph (c) (ii) in the case of such person's death. (D) After completion of the required period of employment specified in the related Stock Appreciation Right agreement, such Right may be exercised, in whole or in part, at any time or from time to time during the balance of the term of the Right, except as limited by provisions contained in such agreement (including provisions regarding exercise in installments) and except that any such Right shall only be exercised during the Exercise Periods defined in paragraph (c) (i) of this section 6. (E) Such Stock Appreciation Right shall terminate if and when the grantee shall cease to be an employee of the Company or a Subsidiary, except as follows: (1) If the grantee shall die while employed by the Company or a Subsidiary or within 90 days after termination of such employment, the Stock Appreciation Right theretofore granted to him may only be exercised by his legal representative within the period of one year following his death, and in no event after the date of expiration of the Stock Appreciation Right, and then only as and to the extent that he was entitled to exercise it at the date of his death; however, in the case of any Stock Appreciation Right exercisable in installments, if the grantee shall die while employed by the Company or a Subsidiary or within 90 days after terminating employment by Early Retirement or by retiring on or after his Normal Retirement Date, such Right may be exercised as to all or that portion of such Right which would have been exercisable in the following installment period if the grantee had not died. (2) If the grantee elects Early Retirement, he may exercise his Stock Appreciation Right on, or any time within the one year following the date of such Early Retirement (but in no event after the date of expiration of such Right) as to all or a portion of such Right exercisable on such date and also, in the case of any such Right exercisable in installments, as to all or a portion of such Right which would have been exercisable in the following installment period if such retirement had not occurred. (3) If the grantee terminates employment by retiring on or after his Normal Retirement Date, he may exercise his Stock Appreciation Right on, or at any time within one year following, his Normal Retirement Date (but in no event after the date of expiration of such Right) as to all or a portion of such Right exercisable on the date of exercise. 18 ================================================================================ (4) If the grantee terminates employment prior to his Normal Retirement Date for any reason other than by death or Early Retirement, he may on the date of such termination or within 90 days following such termination (but in no event after the date of expiration of his Stock Appreciation Right) exercise such Right if and to the extent that he was entitled to exercise it at the date of such termination. (d) Upon exercise of a Stock Appreciation Right, the holder thereof shall be entitled to receive a number of shares equal in Fair Market Value to (1 ) the amount by which the Fair Market Value of a share of Common Stock on the date of such exercise shall exceed the Fair Market Value of a share of Common Stock on the date of grant of the related Option, or, in the case of any such Right granted independently of an option, on the date of grant of such Right (except that if any such Right shall be granted in connection with an Option previously outstanding under the Plan or the 1966 Plan, and if such Right shall so provide, the Fair Market Value of a share of Common stock on the date of grant of such Right, if such Fair Market Value is lower than the Fair Market Value at the time of grant of the related Option, may be used instead of the Fair Market Value at the time of grant of the related Option), multiplied by (2) the number of shares in respect of which such Right shall have been exercised. Settlement for any fraction of a share due shall be made in cash. The Committee may settle all or any part of the Company's obligation arising out of an exercise of any such Right by the payment of cash equal to the aggregate value of the shares of Common Stock that it would otherwise be obligated to deliver under the provisions of this paragraph (d). (e) Upon exercise of any Stock Appreciation Right, (i) there shall be charged against the aggregate and individual limitations in paragraph (a) of section 4 a number of shares equal to (A) the number of shares issued to the grantee under paragraph (d) of this section 6 plus (B) the number of shares purchasable with the amount of any cash paid to the grantee on the basis of the Fair Market Value as of the date of payment; and (ii) the portion of the Incentive in respect of which such Right shall have been exercised shall be cancelled and the number of shares subject to such portion, less the number of shares so charged against such limitations, shall thereafter be available for other grants of Incentives and shall no longer be charged against the individual's maximum limitation. 7. INCENTIVE STOCK RIGHTS (a) An Incentive Stock Right will consist of incentive stock units, each of which will be equivalent to one share of the Company's Common Stock. An Incentive Stock Right wi11 be evidenced by an agreement in form approved by the Committee,will be nontransferable, will entitle the holder to receive shares of Common Stock, without payment to the Company, after the lapse of the incentive period or periods established by the Committee and wi11 be subject to the limitations in paragraph (a) of section 4. Holders of Incentive Stock Rights will be entitled, from the date of the award, to receive from the Company cash payments equal to the amount of dividends declared on the number of shares of Common Stock equal to the number of incentive stock units held by them, such payments to be made on the Company's dividend payment dates. (b) In the event of termination of employment by reason of death, Disability or Early Retirement during an incentive period, the Committee may provide that such period will lapse on the date of termination with respect to that proportion of the incentive stock units that are to vest at the close of such period as the number of full months in such period up to the date of termination bears to the number of months in such period. To the extent that incentive periods have not lapsed prior to the termination of employment for the foregoing or any other reason, the Incentive Stock Right will terminate on termination of employment. (c) After the lapse of the incentive period and the issuance of shares, there will be charged against the aggregate and individual limitations in paragraph (a) of section 4 the number of shares equal to the number of shares issued. 19 ================================================================================ 8. PERFORMANCE UNIT AWARDS (a) A Performance Unit Award will consist of performance units granted to Senior Executives selected by the Committee. Performance units may be granted alone or in conjunction with and related to an Option. When granted in conjunction with an Option, the number of performance units, unless otherwise provided by the Committee, will be equal to the number of shares under the related Option. To the extent that the Committee elects to pay performance units granted with a related Option, there will be a proportionate reduction in the number of shares available under such Option and any related Stock Appreciation Right. To the extent the related Option or a Stock Appreciation Right granted in connection with such Option is exercised, the related number of performance units will be proportionately reduced. (b) The Committee will establish an initial value for each performance unit at the time of grant. At that time the Committee will also establish performance targets to be achieved during the award period of not less than one year set by the Committee. The value of the performance units at the end of the award period will be determined by the degree to which the performance targets are achieved. However, in no event will the value be greater than the initial value established at the time of the grant. Performance Unit Awards will be subject to the limitations in paragraph (a) of section 4 and will be evidenced by agreements setting forth the initial value for each performance unit, the performance targets and award period and such other terms and conditions not inconsistent with the Plan as the Committee may determine. (c) Payment, if any, at the end of the award period will be made in cash, shares of Common Stock, or both, as determined by the Committee. A Performance Unit Award granted alone, not in conjunction with an Option, is automatically payable if the conditions are met. A Performance Unit Award granted in conjunction with an Option is payable only at the election of the Committee, as an alternative to the continuance of the related option and any related Stock Appreciation Right. The Committee may make this election to pay only during the first two months after the end of the award period. If the election to pay is not made, the Performance Unit Award terminates and the related Option and Stock Appreciation Right continue in effect. (d) In the event of termination of employment by reason of death, Disability, or Early Retirement prior to the end of the award period, or if employment terminates for any other reason during the final year of the award period (excepting termination for cause), a pro rata portion of the value of the performance units at the end of the award period will be paid to the employee (or his estate in the case of death), unless the Committee determines that a different portion be payable or elects to terminate the award. Upon termination of employment under any other circumstances, the Performance Unit Award will terminate. (e) Upon payment of a Performance Unit Award there shall be charged against the aggregate and individual limitations in paragraph (a) of section 4 a number of shares equal to (i) the number of shares issued to the employee in respect of the Performance Unit Award plus (ii) the number of shares purchasable with the amount of any cash paid to the employee in respect of the Performance Unit Award on the basis of the Fair Market Value as of the date of payment. (f) The Committee may make such adjustments to the publicly reported amounts of the Company's consolidated earnings or book values it deems appropriate for changes in accounting practices or principles, for material acquisitions or dispositions of stock or property, for recapitalizations or reorganizations or for any other events with respect to which the Committee determines such an adjustment to be appropriate in order to avoid distortion in the operation of the Plan. 9. ADJUSTMENT PROVISIONS The Options granted under the Plan shall contain such provisions as the Committee may determine with respect to adjustments to be made in the number and kind of shares covered by such Options and in the Option price in the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering or any other change in the corporate structure of shares of the Company; and in the event of any such change, the aggregate number and kind of shares available under the Plan and the maximum number of shares that may be charged under the Plan on account of any one individual shall be appropriately adjusted. In the event of any such change, equitable adjustments shall also be made by the Committee in its discretion in the terms and conditions of any Stock Appreciation Right, Incentive Stock Right and Performance Unit Award granted under the Plan. 20 ================================================================================ 10. TERM The Plan shall become effective if and when approved by the Company's shareholders at their 1981 Annual Meeting. No Incentives shall be granted under the Plan after April 3, 1991. 11. ADMINISTRATION (a) The Plan shall be administered by the Committee, to be appointed from time to time by the Board and to consist of not less than three of the then members of the Board. No member of the Committee shall be eligible to participate in the Plan. (b) The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it shall deem advisable. The greater of two members or one-third of the entire Committee shall constitute a quorum, and the act of a majority of the members present shall be the act of the Committee. Any decision or determination reduced to writing, signed by all members of the Committee and filed with the minutes of the proceedings of the Committee, shall be fully as effective as if made by a unanimous vote at a meeting duly called and held. The Committee may appoint a Secretary, shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business and for the carrying out of the Plan as it shall deem appropriate. (c) Incentives under the Plan shall be granted in accordance with the Committee's determinations pursuant to the Plan, by execution and prompt delivery to the employee of instruments approved by the Committee. Any such grant shall be effective on the date of such determination or, if later, on the date specified in the instrument evidencing the grant. (d) The interpretation and construction by the Committee of any provision of the Plan and of any Incentive granted thereunder shall, unless otherwise determined by the Board, be final and conclusive on all persons having any interest thereunder. 12. GENERAL PROVISIONS (a) Absence on leave because of military or governmental service, Disability or other reason, if such absence is approved by the Committee, shall not be considered an interruption or termination of employment for any purpose of the Plan, or Incentives granted thereunder, except that no Incentive may be granted to an employee while he is absent on leave. (b) Incentives may be granted under the Plan from time to time in substitution for non-qualified stock options and/or stock appreciation rights held by employees of other corporations who are or are about to become employees of the Company or a Subsidiary as the result of a merger or consolidation of the employing corporation with the Company or a Subsidiary, or the acquisition by the Company or a Subsidiary of the assets of the employing corporation, or the acquisition by the Company or a Subsidiary of stock of the employing corporation as the result of which it becomes a Subsidiary. Further, Stock Appreciation Rights may be granted under the Plan from time to time in connection with nonqualified stock options assumed by the Company or a Subsidiary as part of any such merger, consolidation or acquisition. The terms and conditions of the substituted Incentives or related Stock Appreciation Rights so granted may vary from the terms and conditions set forth in sections 5 and 6 to such extent as the Board may deem appropriate to conform in whole or in part to the provisions of the substituted incentives. (c) Nothing in the Plan nor in any instrument executed pursuant thereto shall confer upon any employee any right to continue in the employ of the Company or a Subsidiary. (d) No shares of Common Stock shall be sold, issued or transferred pursuant to, or accepted as payment of the Option price of, an Incentive unless and until there has been compliance, in the opinion of the Company's General Counsel, with all applicable legal requirements, including without limitation those relating to securities laws and stock exchange listings. (e) No employee (individually or as a member of a group), and no beneficiary or other person claiming under or through him, shall have any right, title or interest in or to any shares of Common Stock allocated or reserved for the Plan or subject to any Incentive except as to such shares of Common Stock, if any, as shall have been sold, issued or transferred to him. 21 ================================================================================ (f) The Company or a Subsidiary may make such provisions as it may deem appropriate for the withholding of any taxes which the Company or Subsidiary determines it is required to withhold in connection with any Incentive. (g) No Incentive and no rights under the Plan, contingent or otherwise, (i) shall be assignable or subject to any encumbrance, pledge or charge of any nature, whether by operation of law or otherwise, (ii) shall be subject to execution, attachment or similar process, or (iii) shall be transferable other than by will or the laws of descent and distribution, and every Incentive and all rights under the Plan shall be exercisable during the employee's lifetime only by him or by his guardian or legal representative. (h) Nothing in the Plan is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice or arrangement for the payment of compensation or fringe benefits to any employee which the Company or any Subsidiary now has or may hereafter put into effect, including without limitation, any retirement, pension, savings or thrift, insurance, death benefit, stock purchase, incentive compensation or bonus plan. 13. AMENDMENT OR DISCONTINUANCE OF PLAN (a) The Plan may be amended by the Board at any time, provided that, without the approval of the shareholders of the Company, no amendment shall be made which (i) increases the aggregate number of shares of Common Stock that may be made the subject of Incentives as provided in paragraph (a) of section 4, (ii) materially increases the benefits accruing to participants under the Plan, (iii) materially modifies the requirements as to eligibility for participation in the Plan, (iv) amends section 10 to extend the term of the Plan, or (v) amends this section 13. (b) The Board may discontinue the Plan at any time. (c) No amendment or discontinuance of the Plan shall adversely affect, except with the consent of the holder, any Incentive theretofore granted. 22 EX-4.1 8 EXHIBIT 4.1 [CONFORMED COPY] REVOLVING CREDIT AGREEMENT among BARNES GROUP INC., THE LENDERS SIGNATORY HERETO and MELLON BANK, N.A., as Agent Dated as of December 1, 1991 Table of Contents Section Title Page - ------- ----- ---- ARTICLE I DEFINITIONS; CONSTRUCTION .......... ...... 1 1.01 Certain Definitions ................ ...... 1 1.02 Construction ....................... ...... 14 1.03 Accounting Principles .............. ...... 14 ARTICLE II THE CREDITS ........................ ...... 15 2.01 Revolving Credit Loans ............. ...... 15 2.02 Fees; Reduction of the Committed Amounts ......... ...... 15 2.03 Extension of Revolving Credit Maturity Date .................... ...... 16 2.04 Maximum Aggregate Amount of Revolving Credit Loans ........... ...... 17 2.05 Making of Loans .................... ...... 17 2.06 Interest Rates ..................... ...... 18 2.07 Conversion or Renewal of Interest Rate Options ..................... ...... 22 2.08 Prepayments Generally .............. ...... 24 2.09 Prepayments ........................ ...... 24 2.10 Interest Payment Dates ............. ...... 25 2.11 Pro Rata Treatment; Payments Generally .... 25 2.12 Additional Compensation in Certain Circumstances ........................... 26 2.13 HLT Classification ........................ 29 2.14 Taxes ..................................... 30 2.15 Funding by Branch, Subsidiary or Affiliate ............................ 32 ARTICLE III REPRESENTATIONS AND WARRANTIES ............ 33 3.01 Corporate Status .......................... 33 3.02 Corporate Power and Authorization ......... 33 3.03 Execution and Binding Effect .............. 34 3.04 Governmental Approvals and Filings ........ 34 3.05 Absence of Conflicts ...................... 34 3.06 Audited Financial Statements .............. 35 3.07 Absence of Undisclosed Material Liabilities ............................. 35 3.08 Absence of Material Adverse Change ........ 35 3.09 Accurate and Complete Disclosure .......... 35 3.10 Margin Regulations ........................ 35 3.11 Subsidiaries .............................. 36 3.12 Partnerships, etc ......................... 36 3.13 Litigation ................................ 36 -i- 3.14 Absence of Events of Default .............. 36 3.15 Insurance ................................. 36 3.16 Title to Properties ....................... 37 3.17 Intellectual Property ..................... 37 3.18 Taxes ..................................... 37 3.19 Employee Benefits ......................... 38 3.20 Environmental Matters ..................... 39 ARTICLE IV CONDITIONS OF LENDING ..................... 39 4.01 Conditions to Initial Loans ............... 39 4.02 Conditions to All Loans ................... 40 ARTICLE V AFFIRMATIVE COVENANTS ..................... 41 5.01 Basic Reporting Requirements .............. 41 5.02 Insurance ................................. 44 5.03 Payment of Taxes and Other Potential Charges and Priority Claims ............. 44 5.04 Preservation of Corporate Status .......... 44 5.05 Governmental Approvals and Filings ........ 45 5.06 Maintenance of Properties ................. 45 5.07 Avoidance of Other Conflicts .............. 45 5.08 Financial Accounting Practices ............ 45 5.09 Use of Proceeds ........................... 45 5.10 Continuation of or Change in Business ..... 46 5.11 Consolidated Tax Return ................... 46 5.12 ERISA ..................................... 46 ARTICLE VI NEGATIVE COVENANTS ........................ 47 6.01 Financial Covenants ....................... 47 6.02 Liens ..................................... 47 6.03 Indebtedness .............................. 48 6.04 Limitation on Restrictions on Dividends by Subsidiaries, etc .................... 49 6.05 Mergers; Acquisitions ..................... 49 6.06 ERISA Obligations ......................... 50 6.07 Leases .................................... 50 6.08 Disposition of Properties ................. 51 6.09 Transactions with Affiliates .............. 51 6.10 Loans, Advances and Investments ........... 51 ARTICLE VII DEFAULTS .................................. 52 7.01 Events of Default ......................... 52 7.02 Consequences of an Event of Default ....... 54 7.03 Application of Proceeds ................... 55 ARTICLE VIII THE AGENT ................................. 56 8.01 Appointment ............................... 56 -ii- 8.02 General Nature of Agent's Duties ............. 56 8.03 Exercise of Powers ........................... 57 8.04 General Exculpatory Provisions ............... 57 8.05 Administration by the Agent .................. 58 8.06 Lender Not Relying on Agent or Other Lenders .............................. 59 8.07 Indemnification .............................. 59 8.08 Agent in its Individual Capacity ............. 60 8.09 Holders of Notes ............................. 60 8.10 Successor Agents ............................. 60 8.11 Calculations ................................. 61 8.12 Funding by Agent ............................. 61 ARTICLE IX MISCELLANEOUS ................................ 62 9.01 Holidays ..................................... 62 9.02 Records ...................................... 62 9.03 Amendments and Waivers ....................... 62 9.04 No Implied Waiver; Cumulative Remedies ....... 63 9.05 Notices ...................................... 63 9.06 Expenses; Taxes; Indemnity ................... 64 9.07 Severability ................................. 65 9.08 Prior Understandings ......................... 65 9.09 Duration; Survival ........................... 65 9.10 Counterparts ................................. 66 9.11 Limitation on Payments ....................... 66 9.12 Set-Off ...................................... 66 9.13 Sharing of Collections ....................... 67 9.14 Successors and Assigns; Participations Assignments ................................ 67 9.15 Governing Law; Submission to Jurisdiction .... 70 9.16 Replacement of Lender ........................ 71 Exhibit A Form of Revolving Credit Note Exhibit B Form of Transfer Supplement Exhibit C Form of Opinion of John E. Besser, Esquire Exhibit D Form of Quarterly Compliance Certificate Schedule 3.01 Corporate Status Schedule 3.07 Indebtedness Schedule 3.11 Subsidiaries Schedule 3.12 Partnerships Schedule 6.02 Liens -iii- REVOLVING CREDIT AGREEMENT THIS AGREEMENT, dated as of December 1, 1991, by and among BARNES GROUP INC., a Delaware corporation (the "Borrower"), the lenders parties hereto from time to time (the "Lenders", as defined further below) and MELLON BANK, N.A., a national banking association, as Agent for the Lenders hereunder. The Borrower has requested the Lenders to extend credit to the Borrower and the Lenders are willing to extend such credit upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION 1.01. Certain Definitions. In addition to other words and terms defined elsewhere in this Agreement, as used herein the following words and terms shall have the following meanings, respectively, unless the context hereof otherwise clearly requires: "Affected Lender" shall have the meaning set forth in Section 2.06(e) hereof. "Affiliate" of a Person (the "Specified Person") shall mean (a) any Person which directly or indirectly controls, or is controlled by, or is under common control with, the Specified Person, and (b) any director or officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of the Specified Person or of a Person who is an Affiliate of the Specified Person within the meaning of the preceding clause (a). For purposes of the preceding sentence, "control" of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall mean Mellon Bank, N.A., in its capacity Agent for the Lenders hereunder, and any successor Agent appointed in accordance with Section 8.10 hereof. "Anniversary Date" shall mean each December 6 during the term of this Agreement. "Applicable Margin" shall have the meaning set forth in Section 2.06(b) hereof. "Assessment Rate" shall have the meaning set forth in Section 2.06(a)(ii) hereof. "Base Rate" shall have the meaning set forth in Section 2.06(a)(i) hereof. "Base Rate Option" shall have the meaning set forth in Section 2.06(a)(i) hereof. "Base Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at such time (i) under the Base Rate Option or (ii) in accordance with Section 2.11(c)(ii) hereof. If no Loan or Loans is specified, "Base Rate Portion" shall refer to the Base Rate Portion of all Loans outstanding at such time. "Benefit Plan" shall mean any employee benefit plan, as defined in section 3(3) of ERISA), with respect to which the Borrower, any of its Subsidiaries, or a member of their respective Controlled Group, at any relevant time have some liability or obligation to contribute or pay benefits and which relates to current or former employees of the Borrower, any Subsidiary or any member of their respective Controlled Group. "Business Day" shall mean (a) with respect to selection of the Euro-Rate Option, prepayment of any Euro-Rate Portion of any Revolving Credit Loans, or determining the first or last day of any Euro-Rate Funding Period, a day for dealings in deposits in Dollars by and among banks in the London interbank market and on which commercial banks are open for domestic and international business in Pennsylvania and Connecticut and (b) with respect to selection of any other interest rate Option, prepayment of any part of any other Portion of any Revolving Credit Loans, determining the first or last day of any other Funding Period, and in every other context, any day other than a Saturday, Sunday or other day on which banking institutions are authorized or obligated to close in Pennsylvania and Connecticut. "Capitalized Lease" shall mean at any time any lease which is, or is required under GAAP to be, capitalized on the balance sheet of the lessee at such time, and "Capitalized Lease Obligation" of any Person at any time shall mean the aggregate amount which is, or is required under GAAP to be, reported as a liability on the balance sheet of such Person at such time as lessee under a Capitalized Lease. "CD Rate" shall have the meaning set forth in Section 2.06(a)(ii) hereof. -2- "CD Rate Funding Period" shall have the meaning set forth in Section 2.06(c) hereof. "CD Rate Option" shall have the meaning set forth in Section 2.06(a)(ii) hereof. "CD Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at any time under the CD Rate Option or at a rate calculated by reference to the CD Rate under Section 2.11(c)(i) hereof. If no Loan or Loans is specified, "CD Rate Portion" shall refer to the CD Rate Portion of all Loans outstanding at such time. "CD Rate Reserve Percentage" for any day and for any CD Rate Funding Period shall mean the percentage (expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as determined in good faith by the Agent (which determination shall be conclusive absent manifest error), which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) representing the maximum reserve requirement (including without limitation supplemental, marginal and emergency reserve requirements) for a member bank of such System in respect of nonpersonal time deposits in Dollars in the United States having a maturity comparable to such CD Rate Funding Period. "Change of Control" shall mean any Person or group of Persons (as used in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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 (the "SEC") under the Exchange Act) of 30% or more of the Borrower's outstanding Voting Stock; provided, however, that members of the Barnes family, Fleet Norstar Financial Group 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. Guaranteed Stock Plan and State Street Bank & Trust Company, in its capacity as trustee under such plan, and employees of the Borrower (except employees of the Borrower who became beneficial owners of more than 10% of the Borrower's Voting Stock prior to becoming employees of the Borrower) shall not be counted as a Person for purposes hereof. "Closing Date" shall mean the date on which the last of the conditions set forth in Section 4.01 hereof has been satisfied. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and -3- regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Commitment Fee" shall have the meaning set forth in Section 2.02(a) hereof. "Commitment Percentage" of a Lender at any time shall mean the Commitment Percentage for such Lender set forth below its name on the signature page hereof, subject to adjustment as provided in Sections 2.03 and 9.16 hereof and subject to transfer to another Lender as provided in Section 9.14 hereof. "Consolidated Current Assets" at any time shall mean the current assets of the Borrower and its consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Current Liabilities" at any time shall mean the current liabilities of the Borrower and its consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Current Ratio" at any time shall mean the ratio of the Consolidated Current Assets at such time to the Consolidated Current Liabilities at such time. "Consolidated Leverage Ratio" at any time shall mean the ratio of aggregate Indebtedness of the Borrower and its consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP to the Consolidated Net Worth at such time. "Consolidated Net Worth" at any time shall mean the total assets of the Borrower and its Subsidiaries less the liabilities of the Borrower and its Subsidiaries, each as shown on a consolidated balance sheet of the Borrower and its Subsidiaries in accordance with GAAP, plus any negative (less any positive) foreign currency translation adjustments shown in the equity section of such a consolidated balance sheet pursuant to FAS 52 plus any amount shown on such a consolidated balance sheet in the equity contra account arising from the Guaranty. "Controlled Group" shall mean with respect to any Person, all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with such Person, are treated as a single employer under Section 414(b), 414(c), 414(m) or 414(o) of the Code or Section 4001(a)(2) of ERISA. -4- "Corresponding Source of Funds" shall mean: (a) In the case of any Funding Segment of the CD Rate Portion, the proceeds of hypothetical issuances by a Lender of one or more of its certificates of deposit at the beginning of the CD Rate Funding Period corresponding to such Funding Segment, having maturities approximately equal to such CD Rate Funding Period and in an aggregate amount approximately equal to such Lender's Pro Rata share of such Funding Segment; and (b) In the case of any Funding Segment of the Euro-Rate Portion, the proceeds of hypothetical receipts by a Notional Euro-Rate Funding Office or by a Lender through a Notional Euro-Rate Funding Office of one or more Dollar deposits in the interbank eurodollar market at the beginning of the Euro-Rate Funding Period corresponding to such Funding Segment having maturities approximately equal to such Euro-Rate Funding Period and in an aggregate amount approximately equal to such Lender's Pro Rata share of such Funding Segment. "Debt Instrument" shall have the meaning set forth in Section 7.01(f) hereof. "Dollar," "Dollars" and the symbol "$" shall mean lawful money of the United States of America. "Environmental Claim" shall mean, with respect to any Person, any action, suit, proceeding, investigation, notice, claim, complaint, demand, request for information or other communication (written or oral) by any other Person (including but not limited to any Governmental Authority, citizens' group or present or former employee of such Person) alleging, asserting or claiming any actual or potential (a) violation of any Environmental Law, (b) liability under any Environmental Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Hazardous Materials at any location, whether or not owned by such Person. "Environmental Matters" means any matter arising out of, relating to, or resulting from any emissions, discharges, releases or threatened releases of Hazardous Materials into the air, surface water, groundwater, or soil, or otherwise arising out of, relating to, or resulting from the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. -5- "Environmental Permits" means all permits, licenses, authorizations, registrations and other governmental consents required by applicable Requirements of Law for the use, storage, treatment, transportation, release, emission and disposal of raw materials, by-products, wastes and other substances used or produced by or otherwise relating to the operations of the Borrower and any Subsidiary of the Borrower. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Lien" shall mean a security interest or lien arising under or in connection with a Pension Plan or Title IV of ERISA or a claim asserted (including for failure to withhold) by the government which if successful would result in such a lien; provided, however, that any claim asserted, (a) for which the Borrower has reasonable grounds to contest and (b) which the Borrower is diligently contesting in good faith through appropriate proceedings with the IRS or a court of law, shall not be deemed an ERISA Lien for so long as all of the above conditions are met. "Eurocurrency Liabilities" shall have the meaning set forth in the definition of Euro-Rate Reserve Percentage set forth in Section 1.01 hereof. "Euro-Rate" shall have the meaning set forth in Section 2.06(a)(iii) hereof. "Euro-Rate Funding Period" shall have the meaning set forth in Section 2.06(c) hereof. "Euro-Rate Option" shall have the meaning set forth in Section 2.06(a)(iii) hereof. "Euro-Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at any time under the Euro-Rate Option or at a rate calculated by reference to the Euro-Rate under Section 2.11(c)(i) hereof. If no Loan or Loans is specified, "Euro-Rate Portion" shall refer to the Euro-Rate Portion of all Loans outstanding at such time. "Euro-Rate Reserve Percentage" for any day for any Lender shall mean the percentage (expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as determined in good faith by such Lender (which determination shall be conclusive absent manifest error), which is in effect on such -6- day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) representing the maximum reserve requirement of such Lender (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities") of a member bank in such System. "Event of Default" shall mean any of the Events of Default described in Section 7.01 hereof. "Federal Funds Effective Rate" for any day shall mean the rate per annum (rounded upward to the nearest 1/100 of 1%) determined by the Agent (which determination shall be conclusive) to be the rate per annum announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight Federal funds transactions arranged by Federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the date of this Agreement; provided, that if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced. "Funding Periods" shall have the meaning set forth in Section 2.06(c) hereof. "Funding Segment" of the CD Rate Portion or the Euro-Rate Portion, as the case may be, of the Revolving Credit Loans at any time shall mean the entire principal amount of such Portion to which at the time in question there is applicable a particular Funding Period beginning on a particular day and ending on a particular day. (By definition, each such Portion is at all times composed of an integral number of discrete Funding Segments and the sum of the principal amounts of all Funding Segments of any such Portion at any time equals the principal amount of such Portion at such time.) "GAAP" shall have the meaning set forth in Section 1.03 hereof. "Governmental Action" shall have the meaning set forth in Section 3.04 hereof. "Governmental Authority" shall mean any government or political subdivision or any agency, authority, bureau, -7- central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Guarantee" shall mean the guarantee by any Person to pay or perform the obligations of any other Person, including any agreement, whether such agreement is on a contingency basis or otherwise, to purchase, repurchase or otherwise acquire Indebtedness of any other Person, or to purchase, sell or lease, as lessee or lessor, property or services, in any such case primarily for the purpose of enabling another Person to make payment of Indebtedness. "Guaranty" shall mean the Guaranty Agreement, effective as of July 28, 1989, from the Borrower to The Connecticut National Bank and National Bank of Detroit (now known as NBD Bank, N.A.). "Hazardous Materials" means any pollutants, contaminants, hazardous or toxic substances, materials or wastes (including petroleum, petroleum by-products, PCBs, and friable asbestos) as those concepts are used in the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Toxic Substance Control Act (TSCA), the Clean Air Act, the Clean Water Act, and other similar federal or state statutes or regulations. "Indebtedness" of a Person shall mean with respect to such Person, without duplication, (a) all debt 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 the Borrower or any Subsidiary or acquired by the Borrower or any Subsidiary subject thereto, whether or not the Indebtedness secured thereby shall have been assumed; (c) all Guarantees, endorsements and other contingent obligations, in respect of Indebtedness of others, including (x) any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase Indebtedness, or to assure 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 and (y) any obligation of any partnership in which the Borrower or any Subsidiary is a general partner; and (d) the obligations to reimburse the issuer in respect of any letters of credit. Indebtedness shall not include the Indebtedness of (i) a Subsidiary of the Borrower to the Borrower or to another Subsidiary of the Borrower, or (ii) the Borrower to a Subsidiary of the Borrower; provided, however, that in the case of debt of a Subsidiary not wholly owned by the Borrower -8- and/or another Subsidiary, Indebtedness shall include a percentage of such Indebtedness equal to the percentage of the total minority ownership. "Indemnified Parties" shall mean the Agent, the Lenders, their respective affiliates, and the directors, officers, employees, attorneys and agents of each of the foregoing. "Initial Revolving Credit Committed Amount" shall have the meaning set forth in Section 2.01(a) hereof. "Investment" by any Person in any other Person shall mean: (a) the amount paid, or the value of property or services contributed, by such Person for or in connection with the acquisition by such Person of any stock, bonds, notes, debentures, option contracts, investment contracts, partnership or other ownership interests or other securities of any other Person; (b) the amount of any advance, loan or extension of credit to any other Person by such Person; and (c) the amount of any Indebtedness of any other Person which such Person has guaranteed and which by its terms or as a consequence of any default thereunder such Indebtedness has or may, at the option of the holder thereof, become due and payable by acceleration or otherwise. "IRS" shall mean the Internal Revenue Service. "Law" shall mean any constitution, statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "Lender" shall mean any of the Lenders listed on the signature pages hereof, subject to the provisions of Section 9.14 hereof pertaining to Persons becoming or ceasing to be Lenders. "Lien" shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Loan" shall mean any loan or advance by a Lender under this Agreement, and "Loans" shall mean all loans and advances made by the Lenders under this Agreement. -9- "Loan Documents" shall mean this Agreement, the Notes and the Transfer Supplements, and all other agreements