10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the Quarterly Period Ended April 30, 2006

OR

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

For the Transition Period from                     to                     

Commission File Number 1-14959

BRADY CORPORATION

(Exact name of registrant as specified in its charter)

Wisconsin	39-0178960
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

6555 West Good Hope Road, Milwaukee, Wisconsin 53223
(Address of principal executive offices)
(Zip Code)

(414) 358-6600
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ  Accelerated filer o   Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No þ

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 22, 2006, there were outstanding 45,577,842 shares of Class A Nonvoting Common Stock and 3,538,628 shares of Class B Voting Common Stock. The Class B Common Stock, all of which is held by affiliates of the Registrant, is the only voting stock.

FORM 10-Q

BRADY CORPORATION

INDEX

	Page
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets		3
Condensed Consolidated Statements of Income		4
Condensed Consolidated Statements of Cash Flows		5
Notes to Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		29
PART II. Other Information
Item 1A. Risk Factors		30
Item 6. Exhibits		34
Share Sale and Purchase Agreement
Rule 13a-14(a)/15d-14(a) Certification
Rule 13a-14(a)/15d-14(a) Certification
Section 1350 Certification
Section 1350 Certification

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

	April 30, 2006			July 31, 2005
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	90,314		$	72,970
Short term investments		30,000			7,100
Accounts receivable, less allowance for losses ($5,309 and $3,726, respectively)		166,962			123,453
Inventories:
Finished products		50,827			38,827
Work-in-process		11,162			9,681
Raw materials and supplies		31,863			22,227
Total inventories		93,852			70,735
Prepaid expenses and other current assets		37,402			28,114
Total current assets		418,530			302,372
Other assets:
Goodwill		452,748			332,369
Other intangible assets, net		95,189			71,647
Deferred income taxes		40,302			39,043
Other		9,145			6,305
Total other assets		597,384			449,364
Property, plant and equipment:
Cost:
Land		6,553			6,388
Buildings and improvements		73,606			65,007
Machinery and equipment		175,205			157,093
Construction in progress		10,424			6,510
		265,788			234,998
Less accumulated depreciation		150,251			136,587
Net property, plant and equipment		115,537			98,411
Total	$	1,131,451		$	850,147
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	60,790		$	52,696
Wages and amounts withheld from employees		46,361			49,620
Taxes, other than income taxes		6,443			4,815
Accrued income taxes		23,205			24,028
Other current liabilities		32,713			29,649
Short-term borrowings and current maturities on long-term debt		126			4
Total current liabilities		169,638			160,812
Long-term debt, less current maturities		350,187			150,026
Other liabilities		56,377			42,035
Total liabilities		576,202			352,873
Stockholders’ investment:
Class A nonvoting common stock — Issued 45,881,743 and 45,877,543 shares, respectively and outstanding 45,462,077 and 45,792,199 shares, respectively		459			458
Class B voting common stock — Issued and outstanding 3,538,628 shares		35			35
Additional paid-in capital		101,242			99,029
Income retained in the business		445,508			382,880
Treasury stock — 419,666 and 85,344 shares, respectively of Class A nonvoting common stock, at cost		(15,341	)		(1,575	)
Accumulated other comprehensive income		25,198			17,497
Other		(1,852	)		(1,050	)
Total stockholders’ investment		555,249			497,274
Total	$	1,131,451		$	850,147

See Notes to Condensed Consolidated Financial Statements.