and instruments extending, renewing, refinancing or refunding any indebtedness, obligation or liability arising under any of the foregoing, and any certificate or instrument delivered by the Borrower in connection herewith or therewith, in each case as the same may be amended, modified or supplemented from time to time hereafter. "Material Adverse Effect" shall mean a material adverse effect on the long-term financial condition or prospects of the Borrower and its Subsidiaries taken as a whole or on the ability of the Borrower to perform its obligations under this Agreement or the Notes. "Nonextending Lender" shall have the meaning set forth in Section 2.03 hereof. "Note" or "Notes" shall mean the Revolving Credit Note(s) of the Borrower executed and delivered under this Agreement, together with all extensions, renewals, refinancings or refundings of any thereof in whole or part. "Notional Euro-Rate Funding Office" shall have the meaning given to that term in Section 2.15(a) hereof. "Obligations" shall mean all indebtedness, obligations and liabilities of the Borrower to any Lender or the Agent from time to time arising under or in connection with or related to or evidenced by or secured by this Agreement or any other Loan Document, and all extensions, renewals or refinancings thereof, whether such indebtedness, obligations or liabilities are direct or indirect, otherwise secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising. Without limitation of the foregoing, such indebtedness, obligations and liabilities include the principal amount of Loans, interest, fees, indemnities or expenses under or in connection with this Agreement or any other Loan Document, and all extensions, renewals and refinancings thereof, whether or not such Loans were made in compliance with the terms and conditions of this Agreement or in excess of the obligation of the Lenders to lend. Obligations shall remain Obligations notwithstanding any assignment or transfer or any subsequent assignment or transfer of any of the Obligations or any interest therein. "Office" shall mean the Agent's office located at One Mellon Bank Center, Pittsburgh, Pennsylvania 15258, or at such other office or offices of the Agent or any branch, subsidiary or affiliate thereof as may be designated in writing from time to time by the Agent to the Borrower. -10- "Option" shall mean the Base Rate Option, the CD Rate Option or the Euro-Rate Option, as the case may be. "Participants" shall have the meaning set forth in Section 9.14(b) hereof. "PBGC" means the Pension Benefit Guaranty Corporation established under Title IV of ERISA or any other governmental agency, department or instrumentality succeeding to the functions of said corporation. "Pension Plan" shall mean a single employer plan as defined in Section 4001(a)(15) of ERISA or an individual account plan which is subject to the funding standards of Section 302 of ERISA with respect to which the Borrower, any of its Subsidiaries, or members of their respective Controlled Groups, at any relevant time have some liability or obligation to contribute or pay benefits and which relates to current or former employees of the Borrower, any of its Subsidiaries or any member of their respective Controlled Groups. "Person" shall mean an individual, corporation, partnership, trust, unincorporated association, joint venture, joint-stock company, Governmental Authority or any other entity. "Portion" shall mean the Base Rate Portion, the CD Rate Portion or the Euro-Rate Portion, as the case may be. "Potential Default" shall mean any event or condition which with notice or passage of time, or any combination of the foregoing, would constitute an Event of Default. "Prime Rate" as used herein, shall mean the interest rate per annum announced from time to time by Mellon Bank, N.A. as its prime rate. "Pro Rata" shall mean to or from each Lender in proportion to such Lender's Commitment Percentage. "Purchasing Lender" shall have the meaning set forth in Section 9.14(c) hereof. "Reference Banks" shall mean, collectively, Mellon Bank, N.A. and NBD Bank, N.A. "Register" shall have the meaning set forth in Section 9.14(d) hereof. "Regular Payment Date" shall mean the last Business Day of each March, June, September and December after the date hereof. -11- "Relevant Date" shall have the meaning set forth in Section 1.03 hereof. "Replacement Lender" shall have the meaning set forth in Section 2.03 hereof. "Reportable Event" means an event described in Section 4043 of ERISA or in the regulations thereunder with respect to which the 30-day notice is not waived or an event described in Section 4043 or in the regulations thereunder with respect to which the 30-day notice has been waived and which involves a liability of $1,000,000 or more or a material plan or a receipt of a notice of withdrawal liabilities pursuant to Section 4202 of ERISA. For purposes of this definition a material plan is a plan in which benefit liabilities exceed assets on a termination basis based on PBGC assumptions by $1,000,000. "Required Lenders" shall mean, as of any date, Lenders holding in the aggregate 61% of the aggregate Revolving Credit Committed Amounts of all Lenders. "Requirements of Law" means all applicable federal, state, and local laws, statutes, rules, regulations, codes, ordinances, orders, decrees, directives, permits, licenses and judgments relating to Environmental Matters in effect as of the date of this Agreement. "Responsible Officer" of the Borrower shall mean any of the following: the President, the senior officer of each of the Borrower's three operating groups, the Treasurer, the Chief Financial Officer or the General Counsel. "Revolving Credit Commitment" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Committed Amount" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Loans" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Maturity Date" shall mean December 6, 1995, as such date may be extended pursuant to Section 2.03 hereof. "Revolving Credit Note" shall mean the promissory note of the Borrower executed and delivered under Section 2.01(c) hereof, any promissory note issued in substitution therefor pursuant to Sections 2.15(b) or 9.14(c) hereof, together with all extensions, renewals, refinancings or refundings thereof in whole or part. -12- "Senior Notes" shall mean the Borrower's 9.47% Senior Notes due 2001 in the original aggregate principal amount of $40,000,000. "Significant Subsidiary" shall mean each Subsidiary of the Borrower which in the most recent fiscal year of the Borrower accounted for more than 10% of the consolidated assets of the Borrower and its Subsidiaries for each of the most recent three fiscal years of the Borrower; 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 10% of the consolidated assets of the Borrower and its Subsidiaries in such fiscal year, it shall be deemed to be a Significant Subsidiary for such fiscal year. "Standard Notice" shall mean an irrevocable notice provided to the Agent on a Business Day which is (a) On the same Business Day in the case of selection of, conversion to or renewal of the Base Rate Option or prepayment of any Base Rate Portion; (b) At least one Business Day in advance in the case of selection of, conversion to or renewal of the CD Rate Option or prepayment of any CD Rate Portion; and (c) At least three Business Days in advance in the case of selection of, conversion to or renewal of the Euro-Rate Option or prepayment of any Euro-Rate Portion. Standard Notice must be provided no later than 10:00 a.m., Pittsburgh time, on the last day permitted for such notice. The Agent shall promptly forward to the Lenders copies of all Standard Notices received from the Borrower. "Stock Payment" by any Person shall mean any dividend, distribution or payment of any nature (whether in cash, securities, or other property) on account of or in respect of any shares of the capital stock (or warrants, options or rights therefor) of such Person, including but not limited to any payment on account of the purchase, redemption, retirement, defeasance or acquisition of any shares of the capital stock (or warrants, options or rights therefor) of such Person, in each case regardless of whether required by the terms of such capital stock (or warrants, options or rights) or any other agreement or instrument. "Subsidiary" of a Person at any time shall mean any corporation, association or other business entity of which more than 50% of the outstanding stock having by its terms ordinary voting power to elect a majority of the board of -13- directors of such corporation, association or other business entity (irrespective of whether at such time stock of any other class or classes of such corporation, association or other business entity shall have or might have voting power by reason of the happening of any contingency) is at such time owned directly or indirectly by such Person. "Taxes" shall have the meaning set forth in Section 2.14 hereof. "Transfer Effective Date" shall have the meaning set forth in the applicable Transfer Supplement. "Transfer Supplement" shall have the meaning set forth in Section 9.14(c) hereof. "Voting Stock" shall mean, with respect to any corporation, the capital stock of such corporation having the power to vote for a majority of the board of directors of such corporation under ordinary circumstances. 1.02. Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the plural and the part the whole; "or" has the inclusive meaning represented by the phrase "and/or"; and "property" includes all properties and assets of any kind or nature, tangible or intangible, real, personal or mixed. References in this Agreement to "determination" (and similar terms) by the Agent or by any Lender include reasonable and good faith estimates by the Agent or by such Lender (in the case of quantitative determinations) and good faith beliefs by the Agent or by such Lender (in the case of qualitative determinations). The words "hereof," "herein," "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. The section and other headings contained in this Agreement and the Table of Contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection and exhibit references are to this Agreement unless otherwise specified. 1.03. Accounting Principles. As used herein, "GAAP" shall mean generally accepted accounting principles as such principles shall be in effect at the Relevant Date; provided, however, that such principles shall be applied without giving effect to FAS 106. As used herein, "Relevant Date" shall mean the date a relevant computation or determination is to be made or the date of relevant financial statements, as the case may be. -14- ARTICLE II THE CREDITS 2.01. Revolving Credit Loans. (a) Revolving Credit Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender, severally and not jointly, agrees (such agreement being herein called such Lender's "Revolving Credit Commitment") to make loans (the "Revolving Credit Loans") to the Borrower from time to time on or after the date hereof and to but not including the Revolving Credit Maturity Date. A Lender shall have no obligation to make any Revolving Credit Loan to the extent that the aggregate principal amount of such Lender's Revolving Credit Loans at any time would exceed such Lender's Revolving Credit Committed Amount at such time. Each Lender's "Revolving Credit Committed Amount" at any time shall be equal to the amount set forth as its "Initial Revolving Credit Committed Amount" below its name on the signature pages hereof, as such amount may have been reduced pursuant to Section 2.02(d) hereof at such time, and subject to transfer to another Lender as provided in Section 9.14 hereof. The sum of the Revolving Credit Committed Amounts of the Lenders shall not exceed $100,000,000 at any time. (b) Nature of Credit. Within the limits of time and amount set forth in this Section 2.01, and subject to the provisions of this Agreement, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder. (c) Revolving Credit Notes. The obligation of the Borrower to repay the unpaid principal amount of the Revolving Credit Loans made to it by each Lender and to pay interest thereon shall be evidenced in part by promissory notes of the Borrower, one to each Lender, dated the Closing Date (the "Revolving Credit Notes") in substantially the form attached hereto as Exhibit A, with the blanks appropriately filled, payable to the order of such Lender in a face amount equal to such Lender's Initial Revolving Credit Committed Amount. (d) Maturity. To the extent not due and payable earlier, the Revolving Credit Loans shall be due and payable on the Revolving Credit Maturity Date. 2.02. Fees; Reduction of the Committed Amounts. (a) Commitment Fee. The Borrower shall pay to the Agent for the account of each Lender a commitment fee (the "Commitment Fee") equal to 0.250% per annum (based on a year of 365 or 366 days and actual days elapsed), for each day from and including the Closing Date and to but not including the Revolving Credit Maturity Date, of the amount (not less than zero) equal to (i) such Lender's Revolving Credit Committed Amount on such day, minus (ii) such Lender's Revolving Credit Loans outstanding on -15- such day. Such Commitment Fee shall be due and payable for the preceding period for which such fee has not been paid (x) on each Regular Payment Date and (y) on the Revolving Credit Maturity Date. The Commitment Fee shall be increased to 0.375% for each day on which the aggregate Revolving Credit Loans of all Lenders outstanding exceeds 75% of the aggregate Revolving Credit Commitments of all Lenders. (b) Closing Fee. On the Closing Date, the Borrower shall pay to the Agent for the account of each Lender a closing fee equal to 0.05% of such Lender's Revolving Credit Committed Amount. (c) Other Fees. The Borrower shall pay to the Agent an agency fee and other fees at the times and in the amounts previously agreed upon among the Agent and the Borrower. (d) Optional Reduction of the Revolving Credit Committed Amounts. The Borrower may at any time or from time to time reduce Pro Rata the Revolving Credit Committed Amounts of the Lenders to an aggregate amount (which may be zero) not less than the sum of the outstanding Revolving Credit Loans plus the principal amount of Revolving Credit Loans not yet outstanding as to which notice has been given by Borrower under Section 2.05 hereof. Any reduction of the Revolving Credit Committed Amounts shall be in an aggregate amount not less than $5,000,000 which is an integral multiple of $1,000,000. Reduction of the Revolving Credit Committed Amounts shall be made by providing not less than 10 days notice (which notice shall be irrevocable) to such effect to the Agent. 2.03. Extension of Revolving Credit Maturity Date. On and after the first Anniversary Date hereof, the Revolving Credit Maturity Date may be extended for successive one year periods at the request of the Borrower with the express consent of each Lender as provided below. Not later than the date 60 days prior to each Anniversary Date, the Borrower shall, at its option, in a written notice to the Agent request (an "Extension Request") that the Revolving Credit Maturity Date be extended for a period of one year. The Agent shall promptly inform the Lenders of such Extension Request. Each Lender that agrees with such Extension Request shall deliver to the Agent its express written consent thereto no later than such Anniversary Date. If (i) any Lender notifies the Agent in writing prior to such Anniversary Date that it will not consent to such Extension Request or (ii) all of the Lenders have not in writing expressly consented to any such Extension Request as provided in the preceding sentence, then the Agent shall so notify the Borrower and the Borrower, at its option, may replace each Lender which has not agreed to such Extension Request (a "Nonextending Lender") with another commercial lending institution (a "Replacement Lender") by giving (not later than 90 days after such Anniversary Date) notice of the name of such Replacement Lender to the Agent. Upon notice from -16- the Agent, each Nonextending Lender shall promptly (but in no event later than the date which is 120 days after such Anniversary Date) assign all of its interests hereunder to such Replacement Lender in accordance with the provisions of Section 9.14(c) hereof. If, prior to the date which is 120 days after such Anniversary Date some, but not all, of the Lenders have agreed to such Extension Request, and each Nonextending Lender has not been replaced by the Borrower in accordance with the terms of this Section 2.03, the Revolving Credit Maturity Date shall be extended in accordance with such Extension Request; provided, however, that on the original Revolving Credit Maturity Date (as such date may have been previously extended), the Borrower shall pay to the Agent for the account of such Nonextending Lender such Nonextending Lender's Pro Rata share of all outstanding Revolving Credit Loans, together with interest thereon, and all fees due and payable to such Nonextending Lender and the total Revolving Credit Commitment shall be irrevocably reduced by an amount equal to the Commitment of each Nonextending Lender. If all Lenders consent to any such Extension Request (or, if any Nonextending Lenders are replaced in accordance with this Section), then as of 5:00 p.m. Pittsburgh time on the date which is 120 days after such Anniversary Date the Revolving Credit Maturity Date shall be deemed to have been extended for, and shall be the date, one year after the then effective Revolving Credit Maturity Date. 2.04. Maximum Aggregate Amount of Revolving Credit Loans. No Loan shall be made or requested or permitted to remain outstanding hereunder if the making or maintenance of such Loan would cause the aggregate amount of all Revolving Credit Loans outstanding hereunder to exceed the sum of the aggregate Revolving Credit Committed Amounts of all Lenders. 2.05. Making of Loans. Whenever the Borrower desires that the Lenders make Revolving Credit Loans, the Borrower shall provide Standard Notice to the Agent setting forth the following information (a separate notice being required for each such type of Loans): (a) The date, which shall be a Business Day, on which such proposed Loans are to be made; (b) The aggregate principal amount of such proposed Loans, which shall be the sum of the principal amounts selected pursuant to clause (c) of this Section 2.05, and which shall be an integral multiple of $1,000,000 not less than $5,000,000; (c) The interest rate Option or Options selected in accordance with Section 2.06(a) hereof and the principal amounts selected in accordance with Section 2.06(d) hereof of the Base Rate Portion and each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, of such proposed Loans; and -17- (d) With respect to each such Funding Segment of such proposed Loans, the Funding Period to apply to such Funding Segment, selected in accordance with Section 2.06(c) hereof. Standard Notice having been so provided, the Agent shall promptly notify each Lender of the information contained therein and of the amount of such Lender's Loan. Unless any applicable condition specified in Article IV hereof has not been satisfied, on the date specified in such Standard Notice each Lender shall make the proceeds of its Loan available to the Agent at the Agent's Office, no later than 12:00 o'clock Noon, Pittsburgh time, in funds immediately available at such Office. 2.06. Interest Rates. (a) Optional Bases of Borrowing. The unpaid principal amount of the Revolving Credit Loans shall bear interest for each day from and including the date on which funds are made available to the Borrower by the Agent and to but excluding the date of repayment on one or more bases selected by the Borrower from among the interest rate Options set forth below. Subject to the provisions of this Agreement the Borrower may select different Options to apply simultaneously to different Portions of the Loans and may select different Funding Segments to apply simultaneously to different parts of the CD Rate Portion or the Euro-Rate Portion of the Loans. Each selection of a rate Option shall apply separately and without overlap to the Revolving Credit Loans as a class. The aggregate number of Funding Segments applicable to the CD Rate Portion and the Euro-Rate Portion of the Revolving Credit Loans at any time shall not exceed six unless otherwise permitted by the Agent. (i) Base Rate Option: A rate per annum (computed on the basis of a year of 365 or 366 days and actual days elapsed) for each day equal to the Base Rate for such day plus the Applicable Margin for such day. The "Base Rate" for any day shall mean the greater of (A) the Prime Rate for such day or (B) 0.50% plus the Federal Funds Effective Rate for such day, such interest rate to change automatically from time to time effective as of the effective date of each change in the Prime Rate or the Federal Funds Effective Rate. (ii) CD Rate Option: A rate per annum (based on a year of 360 days and actual days elapsed) for each day equal to the CD Rate for such day plus the Applicable Margin for such day. "CD Rate" for any day shall mean for each Funding Segment of the CD Rate Portion corresponding to a proposed or existing CD Rate Funding Period the rate per annum determined by the Agent by adding (A) the rate per annum (which shall be the same for each day in such CD Rate Funding Period) determined -18- in good faith by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the arithmetic average of the rates offered to the Reference Banks at or about 11:00 a.m., Eastern time, on the first day of such CD Rate Funding Period by dealers of recognized standing in negotiable certificates of deposit for the purchase at face value of negotiable certificates of deposit of major money center banks for delivery on such day in amounts comparable to such Funding Segment and having maturities comparable to such CD Rate Funding Period plus (B) the Assessment Rate. "Assessment Rate" for any day shall mean the rate per annum (rounded upward to the nearest 1/100 of 1%) determined in good faith by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the maximum effective rate per annum payable by a depository institution insured by the Federal Deposit Insurance Corporation (or any successor) for such day as an assessment for insurance on Dollar time deposits, exclusive of any credit that is or may be allowed against such assessment on account of assessment payments made or to be made by such depository institution. The CD Rate shall be adjusted automatically as of the effective date of each change in the Assessment Rate. The CD Rate Option shall be calculated in accordance with the foregoing if any Lender is actually required to pay FDIC assessments or, if required to pay such assessments, is required to pay such assessments at the "Assessment Rate" as herein defined. The Agent shall give prompt notice to the Borrower and to the Lenders of the CD Rate determined or adjusted in accordance with the definition of CD Rate, which determination or adjustment shall be conclusive if made in good faith. (iii) Euro-Rate Option: A rate per annum (based on a year of 360 days and actual days elapsed) for each day equal to the Euro-Rate for such day plus, in each case, the Applicable Margin for such day. "Euro-Rate" for any day, as used herein, shall mean for each Funding Segment of the Euro-Rate Portion corresponding to a proposed or existing Euro-Rate Funding Period the rate per annum determined by the Agent to be the rate of interest (which shall be the same for each day in such Euro-Rate Funding Period) determined in good faith by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the average of the rates per annum for deposits in Dollars offered to the Reference Banks in the London interbank market at approximately 11:00 a.m., London time, -19- two Business Days prior to the first day of such Euro-Rate Funding Period for delivery on the first day of such Euro-Rate Funding Period in amounts comparable to such Funding Segment and having maturities comparable to such Funding Period. The Agent shall give prompt notice to the Borrower and to the Lenders of the Euro-Rate determined in accordance with the definition of the Euro-Rate, which determination shall be conclusive if made in good faith. (b) Applicable Margins. The "Applicable Margin" and interest rate Option for any day shall mean the percentage set forth below:
Interest Rate Option Applicable Margin -------------------- ----------------- Base Rate Option 0.000% CD Rate Option 0.625% Euro-Rate Option 0.500%
provided, however, that the Applicable Margin for each day on which the Borrower's Consolidated Leverage Ratio is equal to or greater than 1.45:1 (but less than or equal to 1.55:1) shall mean the percentage set forth below:
Interest Rate Option Applicable Margin -------------------- ----------------- Base Rate Option 0.125% CD Rate Option 0.750% Euro-Rate Option 0.625%
(c) Funding Periods. At any time when the Borrower shall select, convert to or renew the CD Rate Option or the Euro-Rate Option to apply to any part of the Loans, the Borrower shall specify one or more periods (the "Funding Periods") during which each such Option shall apply, such Funding Periods being as set forth below: Interest Rate Option Available Funding Periods - -------------------- ------------------------- CD Rate Option 30, 60, 90 or 180 days or such longer period as may be offered by all of the Lenders ("CD Rate Funding Period"); and Euro-Rate Option One, two, three or six months or such longer period as may be offered by all of the Lenders ("Euro-Rate Funding Period"); -20- provided, that: (i) Each CD Rate Funding Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day; (ii) Each Euro-Rate Funding Period shall begin on a Business Day, and the term "month", when used in connection with a Euro-Rate Funding Period, shall be construed in accordance with prevailing practices in the interbank eurodollar market at the commencement of such Euro-Rate Funding Period, as determined in good faith by the Agent (which determination shall be conclusive); (iii) The Borrower may not select a Funding Period that would end after the Revolving Credit Maturity Date; and (iv) The Borrower shall, in selecting any Funding Period, allow for scheduled mandatory payments of the Loans. (d) Transactional Amounts. Every selection of, conversion from, conversion to or renewal of an interest rate Option and every payment or prepayment of any Loans shall be in a principal amount such that after giving effect thereto the aggregate principal amount of the Base Rate Portion of the Revolving Credit Loans shall be $1,000,000 and integral multiples thereof, and the aggregate principal amount of each Funding Segment of the CD Rate Portion or the Euro-Rate Portion of the Revolving Credit Loans shall be $5,000,000 and integral multiples of $1,000,000 thereof. (e) CD Rate or Euro-Rate Unascertainable; Impracticability. If (i) on any date on which a CD Rate or a Euro-Rate would otherwise be set the Agent (in the case of clauses (A) or (B) below) shall have determined in good faith (which determination shall be conclusive absent manifest error) that: (A) adequate and reasonable means do not exist for ascertaining such CD Rate or Euro-Rate, or (B) a contingency has occurred which materially and adversely affects the secondary market for negotiable certificates of deposit maintained by dealers of recognized standing or the interbank eurodollar market, as the case may be, or (ii) at any time any Lender shall have determined in good faith (which determination shall be conclusive absent manifest error) that the making, maintenance or funding of any part of the CD Rate Portion or the Euro-Rate Portion has -21- been made impracticable or unlawful by compliance by such Lender or a Notional Euro-Rate Funding Office in good faith with any Law or guideline or interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or with any request or directive of any such Governmental Authority (whether or not having the force of law); then, and in any such event, the Agent or such Lender, as the case may be, may notify the Borrower of such determination (and any Lender giving such notice shall notify the Agent). Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of each of the Lenders to allow the Borrower to select, convert to or renew the CD Rate Option or Euro-Rate Option, as the case may be, shall be suspended until the Agent or such Lender, as the case may be, shall have later notified the Borrower (and any Lender giving such notice shall notify the Agent) of the Agent's or such Lender's determination in good faith (which determination shall be conclusive absent manifest error) that the circumstance giving rise to such previous determination no longer exist. If any Lender notifies the Borrower of a determination under subsection (ii) of this Section 2.06(e), the CD Rate Portion or the Euro-Rate Portion, as the case may be, of the Loans of such Lender (the "Affected Lender") shall, subject to Section 2.12(b) hereof, automatically be converted to the Base Rate Option as of the last day of the then current Funding Period with respect to such Loans (in the case of a determination that the making, maintenance or funding of any CD Rate Portion or Euro-Rate Portion of such Loans is impracticable) and the last day on which the making, maintenance or funding of any CD Rate Portion or Euro-Rate Portion of such Loans is not unlawful (in the case of a determination that the making, maintenance or funding of any CD Rate Portion or Euro-Rate Portion of such Loans is unlawful) and accrued interest thereon shall be due and payable on such date. If at the time the Agent or a Lender makes a determination under subsection (i) or (ii) of this Section 2.06(e), the Borrower previously has notified the Agent that it wishes to select, convert to or renew the CD Rate Option or the Euro-Rate Option, as the case may be, with respect to any proposed Loans but such Loans have not yet been made, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option instead of the CD Rate Option or the Euro-Rate Option, as the case may be, with respect to such Loans or, in the case of a determination by a Lender, such Loans of such Lender. 2.07. Conversion or Renewal of Interest Rate Options. (a) Conversion or Renewal. Subject to the provisions of Section 2.12(b) hereof, so long as no Event of Default or -22- Potential Default shall have occurred or be continuing hereunder, the Borrower may convert any part of its Loans from any interest rate Option or Options to one or more different interest rate Options and may renew the CD Rate Option or the Euro-Rate Option as to any Funding Segment of the CD Rate Portion or the Euro-Rate Portion: (i) At any time with respect to conversion from the Base Rate Option; or (ii) At the expiration of any Funding Period with respect to conversions from or renewals of the CD Rate Option or the Euro-Rate Option, as the case may be, as to the Funding Segment corresponding to such expiring Funding Period. Whenever the Borrower desires to convert or renew any interest rate Option or Options, the Borrower shall provide to the Agent Standard Notice setting forth the following information: (w) The date, which shall be a Business Day, on which the proposed conversion or renewal is to be made; (x) The principal amounts selected in accordance with Section 2.06(d) hereof of the Base Rate Portion and each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, to be converted from or renewed; (y) The interest rate Option or Options selected in accordance with Section 2.06(a) hereof and the principal amounts selected in accordance with Section 2.06(d) hereof of the Base Rate Portion and each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, to be converted to; and (z) With respect to each Funding Segment to be converted to or renewed, the Funding Period selected in accordance with Section 2.06(c) hereof to apply to such Funding Segment. Standard Notice having been so provided, on and after the date specified in such Standard Notice, interest shall be calculated upon the principal amount of the Loans as so converted or renewed. Interest on the principal amount of any part of the Loans converted or renewed (automatically or otherwise) shall be due and payable on the conversion or renewal date. (b) Failure to Convert or Renew. Absent payment of a Loan or due notice from the Borrower of conversion or renewal in the circumstances described in Section 2.07(a)(ii) hereof, any part of the CD Rate Portion or Euro-Rate Portion for which such notice is not received shall be converted automatically to the Base Rate Option on the last day of the expiring Funding Period. -23- 2.08. Prepayments Generally. Whenever the Borrower desires or is required to prepay any part of its Loans, it shall provide Standard Notice to the Agent setting forth the following information: (a) The date, which shall be a Business Day, on which the proposed prepayment is to be made; (b) The total principal amount of such prepayment, which shall be the sum of the principal amounts selected pursuant to clause (c) of this Section 2.08; and (c) The principal amounts selected in accordance with Section 2.06(d) hereof of the Base Rate Portion and each part of each Funding Segment of the CD Rate Portion and the Euro-Rate Portion, as the case may be, to be prepaid. Standard Notice having been so provided, on the date specified in such Standard Notice, the principal amounts of the Base Rate Portion and each part of the CD Rate Portion and the Euro-Rate Portion specified in such notice, together with interest on each such principal amount to such date, shall be due and payable. 2.09. Prepayments. (a) The Borrower shall have the right at its option from time to time to prepay its Revolving Credit Loans in whole or part without premium or penalty (subject, however, in the case of clause (iii) below, to Section 2.12(b) hereof): (i) At any time (other than a time when Standard Notice requesting the making of Revolving Credit Loans bearing interest under the Euro-Rate Option has been given by the Borrower but such Loans have not yet been made) with respect to any part of the Base Rate Portion; (ii) At the expiration of any Funding Period with respect to prepayment of the CD Rate Portion or the Euro-Rate Portion, as the case may be, with respect to any part of the Funding Segment corresponding to such expiring Funding Period; or (iii) Prior to the expiration of any Funding Period with respect to prepayment of the CD Rate Portion or the Euro-Rate Portion, as the case may be, with respect to any part of the Funding Segment corresponding to such expiring Funding Period, upon payment of the indemnity payment set forth in Section 2.12(b) hereof. (b) All prepayments shall be made in accordance with Section 2.08 hereof. -24- 2.10. Interest Payment Dates. Interest on the Base Rate Portion shall be due and payable on the date of any conversion of all or part of the Base Rate Portion to a different interest rate Option, any prepayment of any part of the Base Rate Portion on the amount prepaid, and on each Regular Payment Date. Interest on each Funding Segment of the CD Rate Portion shall be due and payable on the last day of the corresponding CD Rate Funding Period and, if such CD Rate Funding Period is longer than 90 days, also every 90th day during such CD Rate Funding Period. Interest on each Funding Segment of the Euro-Rate Portion shall be due and payable on the last day of the corresponding Euro-Rate Funding Period and, if such Euro-Rate Funding Period is longer than three months, also on the last day of every third month during such Funding Period. After maturity of any part of the Loans (by acceleration or otherwise), interest on such part of the Loans shall be due and payable on demand. 