3

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands, Except Per Share Amounts)

	(Unaudited)
	Three Months Ended April 30,									Nine Months Ended April 30,
							Percentage									Percentage
	2006			2005			Change			2006			2005			Change
Net sales	$	266,494		$	209,766			27.0	%	$	730,103		$	606,401			20.4	%
Cost of products sold		125,739			95,898			31.1	%		348,252			282,052			23.5	%
Gross margin		140,755			113,868			23.6	%		381,851			324,349			17.7	%
Operating expenses:
Research and development		7,314			5,941			23.1	%		20,677			17,744			16.5	%
Selling, general and administrative		89,215			72,384			23.3	%		241,543			208,335			15.9	%
Total operating expenses		96,529			78,325			23.2	%		262,220			226,079			16.0	%
Operating income		44,226			35,543			24.4	%		119,631			98,270			21.7	%
Other income and (expense):
Investment and other income — net		2,279			36			6230.6	%		2,759			812			239.8	%
Interest expense		(4,496	)		(2,101	)		114.0	%		(8,920	)		(6,277	)		42.1	%
Income before income taxes		42,009			33,478			25.5	%		113,470			92,805			22.3	%
Income taxes		11,763			8,522			38.0	%		31,772			26,913			18.1	%
Net income	$	30,246		$	24,956			21.2	%	$	81,698		$	65,892			24.0	%
Per Class A Nonvoting Common Share:
Basic net income	$	0.62		$	0.51			21.6	%	$	1.67		$	1.35			23.7	%
Diluted net income	$	0.61		$	0.50			22.0	%	$	1.64		$	1.32			24.2	%
Dividends	$	0.13		$	0.11			18.2	%	$	0.39		$	0.33			18.2	%
Per Class B Voting Common Share:
Basic net income	$	0.62		$	0.51			21.6	%	$	1.65		$	1.33			24.1	%
Diluted net income	$	0.61		$	0.50			22.0	%	$	1.62		$	1.31			23.7	%
Dividends	$	0.13		$	0.11			18.2	%	$	0.37		$	0.31			19.4	%
Weighted average common shares outstanding (In Thousands):
Basic		48,923			49,177						49,039			48,872
Diluted		49,833			50,192						49,962			49,754

See Notes to Condensed Consolidated Financial Statements.

4

BRADY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

	(Unaudited)
	Nine Months Ended
	April 30,
	2006			2005
Operating activities:
Net income	$	81,698		$	65,892
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,973			19,991
Gain on Foreign Currency Contract		(1,517	)		—
Income tax benefit from the exercise of stock options		—			4,747
Deferred income taxes		(3,500	)		(2,354	)
Loss on sale or disposal of property, plant & equipment		188			599
Provision for losses on accounts receivable		1,102			980
Non-cash portion of stock-based compensation expense		4,275			3,101
Changes in operating assets and liabilities (net of effects of business acquisitions):
Accounts receivable		(25,570	)		(5,099	)
Inventories		(14,123	)		(8,423	)
Prepaid expenses and other assets		(2,604	)		(979	)
Accounts payable and accrued expenses		(3,748	)		(10,056	)
Income taxes		(1,657	)		10,107
Other liabilities		4,813			3,491
Net cash provided by operating activities		63,330			81,997
Investing activities:
Acquisition of businesses, net of cash acquired		(155,283	)		(49,397	)
Purchases of short-term investments		(105,800	)		(34,000	)
Sales of short-term investments		82,900			22,950
Purchases of property, plant and equipment		(26,291	)		(14,411	)
Purchase of Foreign Currency Contract		(2,134	)		—
Proceeds from sale of property, plant and equipment		(51	)		288
Other		(1,907	)		(1,188	)
Net cash used in investing activities		(208,566	)		(75,758	)
Financing activities:
Payment of dividends		(19,070	)		(15,885	)
Proceeds from the exercise of stock options		6,960			14,635
Principal payments on debt		(721	)		(83,046	)
Net proceeds from issuance of debt		200,000			83,000
Purchase of treasury stock		(27,299	)		—
Income tax benefit from the exercise of stock options		3,707			—
Net cash provided by (used in) financing activities		163,577			(1,296	)
Effect of exchange rate changes on cash		(997	)		(760	)
Net increase in cash and cash equivalents		17,344			4,183
Cash and cash equivalents, beginning of period		72,970			68,788
Cash and cash equivalents, end of period	$	90,314		$	72,971
Supplemental disclosures:
Cash paid during the period for:
Interest, net of capitalized interest	$	4,572		$	4,051
Income taxes, net of refunds		30,844			12,982
Acquisitions:
Fair value of assets acquired, net of cash	$	61,602		$	35,971
Liabilities assumed		(23,188	)		(18,212	)
Goodwill		116,869			31,638
Net cash paid for acquisitions	$	155,283		$	49,397

See Notes to Condensed Consolidated Financial Statements.

5

BRADY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended April 30, 2006
(Unaudited)
(In thousands, except share and per share amounts)

NOTE A — Basis of Presentation

          The condensed consolidated financial statements included herein have been prepared by Brady Corporation and subsidiaries (the “Company” or “Brady”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the foregoing statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of April 30, 2006 and July 3l, 2005, and its results of operations for the three months and nine months ended April 30, 2006 and 2005, and its cash flows for the nine months ended April 30, 2006 and 2005. The condensed consolidated balance sheet as of July 31, 2005 has been derived from the audited consolidated financial statements of that date and condensed. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts therein. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from the estimates.

          Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statement presentation. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K for the year ended July 31, 2005.

          Reclassifications — Certain prior period amounts have been reclassified to conform with the current period presentation.

NOTE B — Goodwill and Intangible Assets

          Changes in the carrying amount of goodwill for the nine months ended April 30, 2006, are as follows:

	Americas		Europe		Asia		Total
Balance as of July 31, 2005	$	226,843	$	73,544	$	31,982	$	332,369
Goodwill acquired during the period		101,734		6,102		9,033		116,869
Translation adjustments and other		901		1,258		1,351		3,510
Balance as of April 30, 2006	$	329,478	$	80,904	$	42,366	$	452,748

          Goodwill increased by $120,379 during the nine months ended April 30, 2006, including an increase of $3,510 attributable to translation adjustments and adjustments to the preliminary allocation of the purchase price of Technology Print Supplies Ltd. and its associate, Technology Supply Media Co., Ltd. in Thailand, which were acquired on July 29, 2005. The additional increase in goodwill of $116,869 for the nine months ended April 30, 2006 was due to the allocation of the purchase price for the acquisitions of STOPware, Inc., TruMed Technologies, Inc., J.A.M. Plastics Inc., Personnel Concepts, and IDenticard Systems, Inc. in the United States, Identicam Systems in Canada, Texit Danmark AS and Texit Norge AS in Europe, QDP Thailand Co. Ltd. in Asia, and Accidental Health & Safety Pty. Ltd. and Trafalgar First Aid Pty. Ltd. in Australia.

6

          Other intangible assets include patents, trademarks, non-compete agreements and other intangible assets with finite lives being amortized in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” The net book value of these assets was as follows:

	April 30, 2006									July 31, 2005
	Weighted									Weighted
	Average									Average
	Amortization		Gross							Amortization		Gross
	Period		Carrying		Accumulated			Net Book		Period		Carrying		Accumulated			Net Book
	(Years)		Amount		Amortization			Value		(Years)		Amount		Amortization			Value
Amortized other intangible assets:
Patents		16	$	7,210	$	(4,957	)	$	2,253		16	$	6,830	$	(4,525	)	$	2,305
Trademarks and other		8		2,737		(1,391	)		1,346		10		1,370		(1,134	)		236
Customer relationships		8		71,795		(14,301	)		57,494		8		51,211		(7,244	)		43,967
Purchased software		4		3,523		(1,897	)		1,626		5		3,148		(1,353	)		1,795
Non-compete agreements		4		8,184		(4,336	)		3,848		4		6,216		(3,212	)		3,004
Unamortized other intangible assets:
Trademarks		N/A		28,622		—			28,622		N/A		20,340		—			20,340
Total			$	122,071	$	(26,882	)	$	95,189			$	89,115	$	(17,468	)	$	71,647