2.11. Pro Rata Treatment; Payments Generally. (a) Pro Rata Treatment. Each borrowing of Revolving Credit Loans hereunder and each conversion and renewal of interest rate Options hereunder shall be made, and all payments made in respect of principal, interest and fees due from the Borrower hereunder or under the Notes shall be applied, Pro Rata from and to each Lender, except for payments of agency and arrangement fees pursuant to Section 2.02(c) hereof, payments of interest involving an Affected Lender as provided in Section 2.06(e) hereof and payments to a Lender subject to a withholding deduction under Section 2.14(c) hereof. The failure of any Lender to make a Revolving Credit Loan shall not relieve any other Lender of its obligation to lend hereunder, but neither the Agent nor any Lender shall be responsible for the failure of any other Lender to make a Revolving Credit Loan. (b) Payments Generally. All payments and prepayments to be made by the Borrower in respect of principal, interest, fees, indemnity, expenses or other amounts due from the Borrower to the Agent for the account of the Lenders hereunder or under any Loan Document in Dollars shall be payable at 2:00 p.m., Pittsburgh time, on the day when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature, except for payments to a Lender subject to a withholding deduction under Section 2.14(c) hereof. Except for payments under Sections 2.12 and 9.06 hereof, such payments shall be made to the Agent at its Office in Dollars in funds immediately available at such Office, and payments under Sections 2.12 and 9.06 hereof shall be made to the applicable Lender at such domestic account as it shall specify to the Borrower from time to time in funds immediately available at such account. Any payment or prepayment received by the Agent or such Lender after 2:00 p.m., Pittsburgh time, on any day shall be deemed to have been received on the next -25- succeeding Business Day. The Agent shall distribute to the Lenders all such payments received by it from the Borrower as promptly as practicable after receipt by the Agent. (c) Interest on Overdue Amounts. To the extent permitted by law, after there shall have become due (by acceleration or otherwise) principal, interest, fees, indemnity, expenses or any other amounts due from the Borrower hereunder or under any other Loan Document, such amounts shall bear interest for each day until paid (before and after judgment), payable on demand, at a rate per annum based on a year of 365 or 366 days, as the case may be, and actual days elapsed (in the case of any Portion of Loans bearing interest at the Base Rate Option) and 360 days and actual days elapsed (in the case of any Portion of Loans bearing interest at the CD Rate Option or the Euro-Rate Option) which for each day shall be equal to the following: (i) In the case of any part of the CD Rate Portion or Euro-Rate Portion of any Loans, (A) until the end of the applicable then-current Funding Period at a rate per annum 200 basis points above the rate otherwise applicable to such part, and (B) thereafter in accordance with the following clause (ii); and (ii) In the case of any other amount due from the Borrower hereunder or under any Loan Document, 200 basis points above the then current Base Rate. 2.12. Additional Compensation in Certain Circumstances. (a) Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc. If any Law or change therein or guideline or interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance with any request or directive of any Governmental Authority (whether or not having the force of law) adopted or made after the date hereof: (i) subjects any Lender or any Notional Euro-Rate Funding Office to any tax or changes the basis of taxation with respect to this Agreement, the Notes, the Loans or payments by the Borrower of principal, interest, commitment fee or other amounts due from the Borrower hereunder or under the Notes (except for taxes on the overall net income or overall gross receipts of such Lender or such Notional Euro-Rate Funding Office imposed by the jurisdictions (federal, state and local) in which the Lender's principal office or Notional Euro-Rate Funding Office is located), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, assets (funded or contingent) of, deposits with or for the account of, other -26- acquisitions of funds by, such Lender or any Notional Euro-Rate Funding Office (other than requirements expressly included herein in the determination of the CD Rate, the Euro-Rate, or the determination of additional interest pursuant to Section 2.12(c) hereof, as the case may be, hereunder), (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement (A) against assets (funded or contingent) of, or credits or commitments to extend credit extended by, any Lender or any Notional Euro-Rate Funding Office, or (B) otherwise applicable to the obligations of any Lender or any Notional Euro-Rate Funding Office under this Agreement, or (iv) imposes upon any Lender or any Notional Euro-Rate Funding Office any other condition or expense directly related to this Agreement, the Notes or its making, maintenance or funding of any Loan and the result of any of the foregoing is determined by any Lender to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon such Lender, any Notional Euro-Rate Funding Office or, in the case of clause (iii) hereof, any Person controlling a Lender, with respect to this Agreement, the Notes or the making, maintenance or funding of any Loan (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on such Lender's or controlling Person's capital, taking into consideration such Lender's or controlling Person's policies with respect to capital adequacy) by an amount which such Lender deems to be material (such Lender being deemed for this purpose to have made, maintained or funded each Funding Segment of the CD Rate Portion and the Euro-Rate Portion from a Corresponding Source of Funds), such Lender may from time to time promptly notify the Borrower of the amount determined in good faith (using any averaging and attribution methods) by such Lender (which determination shall be conclusive absent manifest error) to be necessary to compensate such Lender or such Notional Euro-Rate Funding Office for such increase, reduction or imposition. Each Lender will notify the Borrower and the Agent of any event occurring after the date of this Agreement which will entitle such Lender to compensation pursuant to this Section 2.12 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. Each Lender will furnish the Borrower and Agent with a statement setting forth in reasonable detail the basis, the manner of calculation and the amount of each request by such Lender for compensation from the Borrower under this Section 2.12. Such amount shall be due and payable by the Borrower to such Lender 20 days after such notice is given. -27- (b) Funding Breakage. In addition to the compensation required under Section 2.12(a) hereof, the Borrower shall indemnify each Lender against any loss or expense (including loss of margin) which such Lender has incurred as a consequence of: (i) any payment, prepayment or conversion of any part of any Funding Segment of any CD Rate Portion or Euro-Rate Portion of the Loans on a day other than the last day of the corresponding Funding Period (whether or not such payment, prepayment or conversion is mandatory or automatic and whether or not such payment or prepayment is then due), (ii) any attempt by the Borrower to revoke (expressly, by later inconsistent notices or otherwise) in whole or in part any notice stated herein to be irrevocable (the Agent having in its sole discretion the options (A) to give effect to such attempted revocation provided that indemnity under this Section 2.12(b) is obtained or (B) to treat such attempted revocation as having no force or effect, as if never made), or (iii) any default by the Borrower in the performance or observance of any covenant or condition contained in this Agreement or the Notes, including without limitation any failure of the Borrower to pay when due (by acceleration or otherwise) any principal, interest, commitment fee, facility fee or any other amount due hereunder or under any Note. If any Lender sustains or incurs any such loss or expense it shall from time to time notify the Borrower and the Agent in writing setting forth in reasonable detail the amount determined in good faith by such Lender (which determination shall be conclusive absent manifest error) to be necessary to indemnify such Lender for such loss or expense. Such amount shall be due and payable by the Borrower to the Agent for the account of such Lender, 20 days after such notice is given. (c) Additional Interest. (i) So long as any Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including loans made with reference to the CD Rate, such Lender may require the Borrower to pay, but only in respect of any period during which such reserves shall actually be maintained by such Lender, additional interest on the unpaid principal amount of the CD Rate Portion of the Loans, at an interest rate per annum equal at all times during each CD Rate Funding Period to the difference obtained by subtracting (A) the CD Rate for such CD Rate Funding Period from (B) the rate obtained by dividing such CD Rate referred to in clause (A) above by that percentage equal to 100% minus the CD Rate Reserve Percentage of such Lender for such CD Rate Funding Period. -28- (ii) So long as any Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, such Lender may require the Borrower to pay, but only in respect of any period during which such reserves shall actually be maintained by such Lender, additional interest on the unpaid principal amount of the Euro-Rate Portion of the Loans, at an interest rate per annum equal at all times during each Euro-Rate Funding Period to the difference obtained by subtracting (A) the Euro-Rate for such Euro-Rate Funding Period from (B) the rate obtained by dividing such Euro-Rate referred to in clause (A) above by that percentage equal to 100% minus the Euro-Rate Reserve Percentage of such Lender for such Euro-Rate Funding Period. (iii) If any Lender shall claim entitlement to any additional amount pursuant to this Section 2.12(c), then such Lender shall deliver to the Borrower a certificate setting forth the basis for the determination thereof as promptly as practicable. More than one such certificate may be so delivered. Each such certificate shall be conclusive and binding for all purposes as to the amount due absent manifest error. The Borrower shall pay to such Lender the amount shown as due on any such certificate within 20 days after its receipt of the same. 2.13. HLT Classification. The Agent shall promptly give notice to the Borrower and each Lender if at any time (a) the Agent determines in its reasonable judgment (based upon any Law or guideline or interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance with any request or directive of any Governmental Authority (whether or not having the force of law), now existing or hereafter adopted), that any portion of the Loans under this Agreement should be classified as a "highly leveraged transaction" (or any similar or successor classification then in effect) (an "HLT Classification"), (b) the Agent is informed by any Governmental Authority that any portion of the Loans under this Agreement are or should be subject to HLT Classification, or (c) any Lender is informed by any Governmental Authority that any portion of the Loans under this Agreement contemplated hereby are or should be subject to HLT Classification, and such Lender in its discretion gives notice of such fact to the Agent. -29- In such event the parties hereto shall commence negotiations in good faith with a view to agreeing on revised interest rates, fees and other terms and conditions hereof, consistent with then-current market requirements for transactions subject to HLT Classification. If the parties hereto fail to agree on such matters in their respective absolute discretion within 30 days of the notice given by the Agent referred to above, then the Agent, acting at the request of the Required Lenders, may give a further notice to the Borrower, and effective as of the date of such further notice (i) each Applicable Margin set forth in Section 2.06(b) hereof shall be increased by 2.50%, and (ii) the percentage applicable to calculation of the Revolving Credit Commitment Fee in Section 2.02(a) hereof shall be increased by .250%. Except as set forth above, this Agreement shall remain in full force and effect. 2.14 Taxes. (a) Payments Net of Taxes. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, and all liabilities with respect thereto, excluding (i) in the case of the Agent and each Lender, income or franchise taxes imposed on the Agent or such Lender by the jurisdiction under the laws of which the Agent or such Lender is organized or any political subdivision or taxing authority thereof or therein or as a result of a connection between such Lender and any jurisdiction other than a connection resulting solely from this Agreement and the transactions contemplated hereby, and (ii) in the case of each Lender, income or franchise taxes imposed by any jurisdiction in which such Lender's lending offices which make or book Loans are located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld or deducted from any amounts payable to the Agent or any Lender under this Agreement or any other Loan Document, the Borrower shall pay the relevant amount of such Taxes and the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the other Loan Documents. Whenever any Taxes are paid by the Borrower with respect to payments made in connection with this Agreement, as promptly as possible -30- thereafter, the Borrower shall send to the Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. (b) Indemnity. The Borrower hereby indemnifies the Agent and each of the Lenders for the full amount of all Taxes attributable to payments by or on behalf of the Borrower hereunder or under any of the other Loan Documents, any such Taxes paid by the Agent or such Lender, as the case may be, any present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any Taxes (including any incremental Taxes, interest or penalties that may become payable by the Agent or such Lender as a result of any failure to pay such Taxes), whether or not such Taxes were correctly or legally asserted. Such indemnification shall be made within 30 days from the date such Lender or the Agent, as the case may be, makes written demand therefor. (c) Withholding and Backup Withholding. Each Lender that is incorporated or organized under the laws of any jurisdiction other than the United States or any State thereof agrees that, on or prior to the Closing Date (or, with respect to any Lender which becomes a party to this Agreement pursuant to Section 9.14 hereof, the Transfer Effective Date), it will furnish to the Borrower and the Agent (i) two valid, duly completed copies of United States Internal Revenue Service Form 4224 or United States Internal Revenue Form 1001 or successor applicable form, as the case may be, certifying in each case that such Lender is entitled to receive payments under this Agreement and the other Loan Documents without deduction or withholding of any United States federal income taxes, and (ii) a valid, duly completed Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax. Each Lender which so delivers to the Borrower and the Agent a Form 1001 or 4224 and Form W-8 or W-9 applicable forms (the "Forms") agrees to deliver to the Borrower and the Agent two further copies of the Forms, or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or otherwise is required to be resubmitted as a condition to obtaining an exemption from withholding tax, or after the occurrence of any event requiring a change in the most recent form previously delivered by it, and such extensions or renewals thereof as may reasonably be requested by the Borrower and the Agent, certifying in the case of a Form 1001 or Form 4224 that such Lender is entitled to receive payments under this Agreement or any other Loan Document without deduction or -31- withholding of any United States federal income taxes, unless in any such cases an event (including any changes in Law) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such letter or form with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. Notwithstanding anything to the contrary contained herein, the Borrower shall not be required to pay any additional amounts pursuant to this Section 2.14 or pursuant to Section 2.12 if the obligation to pay such additional amounts would not have arisen but for the failure by any Lender to comply with its obligations hereunder, or if such Lender shall have delivered the appropriate Forms and such Lender is not entitled to exemption from deduction or withholding of U.S. federal income tax in respect of payments made by the Borrower hereunder for any reason other than a change in U.S. law or regulations or in the official interpretation thereof after the date of delivery of such Forms. 2.15. Funding by Branch, Subsidiary or Affiliate. (a) Notional Funding. Each Lender shall have the right from time to time, prospectively or retrospectively, without notice to the Borrower, to deem any branch, subsidiary or affiliate of such Lender to have made, maintained or funded any part of the Euro-Rate Portion at any time. Any branch, subsidiary or affiliate so deemed shall be known as a "Notional Euro-Rate Funding Office." Such Lender shall deem any part of the Euro-Rate Portion of the Loans or the funding therefor to have been transferred to a different Notional Euro-Rate Funding Office if such transfer would avoid or cure an event or condition described in Section 2.06(e)(ii) hereof or would lessen compensation payable by the Borrower under Sections 2.12(a) or 2.14(b) hereof, and provided that such Lender determines in its sole discretion that such transfer would be practicable and would not have a material adverse effect on such part of the Loans, such Lender or any Notional Euro-Rate Funding Office (it being assumed for purposes of such determination that each part of the Euro-Rate Portion is actually made or maintained by or funded through the corresponding Notional Euro-Rate Funding Office). Notional Euro-Rate Funding Offices may be selected by such Lender without regard to such Lender's actual methods of making, maintaining or funding Loans or any sources of funding actually used by or available to such Lender. (b) Actual Funding. Each Lender shall have the right from time to time to make or maintain any part of the Euro-Rate Portion by arranging for a branch, subsidiary or affiliate of such Lender to make or maintain such part of the Euro-Rate Portion. -32- Such Lender shall have the right to (i) hold any applicable Note payable to its order for the benefit and account of such branch, subsidiary or affiliate or (ii) request the Borrower to issue one or more promissory notes in the principal amount of such Euro-Rate Portion, in substantially the form attached hereto as Exhibit A with the blanks appropriately filled, payable to such branch, subsidiary or affiliate and with appropriate changes reflecting that the holder thereof is not obligated to make any additional Loans to the Borrower. The Borrower agrees to comply promptly with any request under subsection (ii) of this Section 2.15(b). If any Lender causes a branch, subsidiary or affiliate to make or maintain any part of the Euro-Rate Portion hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such part of the Euro-Rate Portion and to any note payable to the order of such branch, subsidiary or affiliate to the same extent as if such part of the Euro-Rate Portion were made or maintained and such note were a Revolving Credit Note payable to such Lender's order. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower hereby represents and warrants to the Agent and each Lender as follows: 3.01. Corporate Status. The Borrower and each Subsidiary thereof (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has corporate power and authority to own its property and to transact the business in which it is engaged or presently proposes to engage; and (c) is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary, except for matters that, individually or in the aggregate, could not have a Material Adverse Effect. Schedule 3.01 hereof states as of the date hereof the jurisdiction of incorporation of the Borrower and each Subsidiary. 3.02. Corporate Power and Authorization. The Borrower has the corporate power to execute, deliver and perform the Loan Documents to be executed by it, has the power to borrow hereunder and has taken all necessary corporate action and obtained all necessary consents and approvals to authorize the borrowings hereunder on the terms and conditions of this Agreement, has taken all necessary action, corporate or otherwise, to authorize the execution, delivery and performance of this Agreement and the other Loan Documents to be executed by it. No consent or approval of stockholders of the Borrower generally, no consent or approval of any landlord or mortgagee, and no waiver of any Lien of right or distraint or other similar right, is or will be required in -33- connection with the execution, delivery or performance by it, or the validity, enforcement or priority, of the Loan Documents to be executed by it. 3.03. Execution and Bindinq Effect. This Agreement and each other Loan Document to which the Borrower is a party has been, or upon its execution and delivery will be, duly executed and delivered by the Borrower and each constitutes, or upon its execution and delivery will constitute, the valid and legally binding obligation of the Borrower, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors' rights generally and except that the remedy of specific performance and other equitable remedies are subject to judicial discretion. There is no action, suit, proceeding or investigation pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries which questions the validity or the enforceability of any of the Loan Documents. 3.04. Governmental Approvals and Filings. No approval, order, consent, authorization, certificate, license, permit or validation of, or exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority (collectively, "Governmental Action") is or will be necessary or advisable in connection with execution and delivery of this Agreement or any other Loan Document, consummation by the Borrower of the transactions herein or therein contemplated, or performance of or compliance with the terms and conditions hereof or thereof. Neither the Borrower nor any Subsidiary thereof is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any Federal or state statute or regulation limiting the Borrower's ability to incur Indebtedness for money borrowed. Neither the Borrower nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 3.05. Absence of Conflicts. The execution and delivery by the Borrower of this Agreement and each other Loan Document to which it is a party and performance by it hereunder and thereunder, will not violate any Law (including, without limitation, Regulations G, U, T and X of the Federal Reserve Board) and will not conflict with or result in a breach of any order, writ, injunction, ordinance, resolution, decree, or other similar document or instrument of any court or governmental authority, bureau or agency, domestic or foreign, or its certificate of incorporation or by-laws or create (with or without the giving of notice or lapse of time, or both) a default under or breach of any agreement, bond, note or indenture to which it is a party (by successor in interest or otherwise), or by which it is -34- bound or any of its properties or assets is affected, or result in the imposition of any Lien of any nature whatsoever upon any of the properties or assets owned by or used in connection with the business of the Borrower or any of its Subsidiaries. 3.06. Audited Financial Statements. The Borrower has heretofore furnished to the Agent and each Lender consolidated balance sheets of the Borrower and its consolidated Subsidiaries as of December 31, 1990 and the related consolidated statements of income, cash flows and changes in stockholders' equity for the fiscal year then ended, as examined and reported on by Ernst & Young, independent certified public accountants for the Borrower, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its consolidated Subsidiaries as of the end of each such fiscal year and the results of their operations and their cash flows for the fiscal years then ended, all in conformity with GAAP. 3.07. Absence of Undisclosed Material Liabilities. Except as disclosed in writing by the Borrower to the Lenders and except as to the possible effect of the application of FAS 106, neither the Borrower nor any Subsidiary of the Borrower has any liability or obligation of any nature whatever (including without limitation Environmental Matters) which, to the knowledge of any Responsible Officer, will more likely than not have a Material Adverse Effect. As of September 30, 1991, neither the Borrower nor any Subsidiary of the Borrower has any Indebtedness other than the Indebtedness of the Borrower and its Subsidiaries set forth on Schedule 3.07 hereto. 3.08. Absence of Material Adverse Change. Except as to the possible effect of the application of FAS 106, since December 31, 1990, there has been no change in the business, properties, assets or financial condition of the Borrower and its Subsidiaries taken as a whole which is likely to have a Material Adverse Effect. 3.09. Accurate and Complete Disclosure. The Borrower has furnished to the Lenders copies of its Annual Report on Form 10-K for the fiscal year ended December 31, 1990, its Quarterly Report on Form 10-Q for the quarter ended June 30, 1991 and its Annual Report for the year ended December 31, 1990. None of such documents contains any untrue statement of a material fact or omits to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances in which it was provided. 3.10. Margin Regulations. No part of the proceeds of any Loan hereunder will be used for the purpose of buying or carrying any "margin stock", as such term is used in Regulations G and U of the Board of Governors of the Federal Reserve System, as amended from time to time, except margin stock issued by the -35- Borrower, or to extend credit to others for the purpose of buying or carrying any "margin stock." Neither the Borrower nor any Subsidiary thereof is engaged in the business of extending credit to others for the purpose of buying or carrying "margin stock." Neither the making of any Loan nor any use of proceeds of any such Loan will violate or conflict with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, as amended from time to time. 3.11. Subsidiaries. Schedule 3.11 hereof states as of the Closing Date each Subsidiary of the Borrower and the percentage of outstanding shares owned by the Borrower and by each Subsidiary. The outstanding shares of each Subsidiary of the Borrower have been duly authorized and validly issued and are fully paid and nonassessable. The Borrower and each Subsidiary thereof owns beneficially and of record and has good title to all of the shares represented by the ownership percentage shown in such Schedule 3.11, free and clear of any Lien. There are no options, warrants, calls, subscriptions, conversion rights, exchange rights, preemptive rights or other rights, agreements or arrangements (contingent or otherwise) which may in any circumstances now or hereafter obligate any Subsidiary to issue any shares of its capital stock or any other securities. As of the Closing Date, no Subsidiary has outstanding any class of preferred stock or any class of common stock with a prior right to dividends. 3.12. Partnerships, etc. As of the Closing Date, neither the Borrower nor any Subsidiary thereof is a partner (general or limited) of any partnership, is a party to any joint venture or owns (beneficially or of record) any material equity or similar interest in any Person (including but not limited to any interest pursuant to which the Borrower or such Subsidiary has or may in any circumstance have an obligation to make capital contributions to, or be generally liable for or on account of the liabilities, acts or omissions of such other Person), except for the partnership interests set forth in Schedule 3.12 hereof. 3.13. Litigation. Except as disclosed in writing by the Borrower to the Lenders, there is no pending or (to the Borrower's knowledge) threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower, which will more likely than not, individually or in the aggregate, have a Material Adverse Effect. 3.14. Absence of Events of Default. No event has occurred and is continuing and no condition exists which constitutes an Event of Default or Potential Default. 3.15. Insurance. The policies, binders or self-insurance programs for fire, liability, product liability, worker's compensation, vehicular and other insurance currently -36- held by or on behalf of the Borrower and each Subsidiary thereof insure its properties and business activities against such losses and risks as are adequate to protect its properties in accordance with customary industry practice when entered into or renewed. To the best knowledge of the Borrower, all such policies, binders and self-insurance programs are in full force and effect. Neither the Borrower nor, to the best knowledge of the Borrower, any of its Subsidiaries has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance and, to the best knowledge of the Borrower, no such improvements or expenditures are required. Neither the Borrower nor, to the best knowledge of the Borrower, any of its Subsidiaries has received notice of cancellation of any material insurance policy or binder. 3.16. Title to Properties. Except where the failure to possess good and marketable title in fee simple or good title, as the case may be, would not have a Material Adverse Effect, the Borrower and each Subsidiary thereof has good and marketable title in fee simple to all real property owned or purported to be owned by it and necessary for the operation of its business and good title to all other property of whatever nature owned or purported to be owned by it, including but not limited to all property reflected in the most recent audited balance sheet referred to in Section 3.06 hereof or submitted pursuant to Section 5.01(a) hereof, as the case may be (except as sold or otherwise disposed of in the ordinary course of business after the date of such balance sheet or, after the Closing Date, as otherwise expressly permitted by the Loan Documents) in each case free and clear of all Liens, other than Liens permitted by Section 6.02 hereof. 3.17. Intellectual Property. The Borrower and each Subsidiary thereof owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, service, fictitious or otherwise), copyrights, technology (including but not limited to computer programs and software), processes, data bases and other rights, free from burdensome restrictions, necessary to own and operate its properties and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others. 3.18. Taxes. Consolidated federal income tax returns for the Borrower and its domestic Subsidiaries have been examined by the IRS for all years up to and including the year ended December 31, 1987. The Borrower and each of its Subsidiaries have filed or caused to be filed all federal, state and local tax returns which, to the knowledge of any Responsible Officer of the Borrower, are required to be filed and have paid or caused to be paid all taxes as shown on such returns or on any assessment received by it or by any of them, to the extent that such taxes have become due, except any such tax or assessment the validity of which is being contested in good faith by appropriate proceedings -37- and with respect to which the Borrower or a Subsidiary of the Borrower, as appropriate, has set aside on its books adequate reserves to the extent the Borrower or any Subsidiary of the Borrower and a nationally recognized independent certified public accountant believes such reserves are necessary. To the extent that the Borrower in good faith believes is necessary, the Borrower and its Subsidiaries have set up reserves which are believed by the Borrower to be adequate for the payment of additional taxes. All assessed deficiencies resulting from examinations by the IRS up to and including the year ended December 31, 1987 have been discharged, reserved against or will not impair the Borrower's ability to repay the Loans. 3.19. Employee Benefits. (a) No borrowing contemplated by this Agreement is a transaction which is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code or a civil penalty assessed pursuant to Section 502(i) of ERISA (assuming that monies other than monies representing plan assets are borrowed hereunder). Neither the Borrower, any of its Subsidiaries nor any other Person, including any fiduciary, has engaged in any prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) which could subject any of the Benefit Plans, the Borrower, or any Subsidiary (or any entity which they have an obligation to indemnify) to any tax or penalty imposed under 4975 of the Code or Section 502(i) of ERISA or any other material liability under a foreign law of similar nature which alone or together with any other item described in this Section 3.19 would have a Material Adverse Effect. (b) Neither the Borrower nor any of its Subsidiaries (including any member of their respective Controlled Group) (i) has incurred or expects to incur any liability under Title IV of ERISA or Section 502(g) of ERISA or any analogous provision relating to Section 515 of ERISA or (ii) has become subject or expects to be subject to the lien described in Section 412(n) of the Code, which alone or together with any other item described in this Section 3.19 would have a Material Adverse Effect. (c) The Pension Plans do not have an "accumulated funding deficiency" (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. No Pension Plan has benefit liabilities as defined in Section 4001(a)(16) of ERISA which exceed the assets of such Pension Plan by such an amount that the termination of such Pension Plan alone or together with any other item described in this Section would have a Material Adverse Effect. The Borrower has received a favorable determination letter from the IRS with respect to all Pension Plans except for such Pension Plans with respect to which the failure to receive such a favorable determination would not alone or together with any other item described in this Section 3.19 have a Material Adverse Effect and nothing has happened since the date of such letter that has adversely affected such -38- qualification. There is no Lien outstanding or security interest given in connection with a Pension Plan or under Title IV of ERISA which would exceed the percentage limitations of Section 6.02(g) hereof. As of the date hereof, the Borrower has filed all required notices with respect to any terminated Benefit Plans subject to Title IV of ERISA, no objections relating to any such termination by the IRS or the PBGC are pending and the time period for making such objections has lapsed. (d) Neither the Borrower nor any of its Subsidiaries (including any member of their respective Controlled Group) is in default in any material respect under any Benefit Plan and all Benefit Plans are administered in accordance with their terms and are in all material respects in compliance with all applicable Laws, except where any such default or failure to comply would not alone or together with any other item described in this Section 3.19 have a Material Adverse Effect. 3.20 Environmental Matters (a) The Borrower and each Subsidiary of the Borrower, to its knowledge, has been operated in compliance with all applicable Requirements of Law, except for matters which, individually or in the aggregate, are not likely to have a Material Adverse Effect. (b) The Borrower and each Subsidiary of the Borrower, to its knowledge, has not received notice from any governmental authority that any of them is a potentially responsible party under any Requirements of Law at any disposal site containing Hazardous Materials, nor received any notice that any lien under any Requirements of Law against any property of the Borrower or Subsidiary of the Borrower exists, except for matters which, individually or in the aggregate, are not likely to have a Material Adverse Effect. ARTICLE IV CONDITIONS OF LENDING 4.01. Conditions to Initial Loans. The obligation of each Lender to make Loans on the Closing Date is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan, of the following conditions precedent, in addition to the conditions precedent set forth in Section 4.02 hereof: (a) Agreement; Notes. The Agent shall have received executed counterparts of this Agreement for each Lender, duly executed by the Borrower, the Agent and each Lender, and executed Revolving Credit Notes conforming to the requirements hereof, duly executed on behalf of the Borrower. (b) Corporate Proceedings. The Agent shall have received, with a counterpart for each Lender, certificates by -39- the Secretary or Assistant Secretary of the Borrower dated as of the Closing Date as to (i) true copies of the articles of incorporation and by-laws (or other constituent documents) of the Borrower in effect on such date, (ii) true copies of all corporate action taken by the Borrower relative to this Agreement and the other Loan Documents and (iii) the incumbency and signature of the respective officers of the Borrower executing this Agreement and the other Loan Documents to which the Borrower is a party, together with satisfactory evidence of the incumbency of such Secretary or Assistant Secretary. The Agent shall have received, with a copy for each Lender, certificates from the appropriate Secretaries of State or other applicable Governmental Authorities dated not more than 30 days before the Closing Date showing the good standing of the Borrower in its state of incorporation. (c) Financial Statements. The Agent shall have received, with a counterpart for each Lender, copies of the consolidated financial statements referred to in Section 3.06 hereof. (d) Legal Opinion of Counsel to the Borrower. The Agent shall have received, with an executed counterpart for each Lender, an opinion addressed to the Agent and each Lender, dated the Closing Date, of John E. Besser, Esquire, General Counsel of the Borrower, in the form attached hereto as Exhibit C. (e) Fees, Expenses, etc. All fees and other compensation required to be paid to the Agent or the Lenders pursuant hereto or pursuant to any other written agreement on or prior to the Closing Date shall have been paid or received. (f) Additional Matters. All corporate and other proceedings, and all documents, instruments and other matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to the Agent and each Lender. 4.02. Conditions to All Loans. The obligation of each Lender to make any Loan (including the initial Loans) are subject to performance by the Borrower of its obligations to be performed hereunder or under the other Loan conditions precedent set forth herein and in the other Loan Documents and to satisfaction of the following further conditions precedent: (a) Notice. Appropriate notice of such Loan shall have been given by the Borrower as provided in Article II hereof. -40- (b) Representations and Warranties. Each of the representations and warranties made by the Borrower herein shall be true and correct in all material respects on and as of such date as if made on and as of such date (except with respect to representations and warranties which specifically refer to an earlier date, which shall be true and correct in all material respects as of such earlier date), both before and after giving effect to the Loans requested to be made on such date. (c) No Defaults. No Event of Default or Potential Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date. (d) No Violations of Law, etc. Neither the making nor use of the Loans shall cause any Lender to violate or conflict with any Law. Each request by the Borrower for any Loan shall constitute a representation and warranty by the Borrower that the conditions set forth in this Section 4.02 have been satisfied as of the date of such request. Failure of the Agent to receive notice from the Borrower to the contrary before such Loan is made shall constitute a further representation and warranty by the Borrower that the conditions referred to in this Section 4.02 have been satisfied as of the date such Loan is made. ARTICLE V AFFIRMATIVE COVENANTS The Borrower hereby covenants to the Agent and each Lender as follows: 5.01. Basic Reporting Requirements. (a) Annual Audit Reports. The Borrower shall deliver to the Agent, with a copy for each Lender, as soon as available, but in any event within 90 days after the last day of each of its fiscal years, a consolidated balance sheet of the Borrower as at such last day of the fiscal year, and the related consolidated statement of income, consolidated statement of changes in common shareholders equity and consolidated statement of cash flows for such fiscal year, each prepared in accordance with GAAP (except as required by any change in accounting principles or concurred in by the Borrower's independent certified public accountants), in reasonable detail, and, as to the financial statements, certified without qualification (other than relating to a change in accounting principles with which such accountants concur and other than any other qualification which the Agent and the Required Lenders deem, in their reasonable judgment, to be immaterial) by Ernst & Young or another firm of independent certified public -41- accountants satisfactory to the Agent as fairly presenting the financial position at year end and the consolidated results of operations of the Borrower consolidated for the year ending on such date and as having been prepared in accordance with GAAP. (b) Quarterly Consolidated Reports. The Borrower shall deliver to the Agent, with a copy for each Lender, as soon as available, but in any event within 60 days after the end of each of the Borrower's fiscal quarterly periods, a consolidated balance sheet of the Borrower as of the last day of such quarter and consolidated statement of income, consolidated statement of changes in common shareholders' equity and consolidated statement of cash flows, for such quarter, and on a comparative basis figures for the corresponding period of the immediately preceding fiscal year, all in reasonable detail, each such statement to be certified in a certificate of a Responsible Officer of the Borrower, as the case may be, as fairly presenting the financial position and the consolidated results of operations of the Borrower consolidated for such quarter and as having been prepared in accordance with GAAP for interim financial statements (subject to customary year-end audit adjustments). (c) Quarterly Compliance Certificates. The Borrower shall deliver to the Agent, with a copy for each Lender, a Quarterly Compliance Certificate in substantially the form set forth as Exhibit D hereto, duly completed and signed by a Responsible Officer of the Borrower concurrently with the delivery of the financial statements referred to in subsections (a) and (b) of this Section 5.01. (d) Other Financial Statements. The Borrower shall deliver to the Agent, with a copy for each Lender, for each Subsidiary and Subsidiary Investment which is subject to any restriction on its ability to make Stock Payments in respect of its capital stock (except for restrictions applicable to corporations generally in such entity's place of incorporation) and in which there has been an investment of cash or assets since the Closing Date, as soon as possible but in any event within 90 days after the end of each fiscal year, a certificate, duly executed by a Responsible Officer of the Borrower, as to amount of the Borrower's investment, direct or indirect, in each Subsidiary and Subsidiary Investment, together with a balance sheet and an income statement for each Subsidiary subject to any such restriction. (e) Certain Other Reports and Information. Promptly upon their becoming available to the Borrower, the Borrower shall deliver to the Agent, with a copy for each Lender, a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which the Borrower or any Subsidiary shall file with the Securities and Exchange Commission (or any -42- successor thereto), and (ii) all reports, proxy statements, financial statements and other information distributed by the Borrower to its stockholders or bondholders. (f) Further Information. The Borrower will promptly furnish to the Agent, with a copy for each Lender, such other information and in such form as the Agent or any Lender may reasonably request from time to time. (g) Notice of Certain Events. Promptly upon becoming aware of any of the following, the Borrower shall give the Agent notice thereof, together with a written statement of a Responsible Officer of the Borrower setting forth the details thereof and any action with respect thereto taken or proposed to be taken by the Borrower: (i) Any Event of Default or Potential Default. (ii) Any material correspondence with the PBGC, the Secretary of Labor or any representative of the IRS with respect to any Benefit Plan or Pension Plan, relating to an actual or threatened change or development which would have a Material Adverse Effect; and copies of any notices from the PBGC to the Borrower with respect to the intent of the PBGC to institute involuntary proceedings. (iii) Any Environmental Claim pending or threatened against the Borrower or any Subsidiary of the Borrower, which Environmental Claim, if adversely resolved, individually or in the aggregate, could have a Material Adverse Effect; provided, however, that no such notice is required to be given with respect to any Environmental Claim if the Borrower reasonably determines that its liability, if any, with respect to such Environmental Claim will not exceed $1,000,000. (h) Visitation; Verification. The Borrower shall, and shall cause each of its Subsidiaries to, permit the Lenders to make or cause to be made, reasonable inspections of any of its books, records and papers and to make extracts therefrom and copies thereof, or to make reasonable inspections and examinations of any of its properties and facilities, and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with the principal officers of the Borrower and with the Borrower's independent accountants, all at all such reasonable times and as often as any Lender may reasonably require, in order to assure that the Borrower and its Subsidiaries are and will be in compliance with their respective obligations under the Loan Documents or to evaluate the Lenders' investment in the then outstanding Notes. -43- The Agent shall promptly deliver to each Lender copies of all notices, financial statements and other information received pursuant to this Section 5.01. 5.02. Insurance. The Borrower shall, and shall cause each of its Subsidiaries to, maintain, at its expense, and keep in effect with responsible insurance companies, such liability insurance for bodily injury and third party property damage as is customary in the case of corporations engaged in the same or similar business or having similar properties, similarly situated. The Borrower shall, and shall cause each of its Subsidiaries to, keep and maintain, at its expense, its real and personal property insured against loss or damage by fire, theft, explosion, spoilage, and all other risks ordinarily insured against by other owners or users of such properties in similar businesses in an amount equal to the full replacement or cash value thereof, subject to deductible amounts which the Borrower, in its reasonable judgment, deems prudent. 5.03. Payment of Taxes and Other Potential Charges and Priority Claims. Except for situations where the failure to pay or discharge would not have a Material Adverse Effect, the Borrower shall, and shall cause each Subsidiary to, pay or discharge (a) on or prior to the date on which penalties are imposed by a taxing authority with respect thereto, all taxes, assessments and other governmental charges imposed upon it or any of its properties; (b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such property; and (c) on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any such property or which, if unpaid, might give rise to a claim entitled to priority over general creditors of the Borrower or such Subsidiary in a case under Title 11 (Bankruptcy) of the United States Code, as amended; provided, that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced the Borrower or such Subsidiary need not pay or discharge any such tax, assessment, charge or claim so long as (x) the validity thereof is contested in good faith and by appropriate proceedings diligently conducted, (y) such reserves or other appropriate provisions as are required by GAAP shall have been made therefor, and (z) such failure will not have a Material Adverse Effect. 5.04. Preservation of Corporate Status. The Borrower shall, and shall cause each of its Subsidiaries to, do, or cause -44- to be done, all things necessary to preserve, renew and keep in full force and effect its corporate existence, permits and franchises, and use its best efforts to comply with all Laws (including without limitation environmental Laws) applicable to it except where such noncompliance could not have Material Adverse Effect; provided, however, that nothing in this Section 5.04 shall prevent the abandonment or termination of the Borrower's authorization to do business in any foreign jurisdiction or of the corporate existence, rights and franchises of any Subsidiary of the Borrower if such abandonment or termination is in the interest of the Borrower and not disadvantageous in any material respect to the Lenders. 5.05. Governmental Approvals and Filings. The Borrower shall, and shall cause each Subsidiary to, keep and maintain in full force and effect all Governmental Actions necessary, if any, in connection with execution and delivery of any Loan Document, consummation of the transactions hereon or therein contemplated, performance of or compliance with the terms and conditions hereof or thereof or to ensure the legality, validity, binding effect, enforceability or admissibility in evidence hereof or thereof. 5.06. Maintenance of Properties. The Borrower shall, and shall cause each Subsidiary to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by it which are necessary for the effective conduct of its business and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that they are able to serve the functions for which they are currently being used. 5.07. Avoidance of Other Conflicts. The Borrower shall not, and shall not permit any of its Subsidiaries to, violate or conflict with, be in violation of or conflict with, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with its articles of incorporation or by-laws (or other constituent documents) except for matters which, individually or in the aggregate could not have a Material Adverse Effect. 5.08. Financial Accounting Practices. The Borrower shall, and shall cause each of its Subsidiaries to, keep proper books of record and account in accordance with normal business practice. 5.09. Use of Proceeds. The Borrower shall apply the proceeds of Loans hereunder for general corporate purposes. The Borrower shall not use the proceeds of any Loans hereunder directly or indirectly for any unlawful purpose or in any manner inconsistent with any other provision of any Loan Document. -45- 5.10. Continuation of or Change in Business. Neither the Borrower nor any Subsidiary shall engage in any line of business if as a result thereof the business of the Borrower and its Subsidiaries taken as a whole would be substantially different from what it was at December 31, 1990 as described in the Borrower's Annual Report on Form 10-K for the fiscal year ended December 31, 1990. 5.11. Consolidated Tax Return. The Borrower shall not, and shall not suffer any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person other than the Borrower and its Subsidiaries. 5.12. ERISA. The Borrower shall, and shall cause each of its Subsidiaries incorporated in the United States to (a) comply with all applicable provisions of ERISA now and hereafter in effect, non-compliance with which would have a Material Adverse Effect; and (b) as soon as possible and, in any event, within 10 days after the Borrower knows or has reason to know that a Reportable Event has occurred with respect to a Pension Plan, that a transaction prohibited under ERISA or the Code has occurred resulting in a material liability to a Benefit Plan, the Borrower or any of its Subsidiaries (or any entity which they have an obligation to indemnify), that an accumulated funding deficiency has been incurred or an application is to be or has been made to the Secretary of the Treasury for a waiver of the minimum funding standard with respect to an accumulation funding deficiency of $100,000 or more, that a failure to make timely contributions to a Pension Plan may give or has given rise to a lien in a material amount, that an amendment to a Pension Plan may require or requires the granting of a security interest in a material amount, that proceedings are likely to be or have been instituted to terminate a Pension Plan, or that the Borrower, any of its Significant Subsidiaries or a member of their respective Controlled Group will or may incur any material liability under Section 502(g) or any analogous provision relating to Section 515 or Title IV of ERISA, the Borrower will deliver to the Lenders a certificate of a financial officer setting forth details as to such occurrence and action, if any, which the Borrower, such Subsidiary or the respective member of their Controlled Group is required or proposes to take, together with any notices required or proposed to be filed with or by the Borrower, such Subsidiary or the member of their respective Controlled Group, the PBGC or the plan administrator with respect thereto. For purposes of this Section, an item is material if alone or taken with any other item in this Section, it results in a liability of $1,000,000 or more. Copies of any notices required to be delivered to the Lenders hereunder shall be delivered not later than 10 -46- days after the later of the date such notice has been filed with the IRS or the PBGC or received by the Borrower, any of its Subsidiaries or members of their respective Controlled Group. Upon the request of the Agent or any of the Lenders made from time to time, the Borrower will deliver a copy of the most recent actuarial report and annual report completed with respect to any Benefit Plan and any other financial information the Borrower has with respect to the Benefit Plan. ARTICLE VI NEGATIVE COVENANTS The Borrower hereby covenants to the Agent and each Lender as follows: 6.01. Financial Covenants. (a) Consolidated Current Ratio. The Consolidated Current Ratio shall not at any time be less than 1.40:1. (b) Consolidated Leverage Ratio. The Consolidated Leverage Ratio shall not at any time exceed 1.55:1. (c) Consolidated Net Worth. Consolidated Net Worth shall not at any time be less than $120,000,000 plus 50% of the Borrower's after-tax consolidated net income for each fiscal year beginning after December 31, 1991 (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, 1992 and as of the end of each subsequent fiscal year. 6.02. Liens. The Borrower 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: (a) liens incurred or pledges and deposits made in connection with workers' compensation, unemployment insurance, old-age pensions, social security and public liability and similar legislation; (b) 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 -47- nature, incurred as an incident to and in the ordinary course of business; (c) 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; (d) 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; (e) 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 the Borrower or such Subsidiary, as the case may be, or impair the use of such property in the operation of its business; (f) 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; and (g) other liens (including ERISA Liens) that in the aggregate do not exceed 15% of the book value (computed in accordance with GAAP) of all properties and assets of the Borrower and its Subsidiaries at the end of the preceding fiscal year. 6.03. Indebtedness. The Borrower shall not, and shall not permit any Subsidiary to, at any time create, incur, assume or suffer to exist or have outstanding any Indebtedness other than: (a) Indebtedness of the Borrower hereunder or under the Notes; (b) the Senior Notes; (c) Indebtedness of the Borrower which constitutes extensions, renewals or replacements on substantially the same terms and conditions (and does not increase the amount outstanding) of (a) and (b) above; and (d) additional Indebtedness of the Borrower and its Subsidiaries; -48- provided, however, that (i) the total Indebtedness of the Borrower's Subsidiaries shall not at any time exceed $50,000,000, and (ii) the total Indebtedness of the Borrower's domestic Subsidiaries shall not at any time exceed $10,000,000 (excluding from the calculation thereof any pre-existing Indebtedness of a newly-acquired domestic Subsidiary for a period not exceeding 30 days after the acquisition of such domestic Subsidiary if, on each day from and including the date of any such acquisition until payment of such pre-existing Indebtedness, the Borrower or such domestic Subsidiary has in place a committed credit facility acceptable to the Agent which is sufficient to permit the Borrower or such domestic Subsidiary to borrow sufficient funds to repay such Indebtedness and comply with the limitations on Indebtedness set forth in this Section 6.03). 6.04. Limitation on Restrictions on Dividends by Subsidiaries, etc. The Borrower shall not permit any Subsidiary or other entity in which the Borrower or any Subsidiary has an equity investment (a "Subsidiary Investment") to be or become subject to any restriction (except restrictions applicable to corporations generally), whether arising by agreement, by its articles of incorporation, by-laws or other constituent documents of such Subsidiary or Subsidiary Investment or otherwise, on 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 the Borrower or any Subsidiary, (x) pay any obligations from time to time owed to the Borrower or any Subsidiary, or (y) make loans or advances to the Borrower or any Subsidiary, or (z) transfer any of its properties or assets to the Borrower or any Subsidiary; provided, however, that such restrictions may be permitted with respect to any Subsidiary or Subsidiary Investment in which the Borrower or a Subsidiary directly or indirectly owns less than 80% of the Voting Stock and in which the Borrower's 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 the Borrower and its consolidated subsidiaries, and (ii) when taken together with all such Subsidiaries and Subsidiary Investments subject to any such restrictions in which the Borrower 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 the Borrower and its consolidated Subsidiaries. 6.05. Mergers; Acquisitions. The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, consolidate with or merge into any Person or permit any Person to merge into it; provided, however, that (a) any Subsidiary of the Borrower may be merged into the Borrower or any wholly-owned Subsidiary of the Borrower, (b) the Borrower or any Subsidiary of the Borrower may merge or consolidate with another Person or business, if the Borrower or such Subsidiary, as the case may be, is the surviving corporation, (c) the Borrower or any -49- Subsidiary of the Borrower may consolidate with another Person in a transaction where the Borrower or Subsidiary is not the surviving corporation if (i) the continuing or surviving entity shall assume in writing all of the Obligations of the Borrower under this Agreement and the Notes, (ii) the continuing or surviving entity shall not, immediately after such merger or consolidation, be in default of any of the Borrower's obligations under this Agreement or the Notes, (iii) the continuing or surviving entity shall be a corporation organized under the laws of the United States of America or any state thereof, (iv) after giving effect to such consolidation or merger no Potential Default or Event of Default would then exist and (v) such consolidation or merger shall not have a Material Adverse Effect. 6.06. ERISA Obligations. Except for matters which are not likely to have a Material Adverse Effect, neither the Borrower nor any Subsidiary shall at any time (a) engage in any "prohibited transaction" as such term is defined in Section 4975 of the Code or described in Section 406 of ERISA; (b) fail timely to make any required installment to a Pension Plan such that a lien could arise under Section 412(n) of the Code or Section 302(f) of ERISA; (c) permit the incurrence of any "accumulated funding deficiency" as such term is defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code with respect to a Pension Plan, whether or not waived or extended; (d) permit the occurrence of any "reportable event" with respect to a Pension Plan as such term is defined in Section 4043 of ERISA; (e) become obligated to contribute to any "multiemployer plan" as such term is defined in Section 4001(a)(3) of ERISA; (f) amend any Pension Plan such that security would have to be provided to such Pension Plan under Section 401(a)(29) of the Code; or (g) permit any Pension Plan to be terminated other than in a "standard termination" as defined in Section 4041(b) of ERISA. 6.07. Leases. The Borrower shall not, and shall not permit any Subsidiary to, at any time enter into or suffer to remain in effect any lease, as lessee, of any property, or agree, become or remain liable (contingently or otherwise) to any of the foregoing, except leases which on any date in the aggregate will -50- not result in the payment or accrual by the Borrower and its Subsidiaries of a total of more than 15% of the book value (computed in accordance with GAAP) of all properties and assets of the Borrower and its consolidated Subsidiaries in the twelve month period after such date. 6.08. Disposition of Properties. The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, except in the ordinary course of business, sell, convey, assign, lease, transfer, abandon or otherwise dispose of, voluntarily or involuntarily, any of its properties, now owned or hereafter acquired, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, if, as a result of such sale, conveyance, assignment, lease, transfer, abandonment or other disposition, the aggregate net book value or fair market value, whichever shall be higher, of all property and assets sold, conveyed, assigned, leased, transferred, abandoned or otherwise disposed of by the Borrower and its Subsidiaries in the then current fiscal year of the Borrower would exceed an amount equal to 10% of the book value (computed in accordance with GAAP) of all properties and assets of the Borrower and its consolidated Subsidiaries at the end of the preceding fiscal year. 6.09. Transactions with Affiliates. Neither the Borrower nor any Subsidiary shall enter into any transaction (except transactions which do not in any one calendar year involve in the 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 (excluding any wholly-owned Subsidiary) except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate. 6.10. Loans, Advances and Investments. The Borrower shall not, and shall not 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 the Borrower's common or preferred stock, (b) loans or advances of the Borrower or any Subsidiary of the Borrower (in addition to loans or advances permitted by clauses (d) and (e) of this Section 6.10) not in excess of $10,000,000 aggregate principal amount for the Borrower and its Subsidiaries at any time outstanding, (c) investments of its cash by the Borrower or any Subsidiary of the Borrower 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 -51- 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 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 the 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 the Borrower, such investments in marketable obligations 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 the Borrower to any of its Subsidiaries and loans or advances of any Subsidiary of the Borrower to the Borrower 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 the Borrower and its Subsidiaries for such stock or securities of any such corporation, association or other business entity shall not exceed 40% of the Borrower's Consolidated Net Worth within any four year period commencing on the Closing Date, or (f) such other investments in an aggregate amount not to exceed $250,000 as the Borrower or a Subsidiary may elect. ARTICLE VII DEFAULTS 7.01. Events of Default. An Event of Default shall mean the occurrence or existence of one or more of the following events or conditions (for any reason, whether voluntary, involuntary or effected or required by Law): (a) The Borrower shall fail to pay by the close of business at the Agent's office on the date when due principal of any Loan. (b) The Borrower shall fail to pay when due interest on any Loan, any fees, indemnity or expenses, or any other amount due hereunder or under any other Loan Document and such failure shall have continued for a period of five Business Days. (c) Any representation or warranty made or deemed made by the Borrower or any Subsidiary of the Borrower in or pursuant to any Loan Document or in any certificate delivered thereunder, shall prove to have been false or misleading in any material respect as of the time when made or deemed made -52- (including by omission of material information necessary to make such representation, warranty or statement not misleading). (d) The Borrower shall default in the performance or observance of any covenant contained in Article VI hereof. (e) The Borrower shall default in the performance or observance of any other covenant, agreement or duty under this Agreement or any other Loan Document and such default shall have continued for a period of 20 days after the date on which a Responsible Officer first becomes aware thereof. (f) The Borrower or any Subsidiary of the Borrower shall fail to perform or observe any term, condition or covenant of any bond, note, debenture, loan agreement, indenture, guaranty, trust agreement, mortgage or similar instrument to which the Borrower or any such Subsidiary is a party or by which it is bound, or by which any of its properties or assets may be affected (a "Debt Instrument") having a principal or face amount, individually or in the aggregate outstanding at any time, in excess of $5,000,000, so that, as a result of any such failure to perform, the Indebtedness included therein or secured or covered thereby may at the time be declared due and payable prior to the date on which such Indebtedness would otherwise become due and payable; (g) One or more final judgment or judgments which are not subject to appeal for the payment of money aggregating in excess of $5,000,000 is or are outstanding against the Borrower or any Subsidiary and any one of such judgments (x) has not been stayed or paid on the date it is finally due and payable or (y) has resulted in the attachment of a Lien on any property of the Borrower or any Subsidiary. (h) (i) Any Pension Plan is terminated pursuant to Section 4041 or 4042 of ERISA and the benefit liabilities exceed the assets based upon the assumptions used by the PBGC on plan termination by $10,000,000 or more; or (ii) the Borrower or any of its Subsidiaries (or a member of their respective Controlled Group) incur a liability under Section 4062, 4063 or 4064 of ERISA for an amount that would materially and adversely affect the financial condition of the Borrower and its Subsidiaries taken as a whole. (i) A Change in Control shall have occurred. (j) A proceeding shall have been instituted in respect of the Borrower or any Significant Subsidiary (i) seeking to have an order for relief entered in respect of such Person, or seeking a declaration or -53- entailing a finding that such Person is insolvent or a similar declaration or finding, or seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization or other similar relief with respect to such Person, its assets or its debts under any Law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar Law now or hereafter in effect, or (ii) seeking appointment of a receiver, trustee, liquidator, assignee, sequestrator or other custodian for such Person or for all or any substantial part of its property and such proceeding shall result in the entry, making or grant of any such order for relief, declaration, finding, relief or appointment, or such proceeding shall remain undismissed and unstayed for a period of 60 consecutive days. (k) The Borrower or any Significant Subsidiary shall become insolvent; shall fail to pay, become unable to pay, or state that it is or will be unable to pay, its debts as they become due; shall voluntarily suspend transaction of its or his business; shall make a general assignment for the benefit of creditors; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(j)(i) hereof, or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such order for relief, declaration, finding or relief described therein; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(j)(ii) hereof, or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such appointment or to the taking of possession by any such custodian of all or any substantial part of its or his property; shall dissolve, wind-up, revoke or forfeit its charter (or other constituent documents) or liquidate itself or any substantial part of its property; or shall take any action in furtherance of any of the foregoing. 7.02. Consequences of an Event of Default. (a) If an Event of Default specified in subsections (a) through (i) of Section 7.01 hereof shall occur and be continuing or shall exist, then, in addition to all other rights and remedies which the Agent or any Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Lenders shall be under no further obligation to make Loans hereunder, and the Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, from time to time do any or all of the following: -54- (i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other Obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (b) If an Event of Default specified in subsection (j) or (k) of Section 7.01 hereof shall occur or exist, then, in addition to all other rights and remedies which the Agent or any Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Commitments shall automatically terminate and the Lenders shall be under no further obligation to make Loans, and the unpaid principal amount of the Loans, interest accrued thereon and all other Obligations shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. 7.03. Application of Proceeds. After the occurrence of an Event of Default and acceleration of the Loans, any payments received by any Lender on account of Obligations shall be applied by the Agent to payment of the Obligations in the following order: First, to payment of that portion of the Obligations constituting accrued and unpaid interest on Loans, accrued and unpaid Revolving Credit Commitment Fees, ratably among the Lenders in proportion to the respective amounts described in this clause "First" due to them; Second, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause "Second" due to them; Third, to payment of all other Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause "Third" due to them; and Fourth, to payment of that portion of the Obligations constituting fees, indemnities and other amounts due to the Agent in its capacity as such; -55- Finally, the balance, if any, after all of the Obligations have been satisfied and all Commitments shall have terminated, to the Borrower or as otherwise required by law. ARTICLE VIII THE AGENT 8.01. Appointment. Each Lender hereby irrevocably appoints Mellon Bank, N.A. to act as Agent for such Lender under this Agreement and the other Loan Documents. Each Lender hereby irrevocably authorizes the Agent to take such action on behalf of such Lender under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, as are expressly delegated to or required of the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Mellon Bank, N.A. hereby agrees to act as Agent on behalf of the Lenders on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 8.10 hereof. Each Lender hereby irrevocably authorizes the Agent to execute and deliver each of the Loan Documents and to accept delivery of such of the other Loan Documents as may not require execution by the Agent. Each Lender agrees that the rights and remedies granted to the Agent under the Loan Documents shall be exercised exclusively by the Agent, and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent expressly provided herein or therein. 8.02. General Nature of Agent's Duties. Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document: (a) The Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of the Agent shall be read into this Agreement or any Loan Document or shall otherwise exist. (b) The duties and responsibilities of the Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Agent shall not have a fiduciary relationship in respect of any Lender. (c) The Agent is and shall be solely the agent of the Lenders. The Agent assumes no, and shall not at any time be deemed to have, any relationship of agency or trust with or any other duty or responsibility to, the Borrower, and Subsidiary of the Borrower or any other Person (except only for (i) its relationship as agent for, and its express duties -56- and responsibilities to, the Lenders and (ii) its express duties and responsibilities to, the Borrower, all as provided in this Agreement and the other Loan Documents). (d) The Agent shall not be under any obligation to take any action hereunder or under any other Loan Document if the Agent believes in good faith after consultation with counsel that taking such action may conflict with any Law or any provision of this Agreement or any other Loan Document, or may require the Agent to qualify to do business in any jurisdiction where it is not then so qualified. 8.03. Exercise of Powers. The Agent shall take any action of the type specified in this Agreement or any other Loan Document as being within the Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or, to the extent this Agreement or such Loan Document expressly requires the direction or consent of some other Person or set of Persons, then instead in accordance with the directions of such other Person or set of Persons). In the absence of such directions, the Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent this Agreement or such Loan Document expressly requires the direction or consent of the Required Lenders (or some other Person or set of Persons), in which case the Agent shall not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on all the Lenders. The Agent shall not have any liability to any Person as a result of (x) the Agent acting or refraining from acting in accordance with the directions of the Required Lenders (or other applicable Person or set of Persons), (y) unless expressly required to act under the terms hereof, the Agent refraining from acting in the absence of instructions to act from the Required Lenders (or other applicable Person or set of Persons), whether or not the Agent has discretionary power to take such action, or (z) the Agent taking discretionary action it is authorized to take under this Section absent gross negligence or willful misconduct. 8.04. General Exculpatory Provisions. Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document: (a) The Agent shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or anY other Loan Document, unless caused by its own gross negligence or willful misconduct. (b) Except for the records to be maintained by the Agent pursuant to Section 9.02, the Agent shall not be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of this Agreement or any other Loan Document, (ii) any recital, -57- representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, this Agreement or any other Loan Document or (iii) any failure of the Borrower or any Subsidiary of the Borrower or Lender to perform any of their respective obligations under this Agreement or any other Loan Document. (c) Except as otherwise expressly provided herein, the Agent shall not be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of the Borrower or any Subsidiary of the Borrower, (ii) the business, operations, condition (financial or otherwise) or prospects of the Borrower or any other Person, or (iii) except to the extent set forth in Section 8.05(f) hereof, the existence of any Event of Default or Potential Default. (d) The Agent shall not be under any obligation, either initially or on a continuing basis, to provide any Lender with any notices, reports or information of any nature, whether in its possession presently or hereafter, except for such notices, reports and other information expressly required by this Agreement or any other Loan Document to be furnished by the Agent to such Lender. 8.05. Administration by the Agent. (a) The Agent may rely in good faith upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the proper party or parties, and Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. (b) The Agent may consult with legal counsel (including, without limitation, in-house counsel for the Agent or in-house or other counsel for the Borrower), independent public accountants and any other experts selected by it from time to time, and the Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. (c) The Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Agent shall deem it necessary or desirable that a matter be proved or established with respect to the Borrower or any Lender, such matter may be established by a -58- certificate of the Borrower or Lender, as the case may be, and the Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document). (d) The Agent may fail or refuse to take any action unless it shall be indemnified to its reasonable satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against the Agent by reason of taking or continuing to take any such action. (e) The Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. (f) The Agent shall not be deemed to have any knowledge or notice of the occurrence of any Event of Default or Potential Default unless the Agent has actual knowledge or has received notice from a Lender or the Borrower referring to this Agreement, describing such Event of Default or Potential Default, and stating that such notice is a "notice of default." If the Agent receives such a notice, the Agent shall give prompt notice thereof to each Lender. 8.06. Lender Not Relying on Agent or Other Lenders. Each Lender acknowledges as follows: (a) Neither the Agent nor any other Lender has made any representations or warranties to it, and no act taken hereafter by the Agent or any other Lender shall be deemed to constitute any representation or warranty by the Agent or such other Lender to it. (b) It has, independently and without reliance upon the Agent or any other Lender, and based upon such documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents. (c) It will, independently and without reliance upon the Agent or any other Lender, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents. 8.07. Indemnification. Each Lender agrees to reimburse and indemnify the Agent and its directors, officers, employees and agents (to the extent not reimbursed by the Borrower and without limitation of the obligations of the Borrower to do so), Pro Rata, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including, without limitation, the reasonable fees and disbursements of counsel for the Agent or such other Person in connection with any -59- investigative, administrative or judicial proceeding commenced or threatened, whether or not the Agent or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Agent or such other Person as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan, provided that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting from the gross negligence or willful misconduct of the Agent or such other Person, as finally determined by a court of competent jurisdiction. 8.08. Agent in its Individual Capacity. With respect to its Commitments and the Obligations owing to it, the Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Agent, and the terms "Lenders," "holders of Notes" and like terms shall include the Agent in its individual capacity as such. The Agent and its affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, and engage in any other business with, the Borrower and any stockholder, Subsidiary or Affiliate of the Borrower, as though the Agent were not the Agent hereunder. 8.09. Holders of Notes. The Agent may deem and treat the Lender which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until a Transfer Supplement with respect to the assignment or transfer thereof shall have been filed with the Agent in accordance with Section 9.14 hereof. Any authority, direction or consent of any Person who at the time of giving such authority, direction or consent is shown in the Register as being a Lender shall be conclusive and binding on each present and subsequent holder, transferee or assignee of any Note or Notes payable to such Lender or of any Note or Notes issued in exchange therefor. 8.10. Successor Agents. The Agent may resign at any time by giving 30 days' written notice thereof to the Lenders and the Borrower. The Agent may be removed by the Required Lenders upon 30 days' written notice thereof to the Agent, the Lenders and the Borrower. Upon receipt of notice of any such resignation or removal, the Borrower shall have the right to appoint a successor Agent; provided, that the Required Lenders shall have the right to disapprove such successor Agent. If no successor Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 20 days after such notice of resignation or removal, then the Required Lenders shall appoint a successor Agent to succeed to the obligations of the Agent hereunder. Each -60- successor Agent shall be a commercial bank or trust company organized under the laws of the United States of America or any State thereof. Upon the acceptance by a successor Agent of its appointment as Agent hereunder, such successor Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Agent, without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Agent, such Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If and so long as no successor Agent shall have been appointed, then any notice or other communication required or permitted to be given by the Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Agent shall be given to each Lender, and all payments to be made to the Agent shall be made directly to the Borrower or Lender for whose account such payment is made. 8.11. Calculations. The Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith except for gross negligence. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made shall be to recover from the other Lenders any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the Borrower, to recover such amount from the Borrower. 8.12. Funding by Agent. Unless the Agent shall have been notified in writing by any Lender not later than the close of business on the day before the day on which Loans are requested by the Borrower to be made that such Lender will not make its ratable share of such Loans, the Agent may assume that such Lender will make its ratable share of the Loans, and in reliance upon such assumption the Agent may (but in no circumstances shall be required to) make available to the Borrower a corresponding amount. If and to the extent that any Lender fails to make such payment to the Agent on such date, such Lender shall pay such amount on demand (or, if such Lender fails to pay such amount on demand, the Borrower shall pay such amount on demand), together with interest, for the Agent's own account, for each day from and including the date of the Agent's payment to and including the date of repayment to the Agent (before and after judgment) at the Federal Funds Effective Rate for the first day and thereafter at the rate or rates per annum applicable to such Loans. All payments to the Agent under this Section shall be made to the Agent at its Office in Dollars in funds immediately available at such Office, without set-off, withholding, counterclaim or other deduction of any nature. -61- ARTICLE IX MISCELLANEOUS 9.01. Holidays. Whenever any payment or action to be made or taken hereunder or under any other Loan Document shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. 9.02. Records. The unpaid principal amount of the Loans owing to each Lender, the unpaid interest accrued thereon, the interest rate or rates applicable to such unpaid principal amount, the duration of such applicability, each Lender's Committed Amount and the accrued and unpaid Commitment Fees shall at all times be ascertained from the records of the Agent, which shall be conclusive absent manifest error. 9.03. Amendments and Waivers. Neither this Agreement nor any Loan Document may be amended, modified or supplemented except in accordance with the provisions of this Section. The Required Lenders and the Borrower may from time to time amend, modify or supplement the provisions of this Agreement or any other Loan Document for the purpose of amending, adding to, or waiving any provisions or changing in any manner the rights and duties of the Borrower, the Agent or any Lender. Any such amendment, modification or supplement made by the Borrower, the Agent and the Required Lenders in accordance with the provisions of this Section shall be in writing and shall be binding upon the Borrower, each Lender and the Agent; provided, that no such amendment, modification or supplement may be made which will: (a) Increase the Committed Amount of any Lender over the amount thereof then in effect, subject any Lender to additional obligations hereunder or extend the Revolving Credit Maturity Date without the written consent of each Lender affected thereby; (b) Reduce the principal amount of or extend the time for any payment of any Loan, or reduce the amount of or rate of interest or extend the time for payment of interest borne by any Loan or extend the time for payment of or reduce the amount of any Commitment Fee or reduce or postpone the date for payment of any other fees, expenses, indemnities or amounts payable under any Loan Document, without the written consent of each Lender affected thereby; (c) Change the definition of "Required Lenders" or amend this Section 9.03, without the written consent of all the Lenders; -62- (d) Amend or waive any of the provisions of Article IX hereof, or impose additional duties upon the Agent or otherwise adversely affect the rights, interests or obligations of the Agent, without the written consent of the Agent; or (e) Amend Section 2.13 hereof, without the written consent of all Lenders. provided further, that Transfer Supplements may be entered into in the manner provided in Section 9.14 hereof. Any such amendment, modification or supplement must be in writing and shall be effective only to the extent set forth in such writing. Any Event of Default or Potential Default waived or consented to in any such amendment, modification or supplement shall be deemed to be cured and not continuing to the extent and for the period set forth in such waiver or consent, but no such waiver or consent shall extend to any other or subsequent Event of Default or Potential Default or impair any right consequent thereto. 9.04. No Implied Waiver; Cumulative Remedies. No course of dealing and no delay or failure of the Agent or any Lender in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Agent and the Lenders under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Agent or any Lender would otherwise have hereunder or thereunder, at law, in equity or otherwise. 