          The increase in customer relationships for the nine months ended April 30, 2006, relates to the acquisitions of STOPware, Inc., TruMed Technologies, Inc., J.A.M. Plastics Inc., Personnel Concepts, and IDenticard Systems, Inc. in the United States, Identicam Systems in Canada, Texit Danmark AS and Texit Norge AS in Europe, QDP Thailand Co. Ltd. in Asia, and Accidental Health & Safety Pty. Ltd. and Trafalgar First Aid Pty. Ltd. in Australia. The increase in trademarks for the same period is due primarily to the acquisitions of Texit Danmark AS, Texit Norge AS, J. A. M. Plastics Inc., and Personnel Concepts. The value of goodwill and intangible assets in the Condensed Consolidated Financial Statements at April 30, 2006 differs from the value assigned to them in the preliminary allocation of purchase price due to the effect of fluctuations in the exchange rates used to translate financial statements into the United States Dollar.

          Amortization expense on intangible assets was $4,084 and $1,978 for the three-month periods ended April 30, 2006 and 2005, respectively and $9,414 and $6,062 for the nine-month periods ended April 30, 2006 and 2005, respectively. The amortization over each of the next five fiscal years is projected to be $12,773, $12,299, $11,770, $11,207 and $10,387 for the years ending July 31, 2006, 2007, 2008, 2009 and 2010, respectively.

NOTE C — Comprehensive Income

          Total comprehensive income, which is comprised of net income, foreign currency adjustments and net unrealized gains and losses from cash flow hedges, amounted to approximately $34,579 and $34,619 for the three months ended April 30, 2006 and 2005, respectively and $89,399 and $82,692 for the nine months ended April 30, 2006 and 2005, respectively.

7

NOTE D — Net Income Per Common Share

          Reconciliations of the numerator and denominator of the basic and diluted per share computations for the Company’s Class A and Class B common stock are summarized as follows:

	Three Months Ended				Nine Months Ended
	April 30,				April 30,
	2006		2005		2006			2005
Numerator:
Net Income	$	30,246	$	24,956	$	81,698		$	65,892
Numerator for basic and diluted Class A net income per share		30,246		24,956		81,698			65,892
Less: Preferential dividends		—		—		(758	)		(751	)
Less: Preferential dividends on dilutive stock options		—		—		(16	)		(23	)
Numerator for basic and diluted Class B net income per share	$	30,246	$	24,956	$	80,924		$	65,118
Denominator:
Denominator for basic net income per share for both Class A and Class B		48,923		49,177		49,039			48,872
Plus: Effect of dilutive stock options		910		1,015		923			882
Denominator for diluted net income per share for both Class A and Class B		49,833		50,192		49,962			49,754
Class A Non Voting Common Stock net income per share:
Basic	$	0.62	$	0.51	$	1.67		$	1.35
Diluted	$	0.61	$	0.50	$	1.64		$	1.32
Class B Voting Common Stock net income per share:
Basic	$	0.62	$	0.51	$	1.65		$	1.33
Diluted	$	0.61	$	0.50	$	1.62		$	1.31

          Options to purchase 614,500 and 621,500 shares of Class A Common Stock were excluded from the calculation of diluted net income per share for the three and nine months ended April 30, 2006, respectively, because their inclusion would have been anti-dilutive, or in the case of performance stock awards, because the number of shares ultimately issued is contingent on Company performance against metrics established for the performance period.

          Options to purchase 616,000 shares of Class A Common Stock were not included in the computation of diluted net income per share for the nine months ended April 30, 2005 because the option exercise price was greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive. No options were excluded from the computation of diluted net income per share for the three months ended April 30, 2005.