9.05. Notices. (a) Except to the extent otherwise expressly permitted hereunder or thereunder, all notices, requests, demands, directions and other communications (collectively "notices") under this Agreement or any Loan Document shall be in writing (including telexes and communication using facsimile machines) and shall be sent by first-class mail, or by nationally-recognized overnight courier, or by telex or facsimile (with confirmation in writing mailed first-class or sent by such an overnight courier), or by personal delivery. All notices shall be sent to the applicable party at the address stated on the signature pages hereof or in accordance with the last unrevoked written direction from such party to the other parties hereto, in all cases with postage or other charges prepaid. Any such properly given notice shall be effective on the earliest to occur of receipt, telephone -63- confirmation of receipt of telex or facsimile communication, one Business Day after delivery to a nationally-recognized overnight courier, or five Business Days after deposit in the mail. (b) Any Lender giving any notice to the Borrower shall simultaneously send a copy thereof to the Agent, and the Agent shall promptly notify the other Lenders of the receipt by it of any such notice. (c) The Agent and each Lender may rely on any notice (whether or not such notice is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the Borrower, and neither the Agent nor any Lender shall have any duty to verify the identity or authority of any Person giving such notice. 9.06. Expenses; Taxes; Indemnity. (a) The Borrower agrees to pay or cause to be paid and to save the Agent and each of the Lenders harmless against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel to the Agent, local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs) incurred by the Agent or, in the case of clause (iii) below any Lender, from time to time arising from or relating to (i) the negotiation, preparation, execution, delivery, administration and performance of this Agreement and the other Loan Documents, (ii) any requested amendments, modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any Loan Document, and (iii) the enforcement or preservation of rights under this Agreement or any Loan Document (including but not limited to any such costs or expenses arising from or relating to (A) collection or enforcement of an outstanding Obligation or any other amount owing hereunder or thereunder by the Agent or any Lender, and (B) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the Loan Documents). (b) The Borrower hereby agrees to pay all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by the Agent or any Lender to be payable in connection with this Agreement or any other Loan Documents or any other documents, instruments or transactions pursuant to or in connection herewith or therewith, and the Borrower agrees to save the Agent and each Lender harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such fees, taxes or impositions. -64- (c) The Borrower hereby agrees to reimburse and indemnify each of the Indemnified Parties from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnified Party shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnified Party as a result of, or arising out of, or in any way related to or by reason of, any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan (and without in any way limiting the generality of the foregoing, including any violation or breach of any Requirement of Law or any other Law by the Borrower or any Subsidiary); or any exercise by the Agent or any Lender of any of its rights or remedies under this Agreement or any other Loan Document; but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of such Indemnified Party. If and to the extent that the foregoing obligations of the Borrower under this subsection (c), or any other indemnification obligation of the Borrower hereunder or under any other Loan Document, are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. 9.07. Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 9.08. Prior Understandings. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein. 9.09. Duration; Survival. All representations and warranties of the Borrower contained herein or in any other Loan Document or made in connection herewith shall survive the making of, and shall not be waived by the execution and delivery, of this Agreement or any other Loan Document, any investigation by or knowledge of the Agent or any Lender, the making of any Loan, or any other event or condition whatever. All covenants and agreements of the Borrower contained herein or in any other Loan Document shall continue in full force and effect from and after -65- the date hereof so long as any Borrower may borrow hereunder and until payment in full of all Obligations. Without limitation, all obligations of the Borrower hereunder or under any other Loan Document to make payments to or indemnify the Agent or any Lender shall survive the payment in full of all other Obligations, termination of the Borrower's right to borrow hereunder, and all other events and conditions whatever. In addition, all obligations of each Lender to make payments to or indemnify the Agent or the other Lenders shall survive the payment in full by the Borrower of all Obligations, termination of the Borrower's right to borrow hereunder, and all other events or conditions whatever. 9.10. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. 9.11. Limitation on Payments. The parties hereto intend to conform to all applicable Laws in effect from time to time limiting the maximum rate of interest that may be charged or collected. Accordingly, notwithstanding any other provision hereof or of any other Loan Document, the Borrower shall not be required to make any payment to or for the account of any Lender, and each Lender shall refund any payment made by the Borrower, to the extent that such requirement or such failure to refund would violate or conflict with nonwaivable provisions of applicable Laws limiting the maximum amount of interest which may be charged or collected by such Lender. 9.12. Set-Off. The Borrower hereby agrees that, to the fullest extent permitted by law, if any Obligation of the Borrower shall be due and payable (by acceleration or otherwise), each Lender shall have the right, without notice to the Borrower, to set-off against and to appropriate and apply to the Obligation any indebtedness, liability or obligation of any nature owing to the Borrower by such Lender, including but not limited to all deposits (whether time or demand, general or special, provisionally credited or finally credited, whether or not evidenced by a certificate of deposit) now or hereafter maintained by the Borrower with such Lender. Such right shall be absolute and unconditional in all circumstances and, without limitation, shall exist whether or not such Lender or any other Person shall have given notice or made any demand to the Borrower or any other Person, whether such indebtedness, obligation or liability owed to the Borrower is contingent, absolute, matured or unmatured (it being agreed that such Lender may deem such indebtedness, obligation or liability to be then due and payable at the time of such setoff), and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to any Lender or any other Person. The Borrower hereby agrees that, to the fullest extent permitted by law, any Participant and any branch, subsidiary or affiliate of any Lender -66- or any Participant shall have the same rights of set-off as a Lender as provided in this Section (regardless of whether such Participant, branch, subsidiary or affiliate would otherwise be deemed in privity with or a direct creditor of such Borrower). The rights provided by this Section are in addition to all other rights of set-off and banker's lien and all other rights and remedies which any Lender (or any such Participant, branch, subsidiary or affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise, and nothing in this Agreement or any Loan Document shall be deemed a waiver or prohibition of or restriction on the rights of set-off or bankers' lien of any such Person. 9.13. Sharinq of Collections. The Lenders hereby agree among themselves that if any Lender shall receive (by voluntary payment, realization upon security, set-off or from any other source) any amount on account of the Loans, interest thereon, or any other Obligation contemplated by this Agreement or the other Loan Documents to be made by the Borrower pro rata to all Lenders in greater proportion than any such amount received by any other Lender, then the Lender receiving such proportionately greater payment shall notify each other Lender and the Agent of such receipt, and equitable adjustment will be made in the manner stated in this Section so that, in effect, all such excess amounts will be shared ratably among all of the Lenders. The Lender receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other Lenders a participation in the applicable Obligations owed to such other Lenders in such amount as shall result in a ratable sharing by all Lenders of such excess amount (and to such extent the receiving Lender shall be a Participant). If all or any portion of such excess amount is thereafter recovered from the Lender making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender making such purchase. The Borrower hereby consents to and confirms the foregoing arrangements. Each Participant shall be bound by this Section as fully as if it were a Lender hereunder. 9.14. Successors and Assigns; Participations; Assignments. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, all future holders of the Notes, the Agent and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights hereunder or interests herein without the prior written consent of all the Lenders and the Agent, and any purported assignment without such consent shall be void. -67- (b) Participations. Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable Law, at any time sell participations to one or more commercial banks or other Persons (each a "Participant") in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitments and the Loans owing to it and any Note held by it); provided, that (i) any such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the parties hereto shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents, (iv) such Participant shall be bound by the provisions of Section 9.13 hereof, and the Lender selling such participation shall obtain from such Participant a written confirmation of its agreement to be so bound, (v) no Participant (unless such Participant is an affiliate of such Lender, or is itself a Lender) shall be entitled to require such Lender to take or refrain from taking action under this Agreement or under any other Loan Document, except that such Lender may agree with such Participant that such Lender will not, without such Participant's consent, take action of the type described in subsections (a), (b), (c), (d) or (e) of Section 9.03 hereof; notwithstanding the foregoing, in no event shall any participation by an Lender have the effect of releasing such Lenders from its obligations hereunder, and (vi) no Participant shall be an Affiliate of the Borrower. The Borrower agrees that any such Participant shall be entitled to the benefits of Sections 2.12, 2.14 and 9.06 with respect to its participation in the Commitments and the Loans outstanding from time to time but only to the extent such Participant sustains such losses; provided, that no such Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred to such Participant had no such transfer occurred. (c) Assignments. Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable Law, at any time assign all or a portion of its rights -68- and obligations under this Agreement and the other Loan Documents (including, without limitation, all or any portion of its Commitments and Obligations owing to it and any Note held by it) to any Lender, any affiliate of a Lender or to one or more additional commercial banks or other Persons (each a "Purchasing Lender"); provided, that (i) any such assignment to a Purchasing Lender which is not a Lender shall be made only with the consent of the Borrower and the Agent which shall not be unreasonably withheld, (ii) if a Lender makes such an assignment of less than all of its then remaining rights and obligations under this Agreement and the other Loan Documents, such transferor Lender shall retain, after such assignment, a minimum principal amount of $5,000,000 of the Commitments and Revolving Credit Loans then outstanding, and such assignment shall be in a minimum aggregate principal amount of $5,000,000 of the Commitments and Revolving Credit Loans then outstanding, (iii) each such assignment shall be of a constant, and not a varying, percentage of each Commitment of the transferor Lender and of all of the transferor Lender's rights and obligations under this Agreement and the other Loan Documents, and (iv) each such assignment shall be made pursuant to a Transfer Supplement in substantially the form of Exhibit C to this Agreement, duly completed (a "Transfer Supplement"). In order to effect any such assignment, the transferor Lender and the Purchasing Lender shall execute and deliver to the Agent a duly completed Transfer Supplement (including the consents required by clause (i) of the preceding sentence) with respect to such assignment, together with any Note or Notes subject to such assignment (the "Transferor Lender Notes") and a processing and recording fee of $2,500; and, upon receipt thereof, the Agent shall accept such Transfer Supplement. Upon receipt of the Purchase Price Receipt Notice pursuant to such Transfer Supplement, the Agent shall record such acceptance in the Register. Upon such execution, delivery, acceptance and recording, from and after the Transfer Effective Date specified in such Transfer Supplement (x) the Purchasing Lender shall be a party hereto and, to the extent provided in such Transfer Supplement, shall have the rights and obligations of a Lender hereunder, and (y) the transferor Lender thereunder shall be released from its obligations under this Agreement to the extent so transferred (and, in the case of an Transfer Supplement -69- covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party to this Agreement) from and after the Transfer Effective Date. On or prior to the Transfer Effective Date specified in an Transfer Supplement, the Borrower, at its expense, shall execute and deliver to the Agent (for delivery to the Purchasing Lender) new Notes evidencing such Purchasing Lender's assigned Commitments or Loans and (for delivery to the transferor Lender) replacement Notes in the principal amount of the Loans or Commitments retained by the transferor Lender (such Notes to be in exchange for, but not in payment of, those Notes then held by such transferor Lender). Each such Note shall be dated the date and be substantially in the form of the predecessor Note. The Agent shall mark the predecessor Notes "exchanged" and deliver them to the Borrower. Accrued interest and accrued fees shall be paid to the Purchasing Lender at the same time or times provided in the predecessor Notes and this Agreement. (d) Register. The Agent shall maintain at its office a copy of each Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Obligations owing to, each Lender from time to time. The entries in the Register shall be conclusive absent manifest error and the Borrower, the Agent and the Lenders may treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of the Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Financial and Other Information. The Borrower authorizes the Agent and each Lender to disclose to any Participant or Purchasing Lender (each, a "transferee") and any prospective transferee any and all financial and other information in such Person's possession concerning the Borrower and its Subsidiaries and Affiliates which has been or may be delivered to such Person by or on behalf of the Borrower in connection with this Agreement or any other Loan Document or such Person's credit evaluation of the Borrower and its Subsidiaries and Affiliates. 9.15. Governing Law; Submission to Jurisdiction. (a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS (EXCEPT TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN DOCUMENTS) SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES. (b) Certain Waivers. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: -70- (i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED LITIGATION") MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE CITY AND COUNTY OF NEW YORK, NEW YORK, AND SUBMITS TO THE JURISDICTION OF SUCH COURTS; (ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER THE BORROWER; AND (iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 9.05 HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW). 9.16. Replacement of Lender. If (a) a change in control shall have occurred with respect to any Lender or (b) any Lender shall impose increased costs on the Borrower pursuant to Section 2.12(a) or 2.12(c) hereof, the Borrower may, upon not less than 30 Business Days' notice to the Agent, cause a Replacement Lender reasonably satisfactory to the Agent (which may be one of the other Lenders) to purchase all of such Lender's interests in accordance with the provisions of Section 9.14(c) hereof. -71- IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. ATTEST: BARNES GROUP INC. By /s/ John E. Besser By /s/ George S. Crowley -------------------------------- -------------------------------- Title: Secretary Title: Executive Vice President- Finance [Corporate Seal] Address for Notices: 123 Main Street Bristol, CT 06010 Telephone: 203-583-7070 Telex: (Answerback: ) Telecopier: 203-589-3507 -72- MELLON BANK, N.A., individually and as Agent By /s/ Joseph F. Bond, Jr. -------------------------------- Title: Vice President Initial Revolving Credit Committed Amount: $35,000,000 Commitment Percentage: 35.000% Address for Notices: Corporate Banking Department Mellon Financial Center 551 Madison Avenue New York, NY 10022-3217 Attn: Joseph F. Bond, Jr. Vice President Telephone: 212-702-4017 Telex: (Answerback: ) Telecopier: 212-702-5269 CHEMICAL BANK By /s/ Stewart U. Wallace -------------------------------- Title: Vice President Initial Revolving Credit Committed Amount: $25,000,000 Commitment Percentage: 25.000% Address for Notices: 277 Park Avenue 6th Floor New York, NY 10172 Telephone: (212) 310-7800 Telex: (Answerback: ) Telecopier: (212) 310-4526 -73- THE CONNECTICUT NATIONAL BANK By /s/ Thomas A. Brugger ------------------------ Title: Vice President Initial Revolving Credit Committed Amount: $10,000,000 Commitment Percentage: 10.000% Address for Notices: 777 Main Street Hartford, CT 06115 Attn: Corporate Banking Dept. Telephone: (203) 728-2751 Telex: 99339 (Answerback: ) Telecopier: (203) 722-9378 NBD BANK, N.A. By /s/ Carolyn Parks ------------------------ Title: Vice President Initial Revolving Credit Committed Amount: $10,000,000 Commitment Percentage: 10.000% Address for Notices: 611 Woodward Ave. Detroit, MI 48226 Telephone: (313) 225-4315 Telex: (Answerback: ) Telecopier: (313) 225-2649 -74- AMERITRUST COMPANY NATIONAL ASSOCIATION By /s/ Michael Jackson ------------------------------- Title: Vice President Initial Revolving Credit Committed Amount: $10,000,000 Commitment Percentage: 10.000% Address for Notices: 900 Euclid Avenue Cleveland, OH 44115 Telephone: Telex: (Answerback: ) Telecopier: FLEET BANK, NATIONAL ASSOCIATION By /s/ Marlene K. Haddad ------------------------------- Title: Vice President Initial Revolving Credit Committed Amount: $10,000,000 Commitment Percentage: 10.000% Address for Notices: One Constitution Plaza CTHMM03G Hartford, CT 06115-1600 Telephone: (203) 244-5825 Telex: (Answerback: ) Telecopier: (203) 244-5391 -75- Exhibit A to Credit Agreement BARNES GROUP INC. Revolving Credit Note $_________ New York, New York _____________, 199_ FOR VALUE RECEIVED, the undersigned, BARNES GROUP INC., a Delaware corporation (the "Borrower"), promises to pay to the order of [NAME OF LENDER] (the "Lender") on or before the Revolving Credit Maturity Date, and at such earlier dates as may be required by the Agreement (as defined below), the lesser of (i) the principal sum of ($ ) or (ii) the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the Borrower from time to time pursuant to the Agreement. The Borrower further promises to pay to the order of the Lender interest on the unpaid principal amount hereof from time to time outstanding at the rate or rates per annum determined pursuant to the Agreement, payable on the dates set forth in the Agreement. This Note is one of the "Revolving Credit Notes" as referred to in, and is entitled to the benefits of, the Revolving Credit Agreement, dated as of December 1, 1991, by and among the Borrower, the Lenders parties thereto from time to time, and Mellon Bank, N.A., as Agent (as the same may be amended, modified or supplemented from time to time, the "Agreement"), which among other things provides for the acceleration of the maturity hereof upon the occurrence of certain events and for prepayments in certain circumstances and upon certain terms and conditions. Terms defined in the Agreement have the same meanings herein. Except as otherwise set forth in the Agreement, the Borrower hereby expressly 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 the Agreement, and an action for amounts due hereunder or thereunder shall immediately accrue. This Note shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to principles of choice of law. BARNES GROUP INC. By__________________________________ Title: Exhibit B to Credit Agreement TRANSFER SUPPLEMENT THIS TRANSFER SUPPLEMENT, dated as of the date specified in Item 1 of Schedule I hereto, among the Transferor Lender specified in Item 2 of Schedule I hereto (the "Transferor Lender"), each Purchasing Lender specified in Item 3 of Schedule I hereto (each a "Purchasing Lender") and Mellon Bank, N.A., as Agent for the Lenders under the Revolving Credit Agreement described below. Recitals: A. This Transfer Supplement is being executed and delivered in accordance with Section 9.14(c) of the Revolving Credit Agreement, dated as of December 1, 1991 by and among Barnes Group Inc., a Delaware corporation (the "Borrower"), the Lenders parties thereto, and Mellon Bank, N.A., a national banking association, as Agent (as the same may be amended, modified or supplemented from time to time, the "Credit Agreement"). Capitalized terms used herein without definition have the meaning specified in the Credit Agreement. B. Each Purchasing Lender (if it is not already a Lender) wishes to become a Lender party to the Credit Agreement. C. The Transferor Lender is selling and assigning to each Purchasing Lender, and each Purchasing Lender is purchasing and assuming, a certain portion of the Transferor Lender's rights and obligations under the Credit Agreement, including, without limitation, the Transferor Lender's Commitments and Loans owing to it and any Notes held by it (the "Transferor Lender's Interests"). NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Transfer Effective Notice. Upon receipt by the Agent of five counterparts of this Transfer Supplement (to each of which is attached a fully completed Schedule I and Schedule II), and each of which has been executed by the Transferor Lender, by each Purchasing Lender and by any other Person required by Section 9.14(c) of the Credit Agreement to execute this Transfer Supplement, the Agent will transmit to the Borrower, the Transferor Lender and each Purchasing Lender a transfer effective notice, substantially in the form of Schedule III to this Transfer Supplement (a "Transfer Effective Notice"). The date specified in such Transfer Effective Notice as the date on which the transfer effected by this Transfer Supplement shall become effective (the "Transfer Effective Date") shall be the fifth Business Day following the date of such Transfer Effective Notice or such other date as shall be agreed upon among the Transfer Lender, the Purchasing Lender, the Agent and the Borrower. From and after the Transfer Effective Date each Purchasing Lender (if not already a Lender party to the Credit Agreement) shall be a Lender party to the Credit Agreement for all purposes thereof having the respective interests in the Transferor Lender's interests reflected in this Transfer Supplement. 2. Purchase Price; Sale. At or before 12:00 Noon, local time at the Transferor Lender's office specified in Schedule III, on the Transfer Effective Date, each Purchasing Lender shall pay to the Transferor Lender, in immediately available funds, an amount equal to the purchase price, as agreed between the Transferor Lender and such Purchasing Lender (the "Purchase Price"), of the portion being purchased by such Purchasing Lender (such Purchasing Lender's "Purchased Percentage") of the Transferor Lender's Interests. Effective upon receipt by the Transferor Lender of the Purchase Price from a Purchasing Lender, the Transferor Lender hereby irrevocably sells, assigns and transfers to such Purchasing Lender, without recourse, representation or warranty (express or implied) except as set forth in Section 6 hereof, and each Purchasing Lender hereby irrevocably purchases, takes and assumes from the Transferor Lender such Purchasing Lender's Purchased Percentage of the Transferor Lender's Interests. The Transferor Lender shall promptly notify the Agent of the receipt of the Purchase Price from a Purchasing Lender ("Purchase Price Receipt Notice"). Upon receipt by the Agent of such Purchase Price Receipt Notice, the Agent shall record in the Register the information with respect to such sale and purchase as contemplated by Section 9.14(d) of the Credit Agreement. 3. Principal, Interest and Fees. All principal payments, interest, fees and other amounts that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Lender in respect of the Transferor Lender's Interests shall, instead, be payable to or for the account of the Transferor Lender and the Purchasing Lenders, as the case may be, in accordance with their respective interests as reflected in this Transfer Supplement. 4. Closing Documents. Concurrently with the execution and delivery hereof, the Transferor Lender will request that the Borrower provide to each Purchasing Lender (if it is not already a Lender party to the Credit Agreement) conformed copies of all documents delivered to such Transferor Lender on the Closing Date in satisfaction of conditions precedent set forth in the Credit Agreement. 5. Further Assurances. Each of the parties to this Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Transfer Supplement. -2- 6. Certain Representations and Agreements. By executing and delivering this Transfer Supplement, the Transferor Lender and each Purchasing Lender confirm to and agree with each other and the Agent and the Lenders as follows: (a) Other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of the Credit Agreement or any other Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, received under or in connection with, the Credit Agreement or any other Loan Document, or (iv) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any of the Loan Documents or otherwise from time to time. (b) The Transferor Lender makes no representation or warranty and assumes no responsibility with respect to (i) the performance or observance of any of the terms or conditions of the Credit Agreement or any other Loan Document on the part of the Borrower or any other Borrower, (ii) the business, operations, condition (financial or otherwise) or prospects of the Borrower or any other Borrower or any other Person, or (iii) the existence of any Event of Default or Potential Default. (c) Each Purchasing Lender confirms that it has received a copy of the Credit Agreement and each of the other Loan Documents, together with copies of the financial statements referred to in Section 3.06 thereof, the most recent financial statements delivered pursuant to Section 5.01 thereof, if any, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Transfer Supplement. Each Purchasing Lender confirms that it has made such analysis and decision independently and without reliance upon the Agent, the Transferor Lender or any other Lender. (d) Each Purchasing Lender, independently and without reliance upon the Agent, the Transferor Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, will make its own decisions to take or not take action under or in connection with the Credit Agreement or any other Loan Document. -3- (e) Each Purchasing Lender irrevocably appoints the Agent to act as Agent for such Purchasing Lender under the Agreement and the other Loan Documents, all in accordance with Article IX of the Credit Agreement and the other provisions of the Credit Agreement and the other Loan Documents. (f) Each Purchasing Lender agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as a Lender. 7. Schedule II. Schedule II hereto sets forth the revised Commitments of the Transferor Lender and each Purchasing Lender as well as administrative information with respect to each Purchasing Lender. 8. Governing Law. This Transfer Supplement shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to principles of choice of law. 9. Counterparts. This Transfer Supplement may be executed on any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Transfer Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. -4- Schedule I to Transfer Supplement COMPLETION OF INFORMATION AND SIGNATURES FOR TRANSFER SUPPLEMENT Re: Revolving Credit Agreement, dated as of December 1, 1991, by and among Barnes Group Inc., a Delaware corporation (the "Borrower"), the Lenders parties thereto from time to time, and Mellon Bank N.A., a national banking association, as Agent for the Lenders (as amended, modified or supplemented from time to time, the "Credit Agreement") Item 1 (Date of [Insert date of Assignment Supplement): Assignment Supplement] Item 2 (Transferor Lender): [Insert name of Transferor Lender] Item 3 (Purchasing Lender[s]): [Insert name[s] of Purchasing Lender[s]] Item 4 (Signatures of Parties to Transfer Supplement): [Name of Transferor Lender] __________________________________________, as Transferor Lender By:_____________________________________ Title: [Name of Purchasing Lender] __________________________________________, as Purchasing Lender By:_____________________________________ Title: [Name of Purchasing Lender] _________________________________________ as Purchasing Lender By:_____________________________________ Title: [Following two consents required only when Purchasing Lender is not already a Lender [or an Affiliate of a Lender]] CONSENTED TO AND ACKNOWLEDGED: BARNES GROUP INC. By:___________________________ Title: MELLON BANK, N.A., as Agent By:___________________________ Title: ACCEPTED FOR RECORDATION IN PURCHASING LENDER REGISTER: MELLON BANK, N.A., as Agent By:___________________________ Title: -2- Schedule II to Transfer Supplement LIST OF LENDING OFFICES, ADDRESSES FOR NOTICES AND COMMITTED AMOUNTS [Name of Transferor Lender] Revised Commitment and Loan Amounts: Revolving Credit Committed Amount $_________ Revised Commitment Percentage: _________ [Name of Purchasing Lender] New Commitment and Loan Amounts: Revolving Credit Committed Amount $_________ New Commitment Percentage: _________ Administrative Information for Purchasing Lender: Address:__________________ __________________ Attention:________________ Telephone:________________ Telex: (Answerback:____________) Telecopier:_______________ Schedule III to Transfer Supplement Transfer Effective Notice To: [Insert Name of Borrower, Transferor Lender and each Purchasing Lender] The undersigned, as the Agent under the Revolving Credit Agreement, dated as of December 1, 1991, by and among Barnes Group Inc., a Delaware corporation (the "Borrower"), the Lenders parties thereto from time to time, and Mellon Bank N.A., a national banking association, as Agent for the Lenders (as amended, modified or supplemented from time to time, the "Credit Agreement"), acknowledges receipt of five executed counterparts of a completed Transfer Supplement, dated __________, 199_, from [name of Transferor Lender] to [name of each Purchasing Lender] (the "Transfer Supplement"). Terms defined in the Transfer Supplement are used herein as therein defined. 1. Pursuant to the Transfer Supplement, you are advised that the Transfer Effective Date will be __________, 199_. [Insert fifth Business Day following date of Transfer Effective Notice or other date agreed to among the Transferor Lender, the Purchasing Lender, the Agent and the Borrower.] 2. Pursuant to Section 9.14(c) of the Credit Agreement, the Transferor Lender has delivered to the Agent the Transferor Lender Notes. 3. Section 9.14(c) of the Credit Agreement provides that the Borrower is to deliver to the Agent on or before the Assignment Effective Date the following Notes, each dated the date of the Note it replaces. [Describe each new Revolving Credit Note for Transferor Lender and Purchasing Lender as to date (as required by the Credit Agreement), principal amount and payee.] 4. The Transfer Supplement provides that each Purchasing Lender is to pay its Purchase Price to the Transferor Lender at or before 12:00 o'clock Noon, local time at the Transferor Lender's lending office specified in Schedule II to the Transfer Supplement, on the Transfer Effective Date in immediately available funds. Very truly yours, MELLON BANK, N.A., as Agent By: _______________________________ Title: [BARNES LETTERHEAD] [BARNES LOGO] Exhibit C to Credit Agreement December 6, 1991 Mellon Bank, N.A., Individually and as Agent Ameritrust Company National Association Chemical Bank The Connecticut National Bank Fleet Bank, National Association NBD Bank, N.A. Gentlemen/Mesdames: I am Vice President, General Counsel and Secretary of Barnes Group Inc., a Delaware corporation (the "Borrower"), and have acted as counsel to the Borrower in connection with the Revolving Credit Agreement dated as of December 1, 1991 between you and the Borrower (the "Agreement"). This opinion is being delivered to the Lenders pursuant to Section 4.01(d) of the Agreement. Capitalized terms used herein without definition are used as defined in the Agreement. In this connection, I have examined and am familiar with the originals or copies, certified or otherwise identified to my satisfaction, of the Agreement, the Revolving Credit Notes, the Restated Certificate of Incorporation and By-Laws of the Company, as currently in effect, resolutions of the Company's Board of Directors authorizing the Agreement and the issuance of the Notes, and such other documents as I have deemed necessary or appropriate as a basis for the opinions set forth below. In my examination, I have assumed the genuineness of all signatures (except for signatures of officers of the Borrower), the legal capacity of natural persons, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies and the authenticity of the originals of such copies. As to the facts material to this opinion which I did not independently establish or verify, I have relied upon statements and representations of officers and other representatives of the Borrower and others. I am admitted to the bar in the State of Missouri and am not admitted in any of the jurisdictions in which the Foreign Subsidiaries are incorporated. With respect to Foreign Subsidiaries, I am generally familiar with their organizational structure, have put in place . . . Page 2 December 6, 1991 procedures designed to ensure their continued qualification to do business and good standing in their respective jurisdictions, and am generally familiar with their current business activities and financial status. Based upon and subject to the forgoing, I am of the opinion that: 1. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power to own its property and to carry on its business as now conducted and is qualified to do business in every jurisdiction where such qualification is necessary and in which the failure to be so qualified would have a Material Adverse Effect. 2. Each Subsidiary incorporated in the United States ("Domestic Subsidiary") is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, has the corporate power to own its property and to carry on its business as now conducted and is qualified to do business in every jurisdiction where such qualification is necessary and in which the failure to be so qualified would have a Material Adverse Effect. The shares of stock of each Domestic Subsidiary purported to be owned by the Borrower are validly issued, fully paid and nonassessable and are owned by the Borrower free and clear of any mortgage, lien, pledge, charge, security interest or other encumbrance. 3. To the best of my knowledge, without any special investigation by me, (a) each subsidiary not incorporated in the United States ("Foreign Subsidiary") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the corporate power to own its property and to carry on its business as now conducted and is qualified to do business in every jurisdiction where such qualification is necessary and in which the failure to be so qualified would have a Material Adverse Effect, and (b) the shares of stock of each Foreign Subsidiary purported to be owned by the Borrower or another Subsidiary are validly issued, fully paid and . . . Page 3 December 6, 1991 nonassessable and are owned by the Borrower or another Subsidiary (except in the case of Director's qualifying shares) free and clear of any mortgage, lien, pledge, charge, security interest or other encumbrance. 4. The Borrower has the corporate power to execute, deliver and perform the Agreement, to borrow under the Agreement, and to execute and deliver the Notes. 5. As of the date hereof, the execution, delivery and performance of the Agreement, any borrowings under the Agreement and the execution and delivery of the Notes by the Borrower, (a) have been duly authorized by all requisite corporate action (including, without limitation, any requisite action of the stockholders of the Borrower), (b) will not violate any provision of the Restated Certificate of Incorporation or By-Laws of the Borrower or any Subsidiary and (c) will not be in conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default with respect to Indebtedness for borrowed money (including but not limited to the Guarantee). 6. To the best of my knowledge, without any special investigation by me other than the laws and documents referred to above, as of the date hereof the execution, delivery and performance of the Agreement, any borrowings under the Agreement and the execution and delivery of the Notes by the Borrower (a) will not (i) violate (A) any provision of Law (including, without limitation, Regulations G, U, T, and X of the Federal Reserve Board), any order of any court or other agency of government or (B) any indenture, agreement or other instrument to which the Company or any Subsidiary of the Company is a party, or by which it or any of its property is bound, (ii) be in conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or (iii) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any property or assets of the Borrower or any Subsidiary of the Borrower and (b) do not require the Borrower or any Subsidiary to obtain the consent or approval of any Federal, State, municipal or other governmental . . . Page 4 December 6, 1991 department, commission, board, bureau, agency or instrumentality, domestic or foreign. 7. Neither the Borrower nor any Subsidiary thereof is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or the Investment Company Act of 1940. Neither the Borrower nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 8. The Agreement and the Revolving Credit Notes have each been duly executed and delivered and, assuming that the Agreement is a valid and binding obligation of you, each constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except (a) that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws nor or hereafter in effect relating to creditors' rights generally, and (b) such enforcement may be subject to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 9. To the best of my knowledge after due inquiry, there is no pending or threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower, which will more likely than not, individually or in the aggregate, have a Material Adverse Effect. I am furnishing this opinion to you solely in connection with the transactions contemplated by the Agreement. This opinion is solely for your benefit and is not to be used, circulated, quoted or otherwise referred to for any other purpose without my written permission. In connection with the transactions contemplated by this Agreement, the law firm of Reed Smith Shaw & McClay may also rely on this opinion. Very truly yours, /s/ John E. Besser ------------------ John E. Besser JEB/hvl Exhibit D to Credit Agreement Quarterly Compliance Certificate I have conducted a review of the terms and conditions of the Revolving Credit Agreement dated as of December 1, 1991 (the "Agreement"), the Notes and the other Loan Documents, and the financial statements of the Borrower. Defined terms used herein without definition are used as defined in the Agreement. Such review has not disclosed nor does the signer have any knowledge of the existence as of the date of this certificate of any condition or event which constitutes a Potential Default or Event of Default. Enclosed are condensed financial statements relating to the most recent quarter. In my opinion they present fairly the consolidated financial position of Barnes Group at the end of the quarter and the results of operations for the indicated periods. These statements were prepared in accordance with generally accepted accounting principles for interim financial statements. Also enclosed are true and correct schedules demonstrating compliance with the covenants contained in Sections 6.01, 6.02 and 6.03 of the Agreement as of the date of this certificate. Date: By: _______________________________ Title: ____________________________ Schedule 3.01 (Corporate Status) 1. The Borrower is incorporated in the State of Delaware. 2. See Schedule 3.11 for the places of incorporation of the Subsidiaries. Schedule 3.07 INDEBTEDNESS (A) The Indebtedness of the Company and its Subsidiaries as of September 30, 1991 is as follows:
Description Amount ----------- ------ 1) Term Loan Agreement Mellon Bank, N.A. $20,000,000.00 2) Senior Notes Various $40,000,000.00 3) Industrial Revenue Comerica Bank, N.A. $ 7,000,000.00 Bond, Saline, MI Trustee 4) Industrial Revenue Mellon Bank, N.A.A. $ 1,714,300.00 Bond, Meridian, MS Trustee 5) Short Term Credit Line Various $37,000,000.00 6) Bank Overdraft Various $ 3,715,803.00 7) Guaranty Agreement Mellon Bank, N.A. $ 1,714,300.00 8) Letter of Credit Fuji Bank, Ltd. $ 7,394,000.00 9) NASCO Guaranty LTCB Trust Co. $ 3,780,000.00 10) NASCO Guaranty Tohlease Corp. $ 3,891,000.00 11) NASCO Guaranty LTCB Trust Co. $ 5,930,000.00 12) NASCO Guaranty LTCB Trust Co. $ 1,350,000 00 13) ESOP Guaranty CT. National Bank $18,002,000.00 Nat. Bank Detroit 14) Standby L/C Connecticut National $ 5,694,000.00 (Insurance) Bank 15) Commercial L/C Fleet Bank, N.A. $ 571,000.00 16) Company Guaranty Various $ 100,000.00 17) Standby L/C (Gardena) Connecticut Nationa1 $ 347,000.00
Total Debt: $149,489,000. Total excludes duplication items listed: (3) Industrial Revenue Bond, Saline, $7,000,000.00. (7) Guaranty Agreement, Meridian, $1,714,300.00. Schedule 3.11 The Company's Subsidiaries are as follows:
Percentage of Voting Stock Owned Jurisdiction of by Company and Each Name of Subsidiary Incorporation Other Subsidiary* ------------------ ------------- ----------------- Associated Spring-Asia PTE. LTD. Singapore 100% Associated Spring Corporation** Connecticut 100% Associated Spring SPEC Ltd. England Note 1 Autoliaisons France S.A. France 100% Barnes Group Canada Inc. Canada 100% Bowman Distribution (U.K.) Limited** United Kingdom 100% Motalink Limited United Kingdom 100% Resortes Industriales Del Norte, S.A. Mexico 100% Resortes Mecanicos, S.A. Mexico 100% Stumpp & Schuele do Brasil Industria e Comercio Limitada Brazil 100% Stumpp & Schuele Distribuidora Ltda. Brazil 100% The Wallace Barnes Company** Connecticut 100% Windsor Airmotive Asia PTE. LTD. Singapore Note 2
Note 1: Associated Spring SPEC Limited is wholly owned by Motalink Limited. Note 2: Windsor Airmotive Asia PTE. LTD. is wholly owned by Barnes Group Canada Inc. * Other than directors' qualifying shares. ** Inactive. Schedule 3.12 (Partnerships, etc.) 1. The Subsidiaries listed in Schedule 4.11. 2. The Borrower owns 45% of the stock of NHK-Associated Spring Suspension Components Inc. 3. The Borrower owns a 15% equity interest in Resortes Argentina, S.A., formerly a wholly-owned subsidiary of the Borrower. EX-10.6 9 EXHIBIT 10.6 1991 BARNES GROUP STOCK INCENTIVE PLAN -------------------------------------- As Amended and Restated as of February 21, 1997 ----------------------------------------------- 1. Purpose ------------ The purpose of the Plan is to authorize the grant to Key Employees of the Company or any Subsidiary of (i) nonqualified options to purchase shares of Common Stock, (ii) Stock Appreciation Rights, (iii) Incentive Stock Rights, and (iv) Performance Unit Awards, and thus benefit the Company by giving such employees a greater personal interest in the success of the enterprise and an added incentive to continue and advance their employment. An additional purpose of the Plan is to provide "qualified performance-based compensation" (within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder ("Section 162(m)") to Key Employees. 2. Definitions ---------------- The following terms, when used in the Plan, shall mean: 1981 Plan: The Barnes Group Inc. Stock Incentive Plan --------- adopted by the stockholders of the Company in 1981. Board: The Board of Directors of the Company. ----- CEO: The Chief Executive Officer of the Company. --- Committee: Such committee as shall be appointed by the --------- Board pursuant to the provisions of Section 11. 1 Common Stock: The Common Stock of the Company, par ------------ value $1.00 per share, or such other class of shares or other securities as may be applicable pursuant to the provisions of Section 9. Company: Barnes Group Inc. ------- Disability: Inability to perform the services normally ---------- rendered by the employee due to any physical or mental impairment that can be expected either to be of indefinite duration or to result in death, as determined by the Committee on the basis of appropriate medical evidence. Fair Market Value: As applied to the Common Stock on ----------------- any day, the closing market price of such stock as reported in the New York Stock Exchange Composite Transactions Index for such day, or if the Common Stock was not traded on such day, for the last preceding day on which the Common Stock was traded. Incentive: An incentive granted under the Plan in one --------- of the forms provided for in Section 3. Key Employee: An employee of the Company or of a ------------ Subsidiary, including an officer or director who is an employee, who in the Committee's or CEO's judgment can contribute significantly to the growth and successful operations of the Company or a Subsidiary. Option: An option to purchase shares of Common Stock. ------ Plan: The 1991 Barnes Group Stock Incentive Plan herein ---- set forth, as amended from time to time. 2 Subsidiary: A corporation in which the Company owns, ---------- directly or indirectly, at least 50% of the voting stock. 3. Grants of Incentives ------------------------- (a) Subject to the provisions of the Plan, the Committee may at any time, or from time to time, grant Incentives under the Plan to, and only to, Key Employees. In addition, subject to the provisions of the Plan, the CEO may also grant Options to Key Employees, but only in connection with the hiring or promotion of such Key Employees and only if such Key Employees are not (or, by virtue of such hiring or promotion, would not become) subject to the reporting requirements under Rule 16a promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any Options granted by the CEO shall be (i) evidenced by a written instrument in the form most recently approved by the Committee for such Option and (ii) subject to, if applicable, the performance targets and incentive periods most recently set forth by the Committee for such Option. For purposes of the Plan, grants by the CEO complying with this Section 3(a) shall be deemed to have been effected by the Committee. (b) Incentives may be in the following forms: (i) an Option, in accordance with Section 5; (ii) a Stock Appreciation Right, in accordance with Section 6; (iii) an Incentive Stock Right, in accordance with Section 7; (iv) a Performance Unit Award, in accordance with Section 8; or (v) a combination of two or more of the foregoing. 3 4. Stock Subject to the Plan ------------------------------ (a) Subject to adjustment as provided in Section 9, the aggregate number of shares of Common Stock which may be issued subject to Incentives granted under the Plan shall not exceed the sum of (i) 1,000,000 shares and (ii) the number of shares of stock covered by outstanding options (or installments thereof) granted under the 1981 Plan which, after its expiration, shall terminate or expire in whole or in part without being exercised. Charges against such aggregate number are governed by the provisions of paragraph (c) of this Section 4, paragraph (k) of Section 5, paragraph (e) of Section 6, paragraph (c) of Section 7, and paragraph (e) of Section 8. No Key Employee may receive grants of Options, Stock Appreciation Rights or Incentive Stock Rights in any year relating to shares of Common Stock which in the aggregate exceed 50,000 shares, which number shall be adjusted pursuant to the terms hereof. (b) Such shares may be either authorized but unissued shares or shares issued and thereafter acquired by the Company. (c) If any shares subject to an Incentive shall cease to be subject thereto because of the termination without exercise or payment, in whole or in part, of such Incentive, the shares as to which the Incentive was not exercised or paid shall no longer be charged against the limits in paragraph (a) of this Section 4 and may again be made subject to Incentives. (d) The Committee may permit the voluntary surrender of all or a portion of any Incentive granted under this Plan conditioned upon the granting to the employee of a new Incentive for the same or a different number of shares or amount of other payment as the Incentive surrendered, or it may require such voluntary surrender as a condition to a grant of a new 4 Incentive to such employee. Such new Incentive shall be exercisable at the price, during the period, and in accordance with any other terms or conditions specified by the Committee at the time the new Incentive is granted, all determined in accordance with the provisions of this Plan without regard to the price, period of exercise, or any other terms or conditions of the Incentive surrendered. 5. Options ------------ Incentives, in the form of options to purchase shares of Common Stock, shall be subject to the following provisions: (a) The Option price per share shall be determined as of the effective date of the grant and shall not be less than 85% of the Fair Market Value of the Common Stock at the time of the grant of the Option. In no event shall the Option price be less than the par value of the stock which is the subject of the Option. (b) Each Option shall expire at such time as the Committee may determine at the time the Option is granted; provided, however, that no Option may, under any circumstances, expire later than ten years from the date such Option shall have been granted. (c) Any Option granted under the Plan may be exercised solely by the person to whom granted, by his/her guardian or legal representative, or, in the case of death, by an estate. (d) No Option may be exercised less than 12 months from the date it is granted. After completion of any additional required period of employment specified in the Option grant, the Option may be exercised, in whole or in part, at any time or from time to time during the balance of 5 the term of the Option, except as limited by provisions contained in the Option (including provisions regarding exercise in installments). (e) If the optionee terminates employment prior to attaining age 55, the Option shall terminate 90 days after termination of employment, except in the case of death or disability. (f) If employment terminates as a result of death or disability, or if the Optionee terminates employment after attaining age 55, the Option shall terminate five years after termination of employment; provided, however, if the Optionee's employment is terminated upon the request of the Company after the Optionee attains age 55, the Option may be terminated by the Committee effective 90 days after termination of employment. (g) Notwithstanding anything else in this Section 5 to the contrary, (1) the Committee may provide that an Option will terminate prior to time periods specified in paragraphs 5(e) and 5(f) on conditions specified by the Committee and incorporated in an Option Agreement between the Company and the person receiving the option; and (2) in no event may any Option be exercised after the expiration date thereof. (h) Shares purchased upon exercise of an Option shall be paid for in full within twenty days of the date of exercise in cash or, with the consent of the Committee, in whole or in part in shares of Common Stock based on their Fair Market Value on the date of exercise. (i) If so authorized by the Committee, the Company may, with the consent of the optionee, and at any time or from time to time, cancel all or a portion of any Option granted under the Plan then subject to exercise and discharge its obligation in respect of the Option either by payment to the 6 optionee of an amount of cash equal to the excess, if any, of the Fair Market Value, at such time, of the shares subject to the portion of the Option so cancelled over the aggregate option price of such shares, or by issuance or transfer to the optionee of shares of Common Stock with a Fair Market Value, at such time, equal to any such excess, or by a combination of cash and shares. (j) The forms of Option authorized by the Plan may contain such other provisions as the Committee shall deem advisable. (k) Upon the exercise of an Option there shall be charged against the limits in paragraph (a) of Section 4 the number of shares issued to the optionee. Upon the cancellation of any Option pursuant to paragraph (i) of Section 5, there shall be charged against the limitations in paragraph (a) of Section 4 a number of shares equal to (A) the number of any shares issued to the optionee plus (B) the number of shares purchasable with the amount of any cash paid to the optionee on the basis of the Fair Market Value as of the date of payment; and the number of shares subject to the portion of the Option so cancelled, less the number of shares so charged against such limitations, shall thereafter be available for other grants of Incentives. (l) An Option will not be treated as an Incentive Stock Option within the meaning of section 422 of the Internal Revenue Code of 1986, as amended. 6. Stock Appreciation Rights ------------------------------ (a) A Stock Appreciation Right ("SAR") may be granted in connection with any Option granted under the Plan, either at the time of the grant of such Option or at any time thereafter during the term of the Option, or independently of the grant of an Option. 7 (b) An SAR shall entitle the holder thereof, upon exercise of the SAR, to receive a number of shares of Common Stock or cash or a combination of cash and shares (as the Committee in its discretion may elect) determined pursuant to paragraph (d) of this Section 6. (c) An SAR shall be subject to the following terms and conditions and to such other terms and conditions not inconsistent with the Plan as shall from time to time be approved by the Committee: (i) If granted in connection with an Option, an SAR shall be exercisable at such time or times and by such person or persons and to the extent, but only to the extent, that the Option to which it relates shall be exercisable; provided, however, that such SAR shall be exercisable only during the ten-day periods (the "Exercise Periods") beginning on the third business day following the date of release of a summary statement of the Company's quarterly or annual sales and earnings and ending on the twelfth business day following such date of release. (ii) If granted independently of an Option, an SAR shall be subject to the following provisions: (A) If a person terminates employment prior to attaining age 55, the SAR shall terminate 90 days after the termination of employment, except in the case of death or disability. (B) If employment terminates as a result of death or disability or if a person terminates employment after attaining age 55, 8 the SAR will terminate one year after the termination of employment. (d) Upon exercise of an SAR, the holder thereof shall be entitled to receive a number of shares equal in Fair Market Value to (1) the amount by which the Fair Market Value of a share of Common Stock on the date of such exercise shall exceed the Fair Market Value of a share of Common Stock on the date of grant of the related Option, or, in the case of any SAR granted independently of an option, on the date of grant of such SAR, multiplied by (2) the number of shares in respect of which the SAR shall have been exercised. Settlement for any fraction of a share due shall be made in cash. The Committee may settle all or any part of the Company's obligation arising out of an exercise of any SAR by the payment of cash equal to the aggregate value of the shares of Common Stock that it would otherwise be obligated to deliver under the provisions of this paragraph (d). (e) Upon exercise of any SAR, (i) there shall be charged against the limitations in paragraph (a) of Section 4 a number of shares equal to (A) the number of shares issued to the grantee under paragraph (d) of this Section 6 plus (B) the number of shares purchasable with the amount of any cash paid to the grantee on the basis of the Fair Market Value as of the date of payment and (ii) the portion of the Incentive in respect of which such SAR shall have been exercised shall be cancelled and the number of shares subject to such portion, less the number of shares so charged against such limitations, shall thereafter be available for other grants of Incentives. 9 7. Incentive Stock Rights --------------------------- (a) An Incentive Stock Right will consist of incentive stock units, each of which will be equivalent to one share of Common Stock. An Incentive Stock Right will be evidenced by an agreement in form approved by the Committee; will be nontransferable; will entitle the holder to receive shares of Common Stock, without payment to the Company, after the lapse of the incentive period or periods established by the Committee and subject to the satisfaction of any performance goals established by the Committee from the performance criteria set forth in Section 14 hereof with respect to such Incentive Stock Rights; and will be subject to the limitations in paragraph (a) of Section 4. The terms of the agreement evidencing an Incentive Stock Right shall provide that holders of Incentive Stock Rights will be entitled, from the date of the award, either (1) to receive from the Company cash payments equal to the amount of dividends declared on the number of shares of Common Stock equal to the number of incentive stock units held by them, such payments to be made on or about the Company's dividend payment dates or (2) to be credited with dividend equivalents based upon dividends paid on outstanding shares of Common Stock. Such dividend equivalents, once credited, shall be converted into a number of additional incentive stock units, as of each dividend payment date, in accordance with the following formula: (A x B) /C in which "A" equals the number of incentive stock units credited to the holder on the dividend payment date, "B" equals the dividend per share and "C" equals the Fair Market Value per share of Common Stock on the dividend payment date. If a dividend is paid in property other than cash, dividend equivalents shall be credited, as of the dividend payment date, in accordance with the formula set forth above, except that "B" shall equal 10 the fair market value per share of the property which the holder would have received in respect of the number of shares of Common Stock equal to the number of incentive stock units credited to the holder as of the dividend payment date, had such shares been owned as of the record date for such dividend. (b) If an employee terminates employment prior to attaining age 55, all Incentive Stock Rights will terminate on the date employment terminates, except in the case of death or disability. Except as otherwise provided in the agreement evidencing the Incentive Stock Right, if employment terminates as a result of death or disability, or after attainment of age 55, the Committee may elect, at any time during or at the end of the Incentive period, to award a portion of the shares of Common Stock that would have been awarded, but for the termination of employment, equal to the number of months in the incentive period prior to the termination date divided by the number of months in the incentive period. (c) After the issuance of shares in respect of Incentive Stock Rights, there will be charged against the limitations in paragraph (a) of Section 4 a number of shares equal to the number of shares so issued. (d) To the extent not inconsistent with Section 162(m), the Committee may make such adjustments to any performance goals or to the Company's financial results as it deems appropriate for changes in accounting practices or principles, for material acquisitions or dispositions of stock or property, for recapitalizations or reorganizations or for any other events with respect to which the Committee determines such an adjustment to be appropriate in order to avoid distortion in the operation of the Plan. 11 8. Performance Unit Awards ---------------------------- (a) A Performance Unit Award will consist of performance units granted to Key Employees selected by the Committee which can be paid in cash or shares of Common Stock. Performance units may be granted alone or in conjunction with and related to an Option. When granted in conjunction with an Option, the number of performance units, unless otherwise provided by the Committee, will be equal to the number of shares under the related Option. To the extent that the Committee elects to pay performance units granted with a related Option, there will be a proportionate reduction in the number of shares available under such Option and any related SAR. To the extent the related Option or an SAR granted in connection with such Option is exercised, the related number of performance units will be proportionately reduced. (b) The Committee will establish an initial value for each performance unit at the time of grant. At that time, the Committee will also establish performance targets (from the performance criteria set forth in Section 14 hereof) to be achieved during the award period of not less than one year set by the Committee. The value of the performance units at the end of the award period will be determined by the degree to which the performance targets are achieved. Performance Unit Awards will be subject to the limitations in paragraph (a) of Section 4 and will be evidenced by agreements setting forth the initial value for each performance unit, the performance targets, the award period and such other terms and conditions not inconsistent with the Plan as the Committee may determine. (c) Payment, if any, at the end of the award period will be made in cash, shares of Common Stock, or both, as determined by the Committee. In no event shall payment to an individual in respect of any Performance 12 Unit Award exceed $250,000 in value. A Performance Unit Award granted alone, not in conjunction with an Option, is automatically payable if the conditions are met. A Performance Unit Award granted in conjunction with an Option is payable only if the conditions are met and then at the election of the Committee, as an alternative to the continuance of the related option and any related SAR. The Committee may make this election to pay only during the first two months after the end of the award period. If the election to pay is not made, the Performance Unit Award terminates and the related Option and SAR continue in effect. (d) In the event of termination of employment prior to the end of the award period by reason of death, disability, or termination of employment after attainment of 55 years of age, a pro rata portion of the value of the performance units at the end of the award period will be paid to the employee (or his/her estate in the case of death), unless the Committee determines that a different portion should be payable or elects to terminate the award. Except as otherwise determined by the Committee, upon termination of employment under any other circumstances, the Performance Unit Award will terminate. (e) Upon payment of a Performance Unit Award, there shall be charged against the aggregate limitations in paragraph (a) of Section 4 a number of shares equal to (i) the number of any shares issued to the employee in respect of the Performance Unit Award plus (ii) the number of shares purchasable with the amount of any cash paid to the employee in respect of the Performance Unit Award on the basis of the Fair Market Value of the Common Stock as of the date of payment. (f) To the extent not inconsistent with Section 162(m), the Committee may make such adjustments to the performance goals or to the Company's 13 financial results as it deems appropriate for changes in accounting practices or principles, for material acquisitions or disposition of stock or property, for recapitalizations or reorganizations or for any other events with respect to which the Committee determines such an adjustment to be appropriate in order to avoid distortion in the operation of the Plan. 9. Adjustment Provisions -------------------------- The Options granted under the Plan shall contain such provisions as the Committee may determine with respect to adjustments to be made in the number and kind of shares covered by such Options and in the Option price in the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of the Company, and in the event of any such change, the aggregate number and kind of shares available under the Plan and the maximum number of Options, Stock Appreciation Rights, and Incentive Stock Rights which can be granted to any individual shall be appropriately adjusted. In the event of any such change, equitable adjustments shall also be made by the Committee in its discretion in the terms and conditions of any SAR, Incentive Stock Right, or Performance Unit Award granted under the Plan. 10. Term --------- The Plan, as amended and restated as of February 16, 1996, shall become effective if and when approved by the Company's stockholders at the 1996 Annual Meeting. In the absence of such approval, the Plan, as in effect prior to such amendment and restatement, shall remain in effect. No Incentives shall be granted under the Plan after April 2, 2006. 11. Administration ------------------- (a) The Plan shall be administered by the Committee, to be appointed from time to time by the Board consisting of not less than three members of the Board. No member of the Committee shall be eligible to participate in the 14 Plan. Each member of the Committee shall qualify as an "outside director" within the meaning of Section 162(m) and as a "disinterested person" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) Incentives under the Plan shall be granted in accordance with the Committee's determinations pursuant to the Plan, by execution and prompt delivery to the employee of instruments approved by the Committee. Any such grant shall be effective on the date of such determination or, if after, on the date specified in the instrument evidencing the grant. (c) The interpretation and construction by the Committee of any provision of the Plan and of any Incentive granted thereunder shall, unless otherwise determined by the Board, be final and conclusive on all persons having any interest thereunder. 12. General Provisions ----------------------- (a) Absence on leave because of military or governmental service, or other reason, if such absence is approved by the Committee, shall not be considered an interruption or termination of employment for any purpose of the Plan, or Incentives granted thereunder, except that no Incentive may be granted to an employee while he/she is absent on leave. (b) Nothing in the Plan or in any instrument executed pursuant thereto shall confer upon any employee any right to continue in the employ of the Company or a Subsidiary. (c) No shares of Common Stock shall be sold, issued, or transferred pursuant to, or accepted as payment of the Option price of, an Incentive unless and 15 until there has been compliance, in the opinion of the Company's General Counsel, with all applicable legal requirements, including without limitation those relating to securities laws and stock exchange listings. (d) No employee (individually or as a member of a group), and no beneficiary or other person claiming under or through him/her, shall have any right, title, or interest in or to any shares of Common Stock allocated or reserved for the Plan or subject to any Incentive except as to such shares of Common Stock, if any, as shall have been sold, issued, or transferred to him/her. (e) The Company or a Subsidiary may make such provisions as it may deem appropriate for the withholding of any taxes which the Company or Subsidiary determines it is required to withhold in connection with any Incentive. (f) No Incentive and no rights under the Plan, contingent or otherwise, (i) shall be assignable or subject to any encumbrance, pledge, or charge of any nature, whether by operation of law or otherwise, (ii) shall be subject to execution, attachment, or similar process, or (iii) shall be transferable other than by will or the laws of descent and distribution, and every Incentive and all rights under the Plan shall be exercisable during the employee's lifetime only by him/her or by a guardian or legal representative. (g) Nothing in the Plan is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice, or arrangement for the payment of compensation or fringe benefits to any employee which the Company or any Subsidiary now has or may hereafter put into effect, including without limitation any retirement, pension, 16 savings or thrift, insurance, death benefit, stock purchase, incentive compensation, or bonus plan. 13. Amendment or Discontinuance of Plan ---------------------------------------- (a) The Plan may be amended by the Board at any time, provided that, without the approval of the stockholders of the Company, no amendment shall be made if stockholder approval is required in order for the Plan to comply with Rule 16b-3 promulgated under the Exchange Act or Section 162(m). (b) The Board may discontinue the Plan at any time. (c) No amendment or discontinuance of the Plan shall adversely affect, except with the consent of the holder, any Incentive theretofore granted. 14. Performance Goals ---------------------- The Committee may establish performance goals or targets in connection with the grant of, and as a condition to payment in respect of, Incentive Stock Rights and shall establish performance goals or targets in connection with the grant of, and as a condition to payment in respect of Performance Unit Awards. Such goals or targets shall be expressed in terms of one or more of the following financial criteria or objectives of the Company: Net Income; Earnings Per Share; Return on Equity; Return on Invested Capital; or Performance Profit. For purposes of the Plan: (a) "Return on Equity" shall mean net income divided by stockholders' equity; (b) "Return on Invested Capital" shall mean net income before interest and taxes times one minus the tax rate divided by interest-bearing debt plus equity; 17 (c) "Performance Profit" shall mean operating income minus the charge for the capital employed in the unit's basic business that is used in the Company's current operating plan. 18 EX-10.8 10 EXHIBIT-10.8 BARNES GROUP INC. AMENDED AND RESTATED DIRECTORS' DEFERRED COMPENSATION PLAN ------------------------------------- Section 1: Establishment of Plan --------------------- This deferred compensation plan, originally effective December 1, 1987, as amended and restated effective July 19, 1996, provides a means whereby Directors of the Company may defer receipt of all or a portion of the compensation they earn in their capacity as a Director of the Company. Section 2: Definitions ----------- When used in this Plan, the following terms shall have the definitions set forth in this section: 2.1 "Board of Directors" shall mean the Board of Directors of Barnes Group Inc. 2.2 "Common Stock" shall mean the common stock, par value $1.00 per share, of the Company. 2.3 "Common Stock Unit" shall mean a unit representing one share of Common Stock. 2.4 "Company" shall mean Barnes Group Inc. 2.5 "Compensation" shall mean retainer fees earned for service as a Director of the Company, meeting attendance fees earned for attending meetings of the Board of Directors or any of its committees, and amounts payable to a Director pursuant to Section 5 of the Barnes Group Inc. Non-Employee Director Deferred Stock Plan effective February 20, 1987. 2.6 "Deferred Compensation Accounts" shall mean, collectively, the Deferred Compensation Cash Account and the Deferred Compensation Phantom Stock Account. 2.7 "Deferred Compensation Cash Account" shall mean the bookkeeping account which is credited with deferred Compensation pursuant to Section 4. 2.8 "Deferred Compensation Phantom Stock Account" shall mean the bookkeeping account which is credited with deferred Compensation pursuant to Section 5. 2.9 "Director" shall mean a member of the Board of Directors who is not employed by the Company. 1 2.10 "Fair Market Value" on a specified day shall mean the closing price of the Common Stock as reported on the New York Stock Exchange, or if no sale of the Common Stock was so reported on that date, on the next preceding day on which there was such a sale. 2.11 "Participant" shall mean a Director who enrolls in the Plan pursuant to the procedures set forth in Section 3. 2.12 "Retirement" shall mean the date a Director ceases to be a member of the Board of Directors for any reason whatsoever. 2.13 "Benefits Committee" shall mean the Benefits Committee of the Board of Directors. Section 3: Participation in the Plan ------------------------- 3.1 A Director may become a Participant in the Plan by filing an enrollment form with the Secretary of the Company in substantially the form attached hereto as Exhibit A in which the Director agrees to defer all or a portion of future Compensation which is not earned on the effective date of Participation. 3.2 At the time such Director becomes a Participant, such Director may elect that deferred Compensation be credited to either (a) the Deferred Compensation Cash Account, (b) the Deferred Compensation Phantom Stock Account, or (c) a combination of the foregoing. 3.3 A Director may withdraw from further participation in the Plan upon 10 days written notice; provided, however, that amounts previously credited to the Deferred Compensation Accounts will only be paid pursuant to Section 6 hereof. 3.4 (a) Except as provided in Section 3.4 (b), effective as of January 1 of any year, a Participant may (i) increase or decrease the amount of future deferred compensation; (ii) allocate such future deferred Compensation between the Deferred Compensation Accounts, and/or (iii) modify the allocation of amounts previously deferred. (b) In connection with the amendment and restatement of this Plan, each Participant with a balance in the Deferred Compensation Account (under the Plan as in effect prior to such amendment and restatement) may elect that all or any portion of such balance be allocated to the Deferred Compensation Phantom Stock Account hereunder, such allocation to be effective 30 days after the effective date of such amendment and restatement. 2 (c) A Participant wishing to make any such modifications must file a form with the Secretary of the Company in substantially the form attached hereto as Exhibit B no later than (i) 60 days prior to the January 1 effective date (in the case of an election under paragraph (a) hereof) or (ii) 10 days after the effective date of the amendment and restatement of the Plan (in the case of an election under paragraph (b) hereof). Section 4: Deferred Compensation Cash Account ---------------------------------- 4.1 The Company shall establish a bookkeeping account on behalf of each Participant who elects to defer Compensation to the Deferred Compensation Cash Account. This account shall be credited with an amount equal to that portion of the Participant's deferred Compensation that the Participant elects to defer under this Section 4 at such times as the Compensation subject to such deferral would otherwise have been paid. The Company shall not be required to segregate or earmark assets with respect to such account and Participants shall have no interest in any specific asset as a result of the creation of such account. 4.2 Interest will be credited quarterly on the unpaid amount standing to any Participant's credit in the Deferred Compensation Cash Account at the end of each quarter. The interest rate shall be the rate of interest for prime commercial loans of 90-day maturities charged by Chemical Bank (or such other New York City bank as the Benefits Committee may select) on the first business day of each quarter. Section 5: Deferred Compensation Phantom Stock Account ------------------------------------------- 5.1 The Company shall establish a bookkeeping account on behalf of each Participant who elects to defer Compensation to the Deferred Compensation Phantom Stock Account. At such times as the Compensation subject to such deferral would otherwise have been paid, the Deferred Compensation Phantom Stock Account shall be credited with a number of Common Stock Units (including fractional Common Stock Units) equal to (a) that portion of the Participant's Deferred Compensation that the Participant elects to defer under this Section 5, divided by (b) the Fair Market Value of the Common Stock on the date such Compensation would otherwise have been paid. The Company shall not be required to segregate or earmark Common Stock with respect to such account and Participants shall have no interest in any specific asset as a result of the creation of such account. 5.2 Each Common Stock Unit shall be credited with dividend equivalents based on the value of any dividends which would have been paid to the Participant if he or she had owned a number of shares of Common Stock equal to the number of his 3 or her Common Stock Units. Such dividend equivalents shall be converted into additional Common Stock Units for the Participant based upon the Fair Market Value of shares of Common Stock on the date on which such dividend is paid. 5.3 In the event of any recapitalization, merger, consolidation, stock split or other significant corporate event affecting the Common Stock, the Common Stock Units credited to a Participant's Deferred Compensation Phantom Stock Account shall be equitably adjusted to reflect such event. 5.4 Payments from the Deferred Compensation Phantom Stock Account shall be made only in cash, and only in accordance with Section 6 hereof. Section 6: Payments -------- 6.1 Payments from the amount standing to the Participant's credit in his or her Deferred Compensation Accounts shall begin on the first day of the month following the Participant's Retirement; provided, however, that if Retirement occurs prior to the Participant's 60th birthday, except for reasons of death or disability, said payments shall commence on the first day of the month following the Participant's 60th birthday. 6.2 Payments shall be made in a lump sum or in installments as elected by the Participant in the initial participation form. Where monthly or annual installments are elected, the Company shall conduct the payout so as to make installments as substantially equal as possible over the period elected. If at Retirement the Participant has amounts credited to the Deferred Compensation Cash Account and the Deferred Compensation Phantom Stock Account, such installments shall be paid in proportionate amounts simultaneously from both such accounts. Amounts paid which relate to a Participant's Deferred Compensation Phantom Stock Account shall be based upon the Fair Market Value of the Common Stock on the date preceding the date of payment. 6.3 A Participant may elect a different form of payment by filing with the Secretary of the Company a form at any time prior to Retirement; provided, however, that such election shall be of no force and effect if such Participant's Retirement occurs within 12 months of the filing of such form. 6.4 If a Participant dies prior to receiving payment of the full amount credited to his or her Deferred Compensation Accounts, the remaining balance shall be paid to the beneficiary designated in the enrollment form as it falls due, or, in the sole discretion of the Benefits Committee, in a lump sum amount equal to the then current value of the deceased Participant's Deferred Compensation Accounts. If no beneficiary or beneficiaries have been designated, then the Participant's estate shall receive a lump-sum amount equal to the then value of the Deferred Compensation Accounts. 4 Section 7: Administration/Amendment ------------------------ 7.1 This Plan shall be administered by the Benefits Committee, whose interpretation of the Plan shall be binding on the Participants. 7.2 This Plan may be amended or terminated by the Board of Directors at any time; provided, however, that no such amendment or termination shall reduce or cancel any amount standing to a Participant's credit in the Deferred Compensation Accounts prior to the effective date of such amendment or termination. 7.3 For serious financial reasons, a Participant may apply to the Benefits Committee for withdrawal of the funds credited to his or her Deferred Compensation Accounts prior to the time that they are otherwise payable. If such application for withdrawal is approved by the Benefits Committee, the withdrawal will be effective at the later of the dates specified in the Participant's application or the date of approval by the Benefits Committee. If at the time of such withdrawal the Participant has amounts credited to a Deferred Compensation Cash Account and the Deferred Compensation Phantom Stock Account, the withdrawal will be taken, to the extent practicable, in proportionate amounts from both such accounts. Serious financial reasons shall include the following: bankruptcy or impending bankruptcy, unexpected and unreimbursed expenses resulting from illness or an accident to person or property, and other types of unexpected and unreimbursed expenses of a major or emergency nature where withdrawal of the funds would be necessary to prevent great hardship to the Participant. Withdrawals for foreseeable expenditures normally budgetable such as a down payment on a home, vacation expenses, purchase of an automobile, or educational expenses will not be permitted. I hereby certify that the foregoing amended and restated Plan was adopted by the Board of Directors on July 19, 1996. /s/ Mary Louise Beardsley -------------------------------- Mary Louise Beardsley, Secretary 5 EXHIBIT A --------- DIRECTORS' DEFERRED COMPENSATION PLAN ------------------------------------- Initial Participation/Form of Payment To: The Secretary, Barnes Group Inc. 1. Initial Participation. a. Beginning , I wish to participate in the ---------- Directors Deferred Compensation Plan and hereby agree to defer my right to receive Compensation as indicated below: % of annual retainer fees for Board membership. ----- % of attendance fees for Board and Committee ----- meetings. % of amounts payable under Section 5 of the ----- Non-Employee Director Deferred Stock Plan. b. I wish that the amount deferred in accordance herewith be credited in the following amounts to the following accounts: % to the Deferred Compensation Cash Account. ----- % to the Deferred Compensation Phantom Stock ----- Account. 2. Form of Payment. I wish that the amount payable on Retirement under Article 6 of the Plan be payable as follows: In substantially equal monthly --------------- (Elect 60 or 120) installments. In substantially equal annual --------------- (Elect 5 or 10) installments. In a lump sum. 1 I wish to designate the following beneficiary (or beneficiaries) in accordance with ARTICLE 6 of the Plan (show name, relationship and address.) ----------------------------------------------------------------- ----------------------------------------------------------------- I acknowledge receipt of a copy of the Director's Deferred Compensation Plan and confirm that I have reviewed and understand all of the terms, provisions, and conditions thereof, which terms, provisions, and conditions are hereby incorporated into this Agreement. Dated: Signed: ----------- ------------------------- Home Address: ------------------------- ------------------------- ------------------------- 2 EXHIBIT B --------- DIRECTORS' DEFERRED COMPENSATION PLAN ------------------------------------- MODIFICATIONS TO FUTURE DEFERRALS/ MODIFICATIONS TO DEFERRED COMPENSATION ACCOUNTS 1. Modification to Future Deferrals. a. In accordance with Section 3.4 of the Plan, beginning January 1, 199 , I wish to modify the amount of Compensation -- to be deferred under the Directors Deferred Compensation Plan as indicated below: % of annual retainer fees for Board membership. ----- % of attendance fees for Board and Committee ----- meetings. % of amounts payable under Section 5 of the Non- ----- Employee Director Deferred Stock Plan. b. I wish that the amount deferred in accordance herewith be credited in the following amounts to the following accounts: % to the Deferred Compensation Cash Account. ----- % to the Deferred Compensation Phantom Stock ----- Account. 2. Modifications to Deferred Compensation Accounts. In accordance with Section 3.4 of the Plan, beginning [January 1, 199 ,] [30 days after the effective date of the -- amendment and restatement of the Plan,] I wish to allocate Compensation previously deferred as indicated below: % in the Deferred Compensation Cash Account. ----- % in the Deferred Compensation Phantom Stock ----- Account. 1 I acknowledge receipt of a copy of the Directors Deferred Compensation Plan and confirm that I have reviewed and understand all of the terms, provisions, and conditions thereof, which terms, provisions, and conditions are hereby incorporated into this Agreement. Dated: Signed: ------------ --------------------------- Home Address: --------------------------- --------------------------- --------------------------- 2 EX-10.13 11 EXHIBIT-10.13 SUPPLEMENTAL SENIOR OFFICER RETIREMENT PLAN Barnes Group Inc. hereby adopts the Supplemental Senior Officer Retirement Plan (the "Plan") effective April 3, 1996. SECTION 1 DEFINITIONS The words and phrases defined hereinafter shall have the following meaning unless a different meaning is clearly required by the context of the Plan. 1.1 "ACCRUED BENEFIT" shall mean a monthly benefit payable in the form of a single life annuity commencing on the Participant's Normal Retirement Date, or Deferred Retirement Date if applicable, which is equal to an amount calculated in accordance with Section 3.1. 1.2 "BENEFITS COMMITTEE" shall mean the Benefits Committee of the Board or its successor. 1.3 "BOARD" shall mean the Board of Directors of Barnes Group Inc., or its successor. 1.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended, or as it may be amended from time to time. 1.5 "COMMITTEE" shall mean the Compensation Committee of the Board or its successor. 1.6 "COMPANY" shall mean Barnes Group Inc. and each subsidiary and affiliated corporation. 1.7 "COMPENSATION" with respect to any calendar year in which the Participant earns Credited Service, shall mean the sum of (a) the Participant's "Compensation", as defined by the Qualified Plan, except that the limits of Code Section 401(a)(17) shall not apply, and (b) bonuses paid pursuant to the Management Incentive Compensation Plan and the Corporate/Group Management Incentive Compensation Plan. For purposes of determining compensation for a calendar year, payments made under a bonus plan shall be attributed to the year earned. 1 1.8 "CONTINGENT ANNUITANT" shall mean the person designated by the Participant, pursuant to Section 7.4, to receive benefits payable hereunder in the event of the death of the Participant. 1.9 "CREDITED SERVICE" shall mean "Credited Service" as defined by the Qualified Plan. 1.10 "DEFERRED RETIREMENT" shall mean a Participant's actual retirement date, if the Participant remains in active service after his Normal Retirement Date. 1.11 "EARLY RETIREMENT DATE" shall mean the date on which a Participant retires from the employ the Company, if such date is before the date the Participant reaches Normal Retirement Date but after the date the Participant has attained age 55 and completed 5 years of Credited Service. 1.12 "EFFECTIVE DATE" shall be January 1, 1996. 1.13 "FINAL AVERAGE COMPENSATION" shall mean Compensation averaged over the 5 calendar years, whether or not consecutive, in the last 10 years of Credited Service immediately preceding his termination date which produce the highest such average. 1.14 "NORMAL RETIREMENT DATE" shall mean the first day of the month coincident with or next following the date a Participant has attained age 62 and completed 10 years of Credited Service. 1.15 "PARTICIPANT" shall mean each employee of the Company whom the Board names as a participant in the Plan. 1.16 "PLAN" shall mean the Barnes Group Inc. Supplemental Senior Officer Retirement Plan, as set forth herein or in any amendment hereto. 1.17 "PRIOR EMPLOYER BENEFIT" shall mean the benefit (or benefit equivalent) payable by each prior employer from which the Participant has received or is entitled to receive a vested benefit. The Prior Employer Benefit shall be expressed as a lifetime annuity commencing at age 62, and determined in accordance with the guidelines outlined below at the time participation in this Plan is extended to the Participant. PENSION PLANS. The pension benefit payable from a prior employer's defined benefit pension plan is converted to a life annuity commencing at age 62, based upon the factors applicable to the prior employer's plan or if none are available, factors from the Qualified Plan. ACCOUNT BALANCE PLANS. The balance from an account balance plan shall be converted to a lifetime benefit payable at age 62, using the following factors: 2 o With respect to account balance plan balances maintained by any prior employer where such plans are the prior employer's principal retirement plan, the account balance shall be measured as soon as is practicable after the date employment with such a prior employer is terminated. o An interest rate equal to the average 30-year Treasury rate for the month preceding the measurement date. o Mortality based upon the table prescribed by the IRS to calculate lump sum distributions from qualified pension plans. OTHER ARRANGEMENTS. Other arrangements will be converted to a lifetime benefit commencing at age 62 using procedures and assumptions which are consistent with the procedures and assumptions outlined above. 1.18 "QUALIFIED PLAN" shall mean the Barnes Group Inc. Salaried Retirement Income Plan, a pension plan sponsored by the Company which satisfies the requirements for qualification under Section 401(a) of the Code. 1.19 "QUALIFIED PLAN BENEFIT" shall mean the annual amount of pension benefit under the Qualified Plan payable immediately as a single life annuity upon the Participant's actual retirement date (Normal Retirement Date, Early Retirement Date, or Deferred Retirement Date, whichever is applicable). 1.20 "SOCIAL SECURITY BENEFIT" shall mean the annual Social Security benefit, which reflects any reduction for commencement prior to a Participant's Social Security Retirement Age or any delayed retirement credit for commencement after his Social Security Retirement Age, as determined under the Social Security Act in effect on the January 1 preceding the date benefits commence, and based upon the following assumptions: (a) the Participant had no earnings during the calendar year which includes the date his employment with the Company terminates, or in any subsequent calendar year; (b) the Participant's earnings in each prior year are equal to the maximum amount of wages subject to old age survivor and disability insurance tax under the Federal Insurance Contributions Act; (c) benefits commence on the Participant's actual retirement date if such retirement date occurs on or after the Participant's 62nd birthday; and 3 (d) in the event the Participant's actual retirement is prior to age 62, his Social Security Benefit shall equal the Social Security Benefit otherwise payable at age 62 multiplied by the appropriate factor from the following table, based on the age when benefits commence (factors for ages not shown shall be interpolated):
Age at Retirement Factor ----------------- ------ 61 96.4% 60 92.8% 59 89.2% 58 85.6% 57 82.0% 56 78.4% 55 74.8%
4 SECTION 2 PURPOSE OF PLAN 2.1 PURPOSE. The Plan is designed to provide supplemental retirement benefits to selected executives of the Company. Such benefits shall be payable out of the general assets of the Company. 5 SECTION 3 NORMAL AND DEFERRED RETIREMENT BENEFITS 3.1 BENEFIT UPON NORMAL RETIREMENT. Upon reaching Normal Retirement Date, a Participant may retire from the employ of the Company and shall be entitled to receive a lifetime monthly "Normal Retirement Benefit" (also referred to as the Accrued Benefit) commencing on his Normal Retirement Date. The Participant's monthly Normal Retirement Benefit shall be equal to one-twelfth of the excess of (a) over the sum of (b), (c) and (d), where: (a) equals 55% of his Final Average Compensation multiplied by the ratio (not to exceed 1.0) of his Credited Service to fifteen; (b) equals his Qualified Plan Benefit; and (c) equals his Social Security Benefit; and (d) equals his Prior Employer Benefit. 3.2 BENEFIT UPON DEFERRED RETIREMENT. Upon retiring on a Deferred Retirement Date, a Participant shall be entitled to receive a benefit commencing on the first day of the month coincident with or next following the Participant's Deferred Retirement Date and continuing monthly for the lifetime of the Participant. The amount of such benefit shall be equal to the amount otherwise payable under Section 3.1 based on the Participant's Final Average Compensation, Credited Service, Qualified Plan Benefit, Social Security Benefit and Prior Employer Benefit determined as of the Participant's Deferred Retirement Date. 6 SECTION 4 EARLY RETIREMENT BENEFITS 4.1 BENEFIT UPON EARLY RETIREMENT. If a Participant retires on or after his Early Retirement Date, but prior to his Normal Retirement Date, and any of conditions (a), (b) or (c) immediately below apply, he shall be entitled to a lifetime monthly "Early Retirement Benefit" as described in Section 4.2 below. (a) His retirement was requested by the President and Chief Executive Officer of the Company, (b) His retirement was requested by the Board, or (c) His retirement has the approval of the Board. 4.2 AMOUNT OF EARLY RETIREMENT BENEFIT. The amount of the Participant's Early Retirement Benefit shall be determined as the excess of (a) over the sum of (b), (c) and (d) below, where: (a) equals the product of (i), (ii), and (iii) below (i) equals 55% of his Final Average Compensation, (ii) equals the ratio (not to exceed 1.0) of his Credited Service to the greater of (a) 15, or (b) the Credited Service the Participant would have completed had Credited Service continued to age 62, and (iii) equals the appropriate factor from the following table, based on the age when benefits commence (factors for ages not shown shall be interpolated):
Age at Retirement Factor ----------------- ------ 61 96.4% 60 92.8% 59 89.2% 58 85.6% 57 82.0% 56 78.4% 55 74.8%
7 (b) equals his Qualified Plan Benefit as of such date, (c) equals his Social Security Benefit, and (d) equals his Prior Employer Benefit, as adjusted by multiplying by the factors in Section 4.2(a)(iii), above. 4.3 COMMENCEMENT DATE. The Participant's Early Retirement Benefit shall commence on the first day of the month coincident with or next following the Participant's Early Retirement Date. 8 SECTION 5 DEATH BENEFITS 5.1 DEATH OF PARTICIPANT PRIOR TO COMMENCEMENT OF BENEFITS. If a Participant dies on or after attaining age 55 and completing 5 years of Credited Service, but prior to the date his benefits under this Plan commence, his Surviving Spouse shall be eligible to receive a monthly lifetime benefit commencing on the first day of the month following the Participant's death. The benefit payable to his Surviving Spouse shall be equal to the amount which would have been payable to the Surviving Spouse if the Participant had: (a) terminated employment on the date of death; (b) elected to receive payments in the form of a joint and 50% contingent annuity with his Surviving Spouse as Contingent Annuitant; and (c) died on the next day. 5.2 DEATH OF PARTICIPANT AFTER COMMENCEMENT OF BENEFITS. If a Participant dies after the commencement of his benefits under this Plan, no death benefit will be payable hereunder except as otherwise provided under the form of annuity payment in effect on the date of death. 9 SECTION 6 DISABILITY 6.1 DISABILITY DEFINED. For purposes of this Plan, a Participant shall be deemed to be disabled if he is eligible for and receiving Social Security disability benefits. 6.2 DISABILITY BENEFITS. No benefits shall be payable hereunder solely on account of disability. However, if a Participant is deemed to be disabled under Section 6.1, he shall continue to accrue Credited Service until the earliest of the following events: (a) the Participant attains his Normal Retirement Date; (b) the Participant elects to retire on an Early Retirement Date; (c) the Participant dies (however, no benefits are payable under the plan on account of death prior to age 55 and completion of 5 years of Credited Service) and (d) the Participant ceases to be disabled. The Participant's Compensation during the period of disability shall, for purposes of this Plan, be deemed to be equal to the Participant's Compensation for the calendar year preceding the date on which such disability began. 10 SECTION 7 NORMAL AND OPTIONAL FORMS OF PAYMENT 7.1 NORMAL FORM OF PAYMENT. The normal form of payment under this Plan for an unmarried Participant is a single life annuity: a benefit payable monthly for the lifetime of the Participant, the first payment to be due on the date specified in Section 3, 4, or 5 hereof, and the last payment to be due on the first day of the calendar month in which death occurs. The normal form of payment under this Plan for a married Participant is a 50% joint and contingent annuity: a benefit payable monthly for the lifetime of the Participant with a lifetime benefit equal to 50% of such benefit payable monthly to the spouse following the death of the Participant. 7.2 OPTIONAL FORMS OF PAYMENT. In lieu of the normal form of payment, a Participant may elect to receive his benefit in the form of: (a) a Single Life Annuity, which is a benefit payable monthly for the lifetime of the Participant with no benefits payable after his death; (b) a Joint and Contingent Annuity, which is a benefit payable monthly for the lifetime of the Participant with a benefit equal to 25%,33 1/3%, 50%,66 2/3%, 75%, or 100% (as selected by the Participant) of such benefit payable monthly to the Contingent Annuitant for the lifetime of the Contingent Annuitant; or (c) a Ten Year Certain and Continuous Annuity, which is a benefit payable monthly for the lifetime of the Participant and, in the event of the Participant's death prior to receiving 120 monthly payments, payable monthly to a named Beneficiary until the Participant and Beneficiary together have received 120 monthly payments. If both the Participant and the Beneficiary die before 120 payments have been made, payments shall be made to the Participant's estate until a total of 120 monthly payments have been paid. The Participant's benefits shall be paid in an optional form if the Participant makes an irrevocable election at least twelve months prior to the time benefits under this Plan commence. In the event that a Participant elects a Joint and Contingent Annuity and the Contingent Annuitant designated by the Participant dies prior to the time benefits commence, the election of the optional form of payment shall be disregarded. In the event that a Participant elects a Ten Year Certain and Continuous Annuity and the Beneficiary designated by the Participant dies prior to the time benefits 11 commence, the Participant shall designate a new Beneficiary. Elections of optional forms of payment shall be filed by the Participant with the Benefits Committee or its designee on a form approved by the Benefits Committee. 7.3 ACTUARIAL EQUIVALENT. The amount of benefit payable under this Plan shall be the actuarial equivalent of the single life annuity. Actuarial equivalence shall be determined using the factors specified in the Qualified Plan. 7.4 DESIGNATION OF CONTINGENT ANNUITANT. Except as provided below, the Participant may designate a Contingent Annuitant or Beneficiary or change any prior designation by giving written notice to the Benefits Committee at any time prior to the date benefits hereunder commence. Exception: The Participant may not change the designation of a Contingent Annuitant at any time that is within twelve months prior to the date that benefits hereunder commence. No such restriction applies to the right of a Participant to change the designation of a Beneficiary under subparagraph 7.2(c). above. 12 SECTION 8 PLAN ASSETS 8.1 COMPANY SOLE OWNER AND NO TRUST CREATED. Title to and beneficial ownership of any assets which the Company may designate to pay benefits under this Plan shall at all times remain in the Company, and neither the Participants, Beneficiaries, nor Contingent Annuitants shall have any property interest whatsoever in any such assets of the Company. Nothing contained in this Plan, and no action taken pursuant to any provision hereunder, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and the Participants, Beneficiaries, Contingent Annuitants or any other person. Any assets which may be invested to fund benefits provided hereunder shall continue for all purposes to be a part of the general funds of the Company, and no person other than the Company shall by virtue of the provisions of this Plan have any interest in such funds. To the extent that any person acquires a right to receive payments from the Company under this Plan, such right shall be no greater than the rights of any unsecured general creditor of the Company. 13 SECTION 9 ADMINISTRATION 9.1 ADMINISTRATION. The Committee shall have full power and authority to interpret and construe the terms of this Plan, and the Committee's interpretations and construction thereof, and actions thereunder, or the amount or recipient of the benefits to be made therefrom shall be binding and conclusive on all persons for all purposes. No agent or representative of the Board shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his own willful misconduct or lack of good faith. 9.2 EXPENSES OF ADMINISTRATION. All expenses incurred in connection with the execution of this Plan and in carrying out the provisions hereof shall be paid by the Company. 9.3 INFORMATION FROM PARTICIPANT. Each Participant shall furnish to the Company such information as the Company may reasonably request for purposes of the proper administration of the provisions of this Plan. 9.4 NO EMPLOYMENT RIGHTS. Nothing contained in the Plan shall be construed as a contract of employment between the Company and a Participant, or as a right of any Participant to be continued in the employment of the Company, or as a limitation of the right of the Company to discharge any of its Participants, with or without cause. Any benefit payable under this Plan shall not be deemed salary, earnings, or other compensation to the Participant for the purpose of computing benefits to which he may be entitled under any qualified retirement plan or other arrangement of the Company for the benefit of its employees. 9.5 RESTRICTIONS ON ALIENATION AND ASSIGNMENT. Neither a Participant nor any Beneficiary or Contingent Annuitant shall have the right to assign, transfer, hypothecate, encumber, commute or anticipate any interest in any payments hereunder, and such payments shall not in any way be subject to any legal process to levy upon or attach the sum for payment of any such claim against the Participant or any Beneficiary or Contingent Annuitant, provided, however, that nothing contained herein shall preclude a Participant from designating a Beneficiary or Contingent Annuitant to receive benefits hereunder in the event of the Participant's death. 14 9.6 FACILITY OF PAYMENT. If the Company shall find, upon receipt of medical evidence or legal representations satisfactory to the Committee, that any Participant to whom a benefit is payable is unable to care for such person's affairs because of illness or accident, any payment due hereunder (unless a prior claim therefor shall have been made by a duly appointed guardian, conservator or other legal representative) may be paid to such Participant's spouse, child, parent or brother or sister, or to any person or persons determined by the Company to have incurred expense for such Participant. Any payment shall be a complete discharge of all liability hereunder. 9.7 FAILURE TO CLAIM AMOUNTS PAYABLE. In the event that any amount shall become payable hereunder to a Participant or, upon a Participant's death, to the Beneficiary, Contingent Annuitant, or representative of the Participant's estate, and if after written notice from the Company mailed to such person's last known address as shown in the Company's records and after diligent effort the Company is unable to locate such person, the Company shall apply to a court of competent jurisdiction for direction as to the distribution of such amount. 9.8 AMENDMENT AND TERMINATION. The Board reserves the right to amend and/or terminate the Plan at any time for whatever reasons it may deem appropriate, except that no such amendment or termination shall adversely affect the benefits payable to any person who has begun to receive benefits hereunder. 9.9 GENDER AND NUMBER. All the words and terms used herein, regardless of the number and gender in which they shall be used, shall be deemed to include any other number, singular and plural, and any other gender, masculine and feminine, as the context may require. 9.10 LAW APPLICABLE. This Plan shall be governed by the laws of the State of Connecticut. 15 EX-13 12 1996 ANNUAL REPORT PAGES 11 THRU 31 Barnes Group Around the World [WORLD-WIDE GLOBE GRAPHIC] - -------------------------------------------------- - -------------- ASSOCIATED SPRING DISTRIBUTION OPERATIONS HEADQUARTERS UNITED STATES Bristol, Connecticut Maumee, Ohio Cerritos, California MANUFACTURING PLANTS Ypsilanti, Michigan NORTH AMERICA Arlington, Texas Bristol, Connecticut New Berlin, Wisconsin Saline, Michigan Syracuse, New York UNITED KINGDOM Arden, North Carolina Evesham Corry, Pennsylvania Dallas. Texas FRANCE Milwaukee, Wisconsin Montigny Burlington, Ontario, Canada Mexico City, Mexico SOUTH AMERICA Campinas, Brazil ASIA Republic of Singapore - -------------------------------------------------- - -------------- BOWMAN DISTRIBUTION HEADQUARTERS Cleveland, Ohio DISTRIBUTION CENTERS BARNES AEROSPACE UNITED STATES HEADQUARTERS Bakersfield, California Windsor, Connecticut Norcross, Georgia Rockford, Illinois MANUFACTURING PLANTS Elizabethtown, Kentucky UNITED STATES Edison, New Jersey East Granby, Connecticut Arlington, Texas Windsor, Connecticut Auburn, Washington Lansing, Michigan Ogden, Utah CANADA ASIA Concord, Ontario Republic of Singapore Edmonton, Alberta Moncton, New Brunswick BARNES GROUP INC. St. Laurent, Quebec HEADQUARTERS Bristol, Connecticut DISTRIBUTION OPERATIONS UNITED KINGDOM Corsham FRANCE Voisins Le Bretonneux [UNITED STATES MAP GRAPHIC] MANAGEMENTOS DISCUSSION AND ANALYSIS BARNES GROUP INC. A SALUTE TO OUR EMPLOYEES WHO HELPED MAKE IT HAPPEN Flowing through the following financial pages is a series of employee photos that represent the thousands of people throughout the company whose contributions in 1996 helped us achieve record earnings for the second year in a row. It is through their efforts that the momentum that began three years ago has accelerated -- and will continue to move us ahead in the future. It has always been a key part of Barnes GroupOs Guiding Philosophy that Opeople are our most important resource.O [PHOTO OF TARIQ AFZAL ASSOCIATED SPRING SOUTHFIELD, MICHIGAN] [PHOTO OF AL BEDELL BARNES AEROSPACE WINDSOR, CONNECTICUT] RESULTS OF OPERATIONS Barnes Group Inc. reported all-time records in sales and earnings in 1996, for the second consecutive year. Sales were $595.0 million compared to $592.5 million in 1995. Sales in 1995 increased 4% over 1994. Operating income was up 13% in 1996 to $55.3 million, compared to $48.8 million in 1995. Operating income in 1995 increased 33% over the $36.6 million reported in 1994. Operating income margin has steadily increased to 9.3% in 1996 compared to 8.2% in 1995 and 6.4% in 1994. The 1996 results reflect profit growth at all three business segments and solid sales gains at Barnes Aerospace. The 1995 results reflected sales and profit improvements at all three business segments. Cost of sales as a percentage of sales was 64.7% in 1996, comparable to the prior two year periods. Selling and administrative expenses decreased in both 1996 and 1995 versus the previous years. SEGMENT REVIEW -- SALES AND OPERATING INCOME Associated Spring segment sales for 1996 were $279.5 million, up slightly from 1995. Sales in 1995 of $279.0 million were 2% higher than 1994. This segment reported an 8% increase in operating income, to a record $45.8 million in 1996. In 1995, Associated Spring reported operating income of $42.6 million compared to $41.7 million in 1994. At the segmentOs North American manufacturing operations, both sales and profits increased, reflecting a stronger domestic automotive market, gains in manufacturing efficiencies and lower material costs. The groupOs distribution business, which markets die springs and precision stock springs, also reported sales and profit growth. Internationally, results were down compared to the strong results reported in 1995, reflecting a slowdown in its electronics business and a softening in Brazil. Bowman Distribution segment sales for 1996 were $213.4 million compared to $217.0 million in 1995 and $215.1 million in 1994. While overall North American sales declined slightly in 1996 versus 1995, good progress was made in penetrating targeted markets, such as railroad, aerospace, public utilities and waste management companies and large customers who look to Bowman for the full support needed to maintain their operating facilities. In Europe, BowmanOs sales declined 5%, as management streamlined its van-based sales force in an effort to eliminate low margin sales volume. At the same time, Bowman U.K. reported an 18% increase in its systems business. Bowman segment operating income in 1996 of $22.0 million increased $4.6 million or 26% from 1995. The 1995 level of $17.4 million was $4.8 million above 1994. The gains in operating income reflect reductions in operating expenses in both North America and Europe. This lower Ocost to serveO is essential to BowmanOs strategy of penetrating targeted markets and large customers where competitive pricing is a key to success. Also during 1996, the U.S. and Canadian operations were integrated into a single, more effective sales and service organization that is expected to have an even greater impact on 1997 results. Barnes Aerospace segment sales were $103.1 million in 1996, up 6% from 1995, which followed an increase of 18% from 1994. Sharply higher sales were reported by the groupOs Repair and Overhaul business in 1996. The Precision Machining business also reported sales growth, while sales from the Advanced Fabrications business were slightly lower than in 1995. Sales growth in 1995 was driven primarily by the Advanced Fabrications and Precision Machining businesses. Barnes Aerospace operating income was $5.3 million in 1996 compared to $5.0 million in 1995. In 1994, the group reported an operating loss of $1.8 million. The increase in 1996 profits reflects the increased sales volume. The sharply higher 11 MANAGEMENTOS DISCUSSION AND ANALYSIS BARNES GROUP INC. [PHOTO OF LOU BESSETTE BARNES AEROSPACE WINDSOR, CONNECTICUT] [PHOTO OF WAYNE BUCK ASSOCIATED SPRING BURLINGTON, ONTARIO] [PHOTO OF CAROL DANIELS BOWMAN DISTRIBUTION YORK, PENNSYLVANIA] profits in 1995 compared to 1994 reflect the higher sales volume, increased gross margins and lower operating costs as a percentage of sales. NON-OPERATING INCOME/EXPENSE Other income was $4.1 million in 1996, $4.4 million in 1995 and $4.6 million in 1994. Other income includes $1.6 million, $1.9 million and $2.3 million from the companyOs investment in NASCO, a company jointly owned with NHK Spring Co., Ltd. of Japan. The 1996 decrease in NASCO profits reflects increased costs, primarily interest and depreciation, associated with a major capacity expansion to meet increased customer requirements for automotive suspension springs. Interest income, another component of other income, was $1.2 million in 1996 compared to $1.4 million in 1995 and $1.3 million in 1994. Interest expense was consistent over the three years reflecting comparable borrowing levels and a relatively stable interest rate environment. Other expenses decreased in 1996 following an increase in 1995, primarily due to foreign exchange and translation losses. These losses were $0.8 million, $1.1 million and $0.5 million in 1996, 1995 and 1994, respectively. INCOME TAXES The companyOs effective income tax rate has declined steadily over the last three years. The companyOs effective tax rate was 37.7% in 1996 compared with 39.5% in 1995 and 40.1% in 1994. The lower rate in 1996 was due in part to lower foreign losses without tax benefit and higher foreign income with tax rates lower than the U.S. statutory tax rate. For further discussion of income taxes, see Note 6 of the Notes to Consolidated Financial Statements on page 20. NET INCOME AND NET INCOME PER SHARE Consolidated net income was $32.6 million in 1996, $27.5 million in 1995 and $20.3 million in 1994. On a per share basis, income for 1996 was $4.90, compared to $4.20 in 1995 and $3.20 in 1994. This marks the second consecutive year of record earnings. INFLATION Management believes that inflation during the 1994- 1996 period did not have a material impact on the companyOs historical financial statements. LIQUIDITY AND CAPITAL RESOURCES The companyOs ability to generate cash from operations in excess of its capital investment and dividend requirements is one of its leading financial strengths. Management anticipates that operating activities in 1997 will continue to provide sufficient cash flows to capitalize on opportunities for business expansion and to meet all of the companyOs financial commitments. Management assesses the companyOs 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, effective utilization of surplus cash positions overseas and adequate bank lines of credit. Operating activities are the principal source of cash flow for the company, generating nearly $46 million of cash flow in 1996 after a record $47 million in 1995. During the past three years, operating activities provided over $130 million of cash which the company used, in part, to pay dividends to stockholders and fund significant investments in plant and equipment. 12 MANAGEMENTOS DISCUSSION AND ANALYSIS BARNES GROUP INC. [PHOTO OF CARL DELINE BARNES AEROSPACE LANSING, MICHIGAN] [PHOTO OF JOHN DONLON EXECUTIVE OFFICE BRISTOL, CONNECTICUT] [PHOTO OF JERRY DRALLE BOWMAN DISTRIBUTION CLEVELAND, OHIO] Investing activities used cash of $32 million in 1996 compared with $37 million in 1995 and $31 million in 1994. Capital expenditures of $34 million in 1996 approached the record level of $36 million in 1995. During the past three years, the company has invested over $100 million in new plant and equipment with nearly $70 million of that invested at Associated Spring. The focus of these investments is plant and equipment to support business growth and to improve productivity and quality. The company expects 1997 capital spending to continue at a strong pace. Financing activities include net borrowings, dividend payments and stock transactions. In 1996, the companyOs financing activities used cash of $7 million compared to $14 million in 1995. The higher usage of cash in 1995 was due, in part, to a $7 million debt reduction. In 1996, the annual cash dividend per share was increased from $1.60 to $1.80. As a result, total cash dividends paid to stockholders increased to $12 million. The company has and will continue to utilize surplus cash from foreign subsidiaries to fund worldwide cash requirements when it is cost effective to do so. The repatriation of certain cash balances to the U.S. could have adverse tax consequences; however, those balances are generally available to fund ordinary business needs worldwide. To supplement internal cash generation, the company maintains substantial bank borrowing facilities. At December 31, 1996, the company had $150 million of borrowing capacity available under a revolving credit agreement that expires in 2001. In addition, the company has available $130 million in uncommitted, short-term bank credit lines, of which $7.5 million was in use at December 31, 1996. During 1996 and 1995, the company maintained long-term debt of $70 million comprised, in part, of borrowings under its short- term bank credit lines backed by its long-term revolving credit agreement. The company considers this a cost effective way to manage its long-term financing needs. The company believes its bank credit facilities coupled with cash generated from operations are adequate for its anticipated future requirements. 13 [PHOTO OF RICK FRANCOLINI BOWMAN DISTRIBUTION CROMWELL, CONNECTICUT] [PHOTO OF MARK GAMBLE ASSOCIATED SPRING BURLINGTON, ONTARIO] [PHOTO OF STEVE GANDOLFO BARNES AEROSPACE WINDSOR, CONNECTICUT] CONSOLIDATED STATEMENTS OF INCOME BARNES GROUP INC. (Dollars in thousands, except per share data)
Years Ended December 31, 1996 1995 1994 - -------------------------------------------------- - ---------------- Net sales $ 594,989$ 592,509$ 569,197 Cost of sales 384,722 382,150 366,455 Selling and administrative expenses 154,951 161,555 166,093 - -------------------------------------------------- - ---------------- 539,673 543,705 532,548 - -------------------------------------------------- - ---------------- Operating income 55,316 48,804 36,649 Other income 4,095 4,373 4,611 Interest expense 4,981 5,274 5,133 Other expenses 2,120 2,453 2,205 - -------------------------------------------------- - ---------------- Income before income taxes52,310 45,450 33,922 Income taxes 19,742 17,966 13,606 - -------------------------------------------------- - ---------------- Net income $ 32,568$ 27,484$ 20,316 ================================================== ================ Per common share: Net income $ 4.90$ 4.20$ 3.20 ================================================== ================ Dividends $ 1.80$ 1.60$ 1.45 ================================================== ================ Average common shares outstanding6,641,3296,546,671 6,353,777
See accompanying notes 14 [PHOTO OF LES GRIFFIN BOWMAN DISTRIBUTION ANAHEIM, CALIFORNIA] [PHOTO OF REBECCA HAMILTON BOWMAN DISTRIBUTION HAYWARD, CALIFORNIA] [PHOTO OF JIM HENDRICKSON BOWMAN DISTRIBUTION ROCKFORD, ILLINOIS] CONSOLIDATED BALANCE SHEETS BARNES GROUP INC. (Dollars in thousands)
December 31, 1996 1995 - -------------------------------------------------- - ---------------- ASSETS Current assets Cash and cash equivalents $ 23,986 $ 17,868 Accounts receivable, less allowances (1996 - $3,158; 1995 - $3,635) 88,060 86,086 Inventories 64,942 56,749 Deferred income taxes 9,772 8,344 Prepaid expenses 3,538 3,769 - -------------------------------------------------- - ---------------- Total current assets 190,298 172,816 Deferred income taxes 23,575 24,308 Property, plant and equipment 131,071 122,870 Goodwill 19,441 20,028 Other assets 25,571 21,527 - -------------------------------------------------- - ---------------- Total assets $389,956 $361,549 ================================================== ================ LIABILITIES AND STOCKHOLDERSO EQUITY Current liabilities Notes payable $ 1,767 $ 509 Accounts payable 30,363 31,839 Accrued liabilities 46,152 42,840 Guaranteed ESOP obligation-current 2,540 2,348 - -------------------------------------------------- - ---------------- Total current liabilities 80,822 77,536 Long-term debt 70,000 70,000 Guaranteed ESOP obligation 4,951 7,491 Accrued retirement benefits 69,085 68,824 Other liabilities 7,934 8,857 StockholdersO equity Common stock - par value $1.00 per share Authorized: 20,000,000 shares Issued: 7,345,923 shares stated at15,73715,737 Additional paid-in capital 28,347 27,360 Retained earnings 156,698 136,092 Foreign currency translation adjustments (10,087) (10,656) Treasury stock at cost (1996 - 682,003 shares; 1995 - 791,205 shares) (26,040) (29,853) Guaranteed ESOP obligation (7,491) (9,839) - -------------------------------------------------- - ---------------- Total stockholdersO equity 157,164 128,841 - -------------------------------------------------- - ---------------- Total liabilities and stockholdersO equity$389,956 $361,549 ================================================== ================
See accompanying notes. 15 [PHOTO OF BOB HOWAT ASSOCIATED SPRING SALINE, MICHIGAN] [PHOTO OF NANCY JOHANSEN BARNES AEROSPACE OGDEN, UTAH] [PHOTO OF RON KURYLO ASSOCIATED SPRING SOUTHFIELD, MICHIGAN] CONSOLIDATED STATEMENTS OF CASH FLOWS BARNES GROUP INC. (Dollars in thousands)
Years Ended December 31, 1996 1995 1994 - -------------------------------------------------- - ---------------- OPERATING ACTIVITIES: Net income $32,568$27,484$20,316 Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization26,626 26,750 23,733 Gain on sale of property, plant and equipment (528) (268) (151) Translation losses 427 290 356 Changes in assets and liabilities: Accounts receivable (2,321) 365(9,411) Inventories (9,971)(6,073)(1,037) Accounts payable (1,548) 794 4,298 Accrued liabilities 2,797(2,664) 2,630 Deferred income taxes 564 3,479 (485) Other liabilities and assets(2,810)(2,862)(2,5 49) - -------------------------------------------------- - ----------------- Net cash provided by operating activities45,80447,295 37,700 INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment 2,361 1,301 2,835 Capital expenditures (33,892)(35,820)(31,848) Other (706)(2,057)(2,252) - -------------------------------------------------- - ---------------- Net cash used by investing activities(32,237)(36,576) (31,265) FINANCING ACTIVITIES: Net increase (decrease) in notes payable1,322(7,389) (2,653) Proceeds from the issuance of common stock4,9075,849 3,956 Payments to acquire treasury stock(1,197)(1,746)-- Dividends paid (11,967)(10,491)(9,223) - -------------------------------------------------- - ---------------- Net cash used by financing activities(6,935)(13,777) (7,920) Effect of exchange rate changes on cash flows(514) (1,097) (621) - -------------------------------------------------- - ---------------- Increase (decrease) in cash and cash equivalents 6,118(4,155)(2,106) Cash and cash equivalents at beginning of year 17,868 22,023 24,129 - -------------------------------------------------- - ---------------- Cash and cash equivalents at end of year$23,986$17,868 $22,023 ================================================== ================
See accompanying notes. 16 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERSO EQUITY BARNES GROUP INC.
Additional Common Paid-In Retained (Dollars in thousands) Stock Capital Earnings - ------------------------------------------------------------------- January 1, 1994 $15,737 $28,745 $107,668 Net income 20,316 Cash dividends (9,223) Employee stock plans (973) Guaranteed ESOP obligation Income tax benefits on unallocated ESOP dividends 177 Translation adjustments - ------------------------------------------------------------------- December 31, 1994 15,737 27,772 118,938 Net income 27,484 Cash dividends (10,491) Employee stock plans (412) Guaranteed ESOP obligation Income tax benefits on unallocated ESOP dividends 161 Translation adjustments - ------------------------------------------------------------------- December 31, 1995 15,737 27,360 136,092 Net income 32,568 Cash dividends (11,967) Employee stock plans 987 (134) Guaranteed ESOP obligation Income tax benefits on unallocated ESOP dividends 139 Translation adjustments - ------------------------------------------------------------------- December 31, 1996 $15,737 $28,347 $156,698 =================================================================== See accompanying notes.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERSO EQUITY BARNES GROUP INC. (CONTINUED)
Foreign Currency Guaranteed Translation Treasury ESOPStockholdersO Adjustments StockObligation Equity - ------------------------------------------------------------------- $ (6,464) $(39,818) $(14,019) $ 91,849 20,316 (9,223) 5,236 4,263 2,008 2,008 177 (2,251) (2,251) - ------------------------------------------------------------------- (8,715) (34,582) (12,011) 107,139 27,484 (10,491) 4,729 4,317 2,172 2,172 161 (1,941) (1,941) - ------------------------------------------------------------------- (10,656) (29,853) (9,839) 128,841 32,568 (11,967) 3,813 4,666 2,348 2,348 139 569 569 - ------------------------------------------------------------------- $(10,087) $(26,040) $ (7,491) $157,164 ===================================================================
17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. [PHOTO OF ERIC MABLEY BOWMAN DISTRIBUTION CONCORD, ONTARIO] [PHOTO OF MARY LOU MANCHESTER AS HEADQUARTERS BRISTOL, CONNECTICUT] [PHOTO OF TERRY MARTIN AS HEADQUARTERS BRISTOL, CONNECTICUT] (All dollar amounts included in the notes are stated in thousands except per share data and the tables in Note 14.) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL: 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. Actual results could differ from those estimates. 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 accounts for its 45% investment in the common stock of NASCO, an automotive suspension spring company jointly owned with NHK Spring Co., Ltd. of Japan, under the equity method. Other income in the accompanying income statements includes $1,550, $1,897 and $2,314 for the years 1996, 1995 and 1994, respectively, of income from the companyOs investment in NASCO. During 1996, the company received $709 in dividends from NASCO. REVENUE RECOGNITION: Sales and related cost of sales are recognized when products are shipped to customers. CASH AND CASH EQUIVALENTS: All highly liquid investments purchased with a maturity of three months or less are cash equivalents and are carried at fair market value. INVENTORIES: Inventories are valued at the lower of cost or market. The last-in, first-out (LIFO) method was used to accumulate the cost of all U.S. inventories which represent 71% of total inventories. The cost of foreign subsidiary inventories was determined using the first-in, first-out (FIFO) method. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at cost. Depreciation is provided using accelerated methods over estimated useful lives, ranging generally from 20 to 50 years for buildings and 3 to 17 years for machinery and equipment. Maintenance and repairs charged to expense were $16,179, $15,396 and $16,341 in 1996, 1995 and 1994, respectively. GOODWILL: Goodwill represents the excess purchase price over the net assets of companies acquired in business combinations. Goodwill acquired since 1970 is being amortized on a straight-line basis over 40 years; similar investments for businesses acquired prior to 1970 (approximately $5,200) are not being amortized. On a periodic basis, the company estimates future undiscounted cash flows of the businesses to which goodwill relates to ensure that the carrying value of goodwill has not been impaired. Accumulated amortization was $8,175 and $7,588 at December 31, 1996 and 1995, respectively. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign operations, except those in countries with high rates of inflation, are translated at year-end rates of exchange; revenue and expenses are translated at average annual rates of exchange. The resulting translation gains and losses are reflected in foreign currency translation adjustments within stockholdersO equity. For operations in countries that have high rates of inflation, translation gains and losses are included in net income. These losses, along with those generated from foreign currency transactions, were $826, $1,078 and $550 in 1996, 1995 and 1994, respectively. STOCK-BASED COMPENSATION: The company applies APB Opinion 25 to account for stock-based compensation. The FASB issued Statement of Financial Accounting Standards No. 123, OAccounting for Stock-Based Compensation,O (FAS 123) effective for years beginning after December 15, 1995. Under the provisions of this accounting standard, the company is not required to change its method of accounting for stock-based compensation. Had the company adopted FAS 123, the impact on net income and income per share would not have been significant. INCOME PER COMMON SHARE: Income per common share is based on the weighted average number of common shares outstanding during the year. The effect of common stock equivalents (stock options and incentive stock rights) is not material. For purposes of calculating income per share, Employee Stock Ownership Plan (ESOP) shares are considered outstanding. 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. [PHOTO OF PATRICIA MARTINEZ BOWMAN DISTRIBUTION EDISON, NEW JERSEY] [PHOTO OF FRAN MCDONALD BOWMAN DISTRIBUTION CLEVELAND, OHIO] [PHOTO OF FAZAL MOHAMED BOWMAN DISTRIBUTION CONCORD, ONTARIO] 2. INVENTORIES
Inventories at December 31, consisted of: 1996 1995 - -------------------------------------------------- - ---------------- Finished goods $ 30,285 $ 29,535 Work-in-process 17,730 13,827 Raw materials and supplies 16,927 13,387 - -------------------------------------------------- - ---------------- $ 64,942 $ 56,749 ================================================== ================
Inventories valued by the LIFO method aggregated $46,056 and $39,219 at December 31, 1996 and 1995, respectively. If LIFO inventories had been valued using the FIFO method, they would have been $13,348 and $12,632 higher at those dates. 3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, consisted of: 1996 1995 - -------------------------------------------------- - ---------------- Land $ 4,577 $ 5,412 Buildings 64,336 60,064 Machinery and equipment 251,691 232,356 - -------------------------------------------------- - ---------------- 320,604 297,832 Less accumulated depreciation 189,533 174,962 - -------------------------------------------------- - ---------------- $131,071 $122,870 ================================================== ================
4. ACCRUED LIABILITIES
Accrued liabilities at December 31, consisted of: 1996 1995 - -------------------------------------------------- - ---------------- Payroll and other compensation $ 15,188 $ 12,699 Postretirement/ postemployment benefits 6,465 6,541 Vacation pay 4,521 4,460 Accrued income taxes 6,688 5,006 Pension and profit sharing 2,102 2,017 Other 11,188 12,117 - -------------------------------------------------- - ---------------- $ 46,152 $ 42,840 ================================================== ================
5. DEBT AND COMMITMENTS
Long-term debt at December 31, consisted of: 1996 1995 - -------------------------------------------------- - ---------------- CARRYING FAIR Carrying AMOUNT VALUE Amount - -------------------------------------------------- - ---------------- 9.47% Notes $30,769 $32,620 $36,923 7.13% Notes 25,000 24,346 25,000 Borrowings under lines of credit 7,231 7,231 1,077 Industrial Revenue Bond 7,000 7,000 7,000 - -------------------------------------------------- - ---------------- $70,000 $71,197 $70,000 ================================================== ================
The 9.47% Notes are payable in thirteen semi- annual payments of $3,077 beginning on September 16, 1995, while the 7.13% Notes are payable in four equal installments of $6,250 beginning on December 5, 2002. The fair values of these notes are determined using discounted cash flows based upon the companyOs estimated current interest rate for similar types of borrowings. The carrying values of other long-term debt, notes payable and the guaranteed ESOP obligation approximate their fair value. 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. [PHOTO OF RAJ OAK ASSOCIATED SPRING SOUTHFIELD, MICHIGAN] [PHOTO OF STEPHEN ORME ASSOCIATED SPRING BURLINGTON, ONTARIO] [PHOTO OF DIANA PEACOCK ASSOCIATED SPRING SALINE, MICHIGAN] The company has a revolving credit agreement with six banks that allows borrowings up to $150,000 under notes due December 6, 2001. A commitment fee of .115% per annum is paid on the unused portion of the commitments. The company had no borrowings under this agreement at December 31, 1996 and 1995. The company has available $130,000 in uncommitted, short-term bank credit lines, of which $7,500 and $1,500 were in use at December 31, 1996 and 1995, respectively. The interest rate on these borrowings was 5.7% and 6.1% at December 31, 1996 and 1995. The Industrial Revenue Bond, due in 2008, has a variable interest rate. The interest rate on this borrowing was 4.5% and 5.9% at December 31, 1996 and 1995, respectively. At December 31, 1996, the company classified $7,231 of borrowings under its lines of credit and $6,154 of its 9.47% Notes due within one year as long-term debt. The company has both the intent and the ability, through its revolving credit agreement, to refinance these amounts on a long- term basis. During 1996, the company had outstanding an interest rate swap, a form of derivative, which effectively converted $15,385 of its fixed rate 9.47% Notes to floating rate debt with interest equal to LIBOR plus 83 basis points. The effective interest rate on the floating rate portion was 6.4% and 6.7% at December 31, 1996 and 1995, respectively. This swap decreases as the Notes are repaid. The fair value of the swap is determined based upon current market prices and was $1,160 at December 31, 1996. The company does not use derivatives for trading purposes. The company guaranteed $8,711 of letters of credit, bank borrowings and capital lease obligations related to its 45% investment in NASCO. In addition, the company has other outstanding letters of credit totaling $3,854 at December 31, 1996. Certain of the companyOs debt arrangements contain requirements to maintain minimum levels of working capital and net worth, which as a result, place limitations on dividend payments and acquisitions of the companyOs common stock. Under the most restrictive covenant in any agreement, $52,104 was available for dividends or acquisitions of common stock at December 31, 1996. Interest paid was $5,736, $5,661 and $5,626 in 1996, 1995 and 1994, respectively. Interest capitalized was $527, $214 and $478 in 1996, 1995 and 1994, respectively, and is being depreciated over the lives of the related fixed assets. 6. INCOME TAXES The components of income before income taxes and the provision for income taxes follow:
1996 1995 1994 - -------------------------------------------------- - ---------------- Income before income taxes: U.S. $37,957 $31,722 $23,639 International 14,353 13,728 10,283 - -------------------------------------------------- - ---------------- $52,310 $45,450 $33,922 ================================================== ================ Income tax provision: Current: U.S. - federal $12,451 $ 7,668 $ 7,975 U.S. - state 3,045 1,363 1,639 International 3,682 5,456 4,477 - -------------------------------------------------- - ---------------- 19,178 14,487 14,091 - -------------------------------------------------- - ---------------- Deferred: U.S. - federal (388) 2,479 (403) U.S. - state (105) 1,056 355 International 1,057 (56) (437) - -------------------------------------------------- - ---------------- 564 3,479 (485) - -------------------------------------------------- - ---------------- $19,742 $17,966 $13,606 ================================================== ================
20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. [PHOTO OF BARRY QUINN BOWMAN DISTRIBUTION CONCORD, ONTARIO] [PHOTO OF JACK RABABEH ASSOCIATED SPRING SOUTHFIELD, MICHIGAN] [PHOTO OF ROBERT REED ASSOCIATED SPRING SALINE, MICHIGAN] Deferred income tax assets and liabilities at December 31, consist of the tax effects of temporary differences related to the following:
Assets Liabilities - -------------------------------------------------- - ---------------- 1996 1995 1996 1995 - -------------------------------------------------- - ---------------- Allowance for doubtful accounts$ 1,108$ 1,296$ (3) $ (10) Depreciation and amortization(7,083)(6,460) 2,450 1,980 Inventory valuation 4,143 3,127 1,382 775 Postretirement/postemployment costs28,51028,921(467) (435) Tax loss carryforwards 9,329 7,665 -- -- Other 4,770 4,742 1,263 1,163 - -------------------------------------------------- - ---------------- 40,77739,291 4,625 3,473 Valuation allowance (7,430)(6,639) -- -- - -------------------------------------------------- - ---------------- $33,347$32,652$4,625 $3,473 ================================================== ================ Current deferred income taxes$9,772$ 8,344$1,379$ 765 Noncurrent deferred income taxes23,57524,308 3,246 2,708 - -------------------------------------------------- - ---------------- $33,347$32,652$4,625 $3,473 ================================================== ================
The components of the net deferred income tax balances recognized in the balance sheet at December 31, follow:
1996 1995 - -------------------------------------------------- - ---------------- Total deferred income tax assets $55,770$53,307 Total deferred income tax asset valuation allowance (7,430)(6,639) Total deferred income tax liabilities(19,618)(17,489) - -------------------------------------------------- - ---------------- $28,722$29,179 ================================================== ================
A portion of the deferred income tax assets can be realized through carrybacks and reversals of existing taxable temporary differences with the remainder, net of the valuation allowance, dependent on future income. Management believes that sufficient income will be earned in the future to realize the remaining net deferred income tax assets. The tax loss carryforwards have remaining carryforward periods ranging from five years to unlimited. The company has not recognized deferred income taxes on $78,733 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 to both U.S. income taxes and foreign withholding taxes. Determination of the amount of this unrecognized deferred income tax liability is not practicable. 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. [Photo of Grace Sciarretta Executive Office Bristol, Connecticut] [Photo of Andy Smith Associated Spring Burlington, Ontario] [Photo of Dave Smith Associated Spring Southfield, Michigan] A reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate follows:
1996 1995 1994 - -------------------------------------------------- - ---------------- U.S. federal statutory income tax rate35.0% 35.0%35.0% State taxes (net of federal benefit) 3.6 3.5 3.8 Foreign losses without tax benefit 1.6 2.7 4.0 Foreign tax rates (2.5) (1.6) (3.1) NASCO income (0.6) (1.0) (2.0) Other 0.6 0.9 2.4 - -------------------------------------------------- - ---------------- Consolidated effective income tax rate37.7% 39.5%40.1% ================================================== ================
Income taxes paid, net of refunds, were $17,825, $13,269 and $8,849 in 1996, 1995 and 1994, respectively. 7. COMMON STOCK In 1996, 1995 and 1994, 129,806, 167,779 and 135,692 shares of common stock were issued from treasury for the exercise of stock options, purchases by the Employee Stock Purchase Plan and various other incentive awards. In 1996 and 1995, the company acquired 20,604 and 42,236 shares of the companyOs common stock from its Guaranteed Stock Plan at a cost of $1,197 and $1,746, respectively. These acquired shares were placed in treasury. In December 1996, the company adopted a new stockholder rights plan. The company had adopted a rights plan in 1986, that expired earlier this year. Under the new plan, 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 two hundred dollars. 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 new Rights are generally redeemable at one cent per Right at any time until 10 days following a public announcement that a 35% or greater position in the companyOs common stock has been acquired and will expire, unless earlier redeemed or exchanged, on December 23, 2006. If, following the acquisition by a person or group of 35% or more of the outstanding shares of the companyOs common stock, the company is acquired in a merger or other business combination or 50% or more of the companyOs 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. 8. PREFERRED STOCK At December 31, 1996 and 1995, the company had 3,000,000 shares of one dollar par value preferred stock authorized, none of which were outstanding. 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. [PHOTO OF JENNIFER SMITH-CAMPBELL BARNES AEROSPACE WINDSOR, CONNECTICUT] [PHOTO OF STAN SUGGS ASSOCIATED SPRING SOUTHFIELD, MICHIGAN [PHOTO OF KHALAF SUKKAR ASSOCIATED SPRING SALINE, MICHIGAN 9. STOCK PLANS All U.S. salaried and non-union hourly employees are eligible to participate in the companyOs Guaranteed Stock Plan (GSP). The GSP provides for the investment of employer and employee contributions in the companyOs common stock. The company guarantees a minimum rate of return on certain GSP assets. The GSP is a leveraged Employee Stock Ownership Plan (ESOP). In 1989, the GSP purchased 579,310 shares of the companyOs common stock at a cost of $21,000 using the proceeds of a loan guaranteed by the company. These shares are held in trust and are issued to employeesO accounts in the GSP as the loan is repaid. Principal and interest on the GSP loan are being paid in quarterly installments through 1999. The loan bears interest based on LIBOR. At December 31, 1996, the interest rate was 6.4%. Interest of $538, $747 and $653 was incurred in 1996, 1995 and 1994, respectively. Contributions and certain dividends received are used in part by the GSP to service its debt. Contributions include both employee contributions up to a maximum of 10% of eligible pay and company contributions. The company contributions are equal to the amount required by the Plan to pay the principal and interest due under the Plan loan plus that required to purchase any additional shares required to be allocated to participant accounts, less the sum of participant contributions and dividends received by the GSP. The GSP used $1,642, $1,459 and $1,323 of company dividends for debt service in 1996, 1995 and 1994, respectively. The company expenses all cash contributions made to the GSP. Compensation expense was $1,666, $2,019 and $2,268 in 1996, 1995 and 1994, respectively. In addition to the company shares held in trust, the GSP also purchases the companyOs common stock on the open market to meet its requirements. As of December 31, 1996, the GSP held 1,149,622 shares of the companyOs common stock, of which 165,855 shares were unallocated. For financial statement purposes, the company reflects its guarantee of the GSPOs debt as a liability with a like amount reflected as a reduction of stockholdersO equity. The company has an Employee Stock Purchase Plan under which eligible employees may elect to have up to 10% of base compensation deducted from payroll for the purchase of the companyOs common stock at 85% of market value on the date of purchase. The maximum number of shares which may be purchased under the Plan is 675,000. During 1996, 17,845 shares (21,012 and 22,367 shares in 1995 and 1994, respectively) were purchased. As of December 31, 1996, 204,026 shares may be issued in the future. 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. [PHOTO OF ROAN TAN BARNES AEROSPACE WINDSOR, CONNECTICUT] [PHOTO OF JEFF TIBOLLA BOWMAN DISTRIBUTION SOUTH JORDAN, UTAH] The 1991 Barnes Group Stock Incentive Plan authorizes the granting of incentives to officers and other executives in the form of stock options, stock appreciation rights, incentive stock rights and performance unit awards. A predecessor plan that provided for similar incentives expired in 1991. Options granted under that plan continue to be exercisable and any options that terminate without being exercised become available for grant under the 1991 Plan. A maximum of 1,051,714 common shares are subject to issuance under this plan after December 31, 1996. As of December 31, 1996, there were 583,630 shares available for future grant (160,570 at December 31, 1995). Compensation cost related to these plans was $904 and $128 in 1996 and 1994, respectively. No amount was recorded in 1995. Data relating to options granted under these plans follow:
1996 1995 - -------------------------------------------------- - ---------------- AVERAGE Average NUMBEREXERCISE NumberExercise OF SHARES PRICEof Shares Price - -------------------------------------------------- - ---------------- Outstanding, January 1500,356$32.73644,554 $31.61 Granted 23,150 $46.96 79,100 $40.09 Exercised 109,212 $33.90 146,046 $32.01 Cancelled 51,297 $35.00 77,252 $32.24 - -------------------------------------------------- - ---------------- Outstanding, December 31, 362,997 $32.95 500,356 $32.73 ================================================== ================ Exercisable, December 31, 72,340 $30.74 142,400 $32.29 ================================================== ================
The following table summarizes information about stock options outstanding at December 31, 1996:
OPTIONS OUTSTANDINGOPTIONS EXERCI SABLE ---------------------------------- - ------------------- RANGE OF AVERAGE AVERAGE AVERAGE EXERCISE NUMBERREMAININGEXERCISE NUMBEREXERCISE PRICESOF SHARES LIFE PRICEOF SHARES PRICE - ------------------------------------------------ - -------------------- $20 to $27 46,3705.7 years $25.43 33,870 $25.05 $31 to $33229,4666.6 years $31.30 14,934 $32.14 $35 to $40 28,7116.3 years $37.50 13,411 $36.37 $40 to $47 51,9008.6 years $41.23 10,125 $40.27 $ 58.50 6,5509.9 years $58.50 -- $ --
Incentive Stock Rights entitle the holder to receive shares of the companyOs common stock without payment, after the lapse of the incentive period and subject to the satisfaction of established performance goals. Additionally, holders are credited with dividend equivalents, which are converted into additional incentive stock units, based on dividends paid on outstanding shares. In 1996, 108,000 incentive stock units were granted, of which 36,500 are subject to performance goals. All units granted have a five year incentive period. During 1996, an additional 2,087 units were credited to holders for dividend equivalents and 5,000 units were forfeited. 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. [PHOTO OF VIBOL TIEM BARNES AEROSPACE OGDEN, UTAH] [PHOTO OF CARYN WOODWARD BARNES AEROSPACE WINDSOR, CONNECTICUT] Under the Non-employee Director Deferred Stock Plan each non-employee director is awarded 2,000 shares of the companyOs common stock upon retirement. There were 2,000 shares issued under this plan in 1996 and 4,000 in 1994. No shares were issued in 1995. As of December 31, 1996, 18,000 shares were reserved for issuance under this plan. Total shares reserved for issuance under all stock plans aggregated 1,273,740 at December 31, 1996. 10. PENSION PLANS The company has noncontributory defined benefit pension plans covering a majority of its worldwide employees at Associated Spring, Bowman Distribution and at its Executive Office. 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 (ERISA). Plan assets consist primarily of common stocks and fixed income investments. Pension expense consisted of the following:
1996 1995 1994 - -------------------------------------------------- - ---------------- Service cost $ 5,591$ 4,836$ 5,282 Interest cost 15,839 15,907 15,290 Actual (return) loss on plan assets(34,906)(43,256) 941 Net amortization and deferral 13,981 22,960(20,295) - -------------------------------------------------- - ---------------- $ 505$ 447$ 1,218 ================================================== ================
The funded status of the plans at December 31, is set forth below:
1996 1995 - -------------------------------------------------- - ---------------- Plan assets at fair value $271,450$247,915 Actuarial present value of benefit obligations: Vested benefits 187,728201,231 Nonvested benefits 13,713 4,124 - -------------------------------------------------- - ---------------- Accumulated benefit obligations 201,441 205,355 Additional benefits based on projected future salary increases 20,840 23,026 - -------------------------------------------------- - ---------------- Projected benefit obligations 222,281 228,381 - -------------------------------------------------- - ---------------- Plan assets greater than projected benefit obligations $ 49,169$ 19,534 ================================================== ================
Reconciliation to net pension asset recognized in the accompanying balance sheets:
1996 1995 - -------------------------------------------------- - ---------------- Plan assets greater than projected benefit obligations $ 49,169$ 19,534 Adjustments for unrecognized: Net gains (39,387)(6,512) Prior service costs 6,843 4,591 Net asset at transition (7,505)(9,043) - -------------------------------------------------- - ---------------- (40,049) (10,964) - -------------------------------------------------- - ---------------- Net pension asset $ 9,120$ 8,570 ================================================== ================
25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. Significant assumptions used in determining pension expense and the funded status of the plans were:
1996 1995 1994 - -------------------------------------------------- - ---------------- Weighted average discount rate 7.75% 7.25% 8.25% Increase in compensation 5.25% 5.25% 5.25% Long-term rate of return on plan assets9.00% 9.00% 9.00%
The company has defined contribution plans covering employees of Barnes Aerospace and field sales employees of Bowman DistributionOs U.S. operation. Company contributions under these plans are based primarily on the performance of the business units and employee compensation. Total expense amounted to $1,735, $1,748 and $1,431 in 1996, 1995 and 1994, respectively. 11. POSTRETIREMENT HEALTHCARE AND LIFE INSURANCE BENEFITS The company provides certain medical, dental and life insurance benefits for a majority of its retired employees in the U.S. and Canada. It is the companyOs practice to fund these benefits as incurred. Postretirement benefit expense consisted of the following:
1996 1995 1994 - -------------------------------------------------- - ---------------- Service cost $ 660 $ 679$ 874 Interest cost 4,782 5,594 5,199 Net amortization (1,150) (158) (158) - -------------------------------------------------- - ---------------- $ 4,292 $6,115$ 5,915 ================================================== ================
The amounts included in the accompanying balance sheets at December 31, were as follows:
1996 1995 1994 - -------------------------------------------------- - ---------------- Accumulated benefit obligations: Retirees $46,283$57,160$50,917 Employees eligible to retire 5,283 6,904 6,209 Employees not eligible to retire 10,464 13,654 12,020 Unrecognized prior service cost 9,799 1,021 1,245 Unrecognized net loss (1,331)(7,339) (986) - -------------------------------------------------- - ---------------- $70,498$71,400$69,405 ================================================== ================Postretirement benefit obligations included in: Accrued liabilities $ 5,273$ 5,673$ 5,300 Accrued retirement benefits 65,225 65,727 64,105 - -------------------------------------------------- - ---------------- $70,498$71,400$69,405 ================================================== ================
A deferred tax asset is included in the accompanying balance sheet recognizing the future tax benefit of the postretirement benefit obligations (See Note 6). Cash payments made in 1996, 1995 and 1994 for postretirement benefits were $5,194, $5,210 and $4,828, respectively. The companyOs accumulated benefit obligations take into account certain cost-sharing provisions. The annual assumed rate of increase in the cost of covered benefits (i.e., healthcare cost trend rate) is assumed to be 9.0% for 1996, gradually reducing to 5.0% by the year 2001. A one percentage point increase in the assumed healthcare cost trend rate would increase the accumulated benefit obligations by approximately $2,175 at December 31, 1996, and would have increased 1996 expense by approximately $168. Discount rates of 7.75%, 7.25% and 8.25% were used in determining the accumulated benefit obligation at December 31, 1996, 1995 and 1994, respectively. 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. 12. LEASES The company has various noncancellable operating leases for buildings, office space and equipment. Capital leases were not significant. Rent expense was $6,268, $5,866 and $6,072 for 1996, 1995 and 1994, respectively. During 1997, both Associated Spring and Bowman Distribution will relocate to new headquarters facilities under operating leases. Minimum rental commitments under noncancellable leases in years 1997 through 2001 are $3,327, $3,612, $2,268, $2,292, $2,420 and $13,349 thereafter. 13. SUBSEQUENT EVENT On February 21, 1997, the Board of Directors authorized, subject to stockholder approval, an amendment to the CompanyOs Restated Certificate of Incorporation, as amended, providing for an increase in the number of shares of authorized common stock from 20,000,000 to 60,000,000 and a reduction in the par values of the common stock and preferred stock from one dollar to one cent per share (the OAmendmentO.) The Amendment is being presented to stockholders for approval at the companyOs April 2, 1997 Annual Meeting of Stockholders. On February 21, 1997, the Board of Directors also authorized (a) a three-for-one stock split of the companyOs common stock in the form of a 200% stock dividend for stockholders of record on April 3, 1997, subject to stockholder approval of the Amendment, and (b) the transfer from stated capital to surplus of all capital in excess of the aggregate par value of the companyOs issued shares, subject to effectiveness of the stock split. If the stock split is effected, the number of shares of issued common stock will triple, per share data for all periods presented will decrease accordingly, adjustments will be made to all outstanding stock options and other stock-based awards and the Board-authorized transfer from stated capital to surplus will occur. 14. INFORMATION ON BUSINESS SEGMENTS The company operates three businesses: ASSOCIATED SPRING: manufactures and distributes custom-made springs and other close-tolerance engineered metal components principally to the transportation, electronics and industrial markets. Associated SpringOs custom metal parts are sold in the United States and through its foreign subsidiaries. Foreign manufacturing operations are located in Brazil, Canada, Mexico and Singapore. The automotive and automotive parts industries constitute Associated SpringOs largest market. BOWMAN DISTRIBUTION: distributes fast-moving, consumable repair and replacement products for industrial, heavy equipment and transportation maintenance markets. Bowman DistributionOs operations and markets are located primarily in the United States. Other important locations include Canada and Europe. BARNES AEROSPACE: manufactures precision machined parts and fabricated assemblies, and refurbishes jet engine components for the aircraft and aerospace industries. Barnes AerospaceOs operations and markets are located primarily in the United States and Singapore. Sales between the business segments and between the geographic areas are accounted for on the same basis as sales to unaffiliated customers. Operating income includes net sales less cost of sales and selling and administrative expenses. Other income and expenses are not included in operating income. Corporate assets consist of cash and cash equivalents, deferred income taxes, other assets, transportation equipment and the Executive Office building. Included in the 1996 identifiable international assets are the assets of manufacturing facilities in Singapore ($23,633), Brazil ($15,320), Canada ($19,421) and Mexico ($13,107) and distribution facilities in Canada ($12,337), United Kingdom ($15,288) and France ($8,042). Associated SpringOs operation in Singapore was an important contributor to the companyOs international operating income during each of the three years presented. 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BARNES GROUP INC. The following tables set forth information about the companyOs operations by its three business segments and by geographic area. OPERATIONS BY BUSINESS SEGMENT
Net Sales Operating Income ---------------------------- - ---------------------- (Dollars in millions) 19961995 1994 1996 1995 1994 - -------------------------------------------------- - ---------------- Associated Spring $279.5$279.0$272.4 $45.8 $42.6 $41.7 Bowman Distribution 213.4 217.0 215.1 22.0 17.4 12.6 Barnes Aerospace103.1 97.3 82.3 5.3 5.0 (1.8) Intersegment sales (1.0) (0.8)(0.6) -- -- -- ---------------------------------- - ----------------- $595.0 $592.5$569.2 73.1 65.0 52.5 ========================== Corporate expenses (17.8)(16 .2) (15.9) - -------------------------------------------------- - ---------------- Operating income $55.3 $48.8 $36.6 ================================================== ================
Identifiable Capital Depreciation Assets Expenditures Expense -------------------------------------------------- - --------------------- (Dollars in millions) 1996 1995 1994 1996 1995 1994 1996 1995 1994 - --------------------------------------------------------------- - ----------------- Associated Spring $177.8$160.3$144.7$21.5$24.2$23.7 $13.0$11.6$ 9.0 Bowman Distribution73.0 79.2 86.0 2.9 3.6 4.3 3.7 4.1 3.1 Barnes Aerospace 96.1 87.0 85.6 9.4 7.8 3.7 7.0 7.2 7.5 Corporate 43.1 35.0 35.7 0.1 0.2 0.1 0.3 0.3 0.2 - ------------------------------------------------------------- - ------------------- $390.0$361.5$352.0$33.9$35.8$31.8 $24.0$23.2$19.8 ============================================================= ===================
OPERATIONS BY GEOGRAPHIC AREA
Net Sales Operating Income -------------------------------- - --------------- (Dollars in millions)1996 1995 1994 1996 1995 1994 - --------------------------------------------------------------------- Domestic $466.4$463.4$454.8 $59.5$51.3$45.0 International 138.8 137.9 121.9 13.6 13.7 7.5 Sales between geographic areas (10.2) (8.8) (7.5) -- -- -- - --------------------------------------------------------------------- $595.0$592.5$569.2 $73.1$65.0$52.5 =====================================================================
Identifiable Assets ----------------------- (Dollars in millions) 1996 1995 1994 - -------------------------------------------------- - ---------------- Domestic $239.8$227.5$226.6 International 107.1 99.0 89.7 Corporate 43.1 35.0 35.7 - -------------------------------------------------- - ---------------- $390.0$361.5$352.0 =========================================================== =======
28 REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF BARNES GROUP INC. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, 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, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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 the opinion expressed above. /s/ PRICE WATERHOUSE LLP Hartford, Connecticut January 22, 1997, except as to Note 13, which is as of February 21, 1997 QUARTERLY DATA (UNAUDITED) BARNES GROUP INC.
(Dollars in millions, First Second Third Fourth Full except per share data) Quarter Quarter Quarter Quarter Year - ---------------------------------------------------------------------- - ------------------ 1996 Net sales $150.1 $152.6 $147.1 $145.2 $595.0 Gross profit* 52.9 53.7 52.2 51.5 210.3 Operating income11.2 14.4 14.7 15.0 55.3 Net income 6.6 8.7 8.7 8.6 32.6 Per Common Share: Net income 1.01 1.30 1.31 1.28 4.90 Dividends .45 .45 .45 .45 1.80 Market prices (high-low)$45 1U4-35$51 7U8-44 3U4$51 1U8-46 1U4$62-49 5U8$62-35 1995 Net sales $158.6 $151.0 $141.7 $141.2 $592.5 Gross profit* 57.7 54.8 49.8 48.1 210.4 Operating income14.5 13.4 11.1 9.8 48.8 Net income 8.3 7.3 6.3 5.6 27.5 Per Common Share: Net income 1.29 1.12 .95 .84 4.20 Dividends .40 .40 .40 .40 1.60 Market price (high-low)$44 3U8-36 1U4$45 3U4-40 1U4$43-40$40 7U8-35 7U8$45 3U4- 35 7U8 *Sales minus cost of sales.
29 SELECTED FINANCIAL DATA BARNES GROUP INC.
1996 1995 19941993(2) - ------------------------------------------------------------- - --------- PER COMMON SHARE (1) Income (loss) Continuing operations $ 4.90$ 4.20$ 3.20$ .70 Effect of accounting changes-- -- -- Net income (loss) 4.90 4.20 3.20 .70 Dividends paid 1.80 1.60 1.45 1.40 Stockholders' equity (at year-end) 23.58 19.66 16.66 14.59 Stock price (at year-end) 60 36 38 31 1U4 - ------------------------------------------------------------- - --------- FOR THE YEAR (in thousands) Net sales $594,989$592,509$569,197$502 ,292 Operating income 55,316 48,80436,649 12,538 As a percent of sales 9.3% 8.2% 6.4% 2.5% Income from continuing operations before income taxes and effect of accounting changes$ 52,310$ 45,450$ 33,922 $ 8,391 Income taxes 19,742 17,96613,606 4,008 Income from continuing operations before effect of accounting changes (8)32,56827,48420,316 4,383 As a percent of average stockholdersO equity 22.8% 22.6% 20.3% 4.7% Effect of accounting changes$ --$ --$ --$ - -- Net income (loss) 32,568 27,48420,316 4,383 Net income (loss) applicable to common stock 32,568 27,48420,316 4,383 Depreciation and amortization26,62626,75023,73323,094 Capital expenditures 33,892 35,82031,848 22,216 Average common shares outstanding 6,641 6,547 6,354 6,250 - ------------------------------------------------------------- - --------- YEAR-END FINANCIAL POSITION (in thousands) Working capital $109,476$ 95,280$ 88,325$ 87 ,011 Current ratio 2.4 to 12.2 to 12.0 to 12.1 to 1 Property, plant and equipment$131,071$122,870$112,569 $103,043 Total assets 389,956361,549351,956333,29 6 Long-term debt 70,000 70,00070,000 70,000 Guaranteed ESOP obligation - long term portion 4,951 7,491 9,839 12,011 StockholdersO equity 157,164128,841107,13991,849 Debt as a percent of total capitalization(9) 33.5% 38.4% 45.6% 50.7% - ------------------------------------------------------------ - ---------- YEAR-END STATISTICS Employees 3,761 3,880 4,181 4,357 (1) All per-share data, other than earnings per common share, are based on common shares outstanding at the end of each year. Earnings per common share are based on weighted average common shares outstanding during each year. (2) Includes a $3.4 million pretax, $2.0 million after-tax charge ($.33 per share) against income related to the plant consolidation and work force reduction at Barnes Aerospace and a $1.5 million charge without tax benefit ($.24 per share) for a plant consolidation at Associated SpringOs Mexican operations. (3) Includes a $17.8 million pretax, $10.7 million after-tax charge ($1.73 per share) against income related to the costs of plant closings at Associated Spring, Barnes Aerospace charges on a terminated contract and restructuring of Bowman U.S. sales organization. These charges were partially offset by a $5.0 million pretax gain, $3.7 million after-tax ($.60 per share) from the sale of BowmanOs Pioneer division. (4) Barnes Group adopted three new accounting standards in 1992 retroactive to the beginning of the year. Included is a one-time $39.7 million after-tax charge ($6.41 per share) to comply with FAS 106 and 112 which changes the accounting for certain postretirement and postemployment benefits to the accrual method and an additional $1.0 million income tax charge ($.15 per share) for FAS 109, which changed income tax accounting.
30 SELECTED FINANCIAL DATA BARNES GROUP INC. (CONTINED)
1992(3)(4) 1991 1990 1989(5) 1988 1987(6) 1986(7) - --------------------------------------------------------------- - ----------------- $ .94$ 2.60$ 2.76 $ 1.94$ 3.06$ 2.80 $ 2.57 (6.56) -- -- -- -- -- -- (5.62) 2.60 2.76 1.94 3.06 2.80 2.57 1.40 1.40 1.40 1.40 1.20 1.15 1.00 15.04 22.46 20.74 18.55 20.35 17.91 19.27 30 1U2 35 3U8 25 7U8 29 35 5U8 32 30 1U2 - --------------------------------------------------------------- - ----------------- $ 529,073$535,660$545,857 $511,221$496,060$458,016 $439,727 7,259 37,982 41,198 33,990 43,702 42,265 43,056 1.4% 7.1% 7.5% 6.6% 8.8% 9.2% 9.8% $ 7,671$ 28,849$ 29,952 $ 23,118$ 33,175$ 34,576 $ 35,336 1,838 12,926 13,163 10,745 14,327 16,736 18,733 5,833 15,923 16,789 11,114 16,711 17,700 16,603 5.8% 12.2% 14.1% 9.9% 15.9% 14.0% 14.0% $(40,695)$ --$ -- $ --$ --$ -- $ -- (34,862) 15,923 16,789 12,373 18,848 17,840 16,603 (34,862) 15,923 16,789 11,114 16,711 17,700 16,603 23,741 23,159 22,044 18,167 16,626 15,470 14,511 16,238 19,099 21,615 18,218 21,821 22,457 18,803 6,202 6,127 6,078 5,733 5,465 6,321 6,461 - --------------------------------------------------------------- - ----------------- $ 93,500$102,995$ 94,087 $ 89,194$102,126$ 85,991$ 54,659 2.0 to 12.2 to 11.9 to 1 1.9 to 12.3 to 12.0 to 1 1.5 to 1 $104,437$114,299$114,717 $107,491$100,403$ 96,066$ 87,613 348,346 341,857 342,383 328,116 311,876 297,946 277,828 70,000 78,428 78,714 79,088 79,287 73,853 32,285 14,019 15,877 17,594 19,181 -- -- -- 93,575 138,813 126,432 112,568 112,810 97,103 123,025 51.9% 46.2% 50.2% 52.8% 45.1% 48.6% 31.6% - --------------------------------------------------------------- - ----------------- 4,051 4,478 4,744 4,799 4,770 4,712 4,697 (5) Includes a $6.5 million pretax, $3.9 million after-tax charge ($.68 per share) against income related to restructuring costs at Associated Spring. (6) Includes a $2.9 million pretax, $1.6 million after-tax charge ($.26 per share) against income related to the transition costs involved in modernizing Associated SpringOs valve spring production facilities in North America. (7) Barnes Group changed its U.S. pension cost accounting to comply with FAS 87. The effect was to increase net income by $2.2 million ($.33 per share). (8) Adjusted for preferred dividends in 1989, 1988 and 1987. (9) Debt includes all interest-bearing debt including the guaranteed ESOP obligation, and total capitalization includes interest- bearing debt and stockholdersO equity.
31 APPENDIX TO FORM EX-13 FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED AND EDGAR-FILED TEXTS. (1) Rule lines for tables are omitted. (2) Italic typeface is displayed in normal type. (3) Boldface type is displayed in capital letters. (4) Because the printed page breaks are not reflected, certain tabular and columnar headings and symbols are displayed differently in this filing. (5) Bullet points and similar graphic symbols are omitted. (6) Page numbering is different. EX-27 13
5 This schedule contains summary financial information extracted from the consolidated balance sheet of Barnes Group Inc. as of December 31, 1996, the related consolidated statement of income, Note 3 to the consolidated financial statements and Schedule VIII of Form 10-K and is qualified in its entirety by reference to such financial statements, note and schedule. 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 23,986 0 91,218 3,158 64,942 190,298 320,604 189,533 389,956 80,822 74,951 15,737 0 0 141,427 389,956 594,989 594,989 384,722 384,722 0 545 4,981 52,310 19,742 32,568 0 0 0 32,568 4.90 4.90
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