8

NOTE E — Acquisitions

          During the nine months ended April 30, 2006, the Company acquired STOPware, Inc. (August 2005), Texit Danmark AS and Texit Norge AS (collectively “Texit”) (September 2005), TruMed Technologies, Inc. (October 2005), QDP Thailand Co. Ltd. (“QDPT”) (October 2005), J.A.M. Plastics Inc. (December 2005), Personnel Concepts (January 2006), IDenticard Systems, Inc. and Identicam Systems in Canada (February 2006) and Accidental Health & Safety Pty. Ltd. and Trafalgar First Aid Pty. Ltd (March 2006) for a total combined purchase price, net of cash purchased, of $155,283 in cash.

          A brief description of each company acquired during the nine months ended April 30, 2006 is included below:

§	STOPware, Inc. is located in San Jose, California and is a manufacturer of visitor-badging and lobby-security software used to identify and track visitors.
§	Texit is a manufacturer and distributor of wire markers and cable-management products headquartered in Odense, Denmark, with operations in Ålesund, Norway.
§	TruMed Technologies, Inc. is a converter of disposable products and components for manufacturers in the medical device, diagnostic, personal care and industrial markets and is located in Burnsville, Minnesota.
§	QDPT is located in Wangnoi, Ayutthaya, Thailand and designs and manufactures high-precision components for the electronic, medical and automotive industries, specializing in precision laminating, stamping and contract assembly.
§	J.A.M. Plastics Inc. is located in Anaheim, California and specializes in the sale and manufacture of security-related accessory products including patented badge holders, lanyards and retractable badge reels.
§	Personnel Concepts is located in Pomona, California and is a direct marketer of labor-law compliance posters and related products. Personnel Concepts also offers consultative expertise on required communication of federal and state minimum wages, HIPAA privacy regulations, and EEO compliance, among other regulatory areas.
§	IDenticard Systems, Inc. is located in Lancaster, Pennsylvania and its affiliate Identicam Systems in Canada is located in Markham, Ontario. The Companies are market leaders in personal identification, access control and consumable identification badges.
§	Accidental Health & Safety Pty. Ltd. and Trafalgar First Aid Pty. Ltd. are located in Glendenning, New South Wales, Australia and are suppliers and distributors of customized first-aid kits, related safety products and signage for commercial enterprises.

9

The allocation of the purchase price of each company acquired during the nine months ended April 30, 2006, with the exception of STOPware, Inc., is preliminary pending the final valuation of intangible assets, tangible assets and liabilities. The results of the operations of each acquisition have been included since their respective dates of acquisition in the accompanying condensed consolidated financial statements.

The combined purchase price resulted in the allocation (or preliminary allocation) to intangible assets in the accompanying Condensed Consolidated Balance Sheet as follows:

	April 30, 2006
Goodwill	$	116,869
Customer relationships		19,549
Trademarks		8,411
Non-compete agreements		1,451
Purchased software		378
Patents		110
Other		1,305
Total	$	148,073

          Of the $116,869 allocated to goodwill, $31,301 associated with J.A.M. Plastics, Inc., TruMed Technologies, Inc. and IDenticard Systems, Inc. is expected to be deductible for tax purposes based on preliminary analysis.

          The purchase agreements for Texit, QDPT and STOPware, Inc. each include a provision for contingent payments based upon meeting certain performance conditions over a period of time subsequent to the acquisition. The total contingent payments of between $3,200 and $5,050 have not been accrued as liabilities in the accompanying condensed consolidated financial statements based on the accounting guidance in SFAS No. 141. The purchase agreements for QDPT and STOPware, Inc. do include holdback provisions of $310 and $200, respectively, that have been recorded as liabilities in the condensed consolidated financial statements.

          As of April 30, 2006, the allocation of the purchase price of Signs and Labels Ltd. in the U.K. remained preliminary pending the determination of the final purchase price and the final valuation of intangible assets. This company was purchased in the fourth quarter of fiscal 2005.

10

The following unaudited pro forma results of operations of the Company for the three and nine months ended April 30, 2006 and 2005, respectively, give effect to all acquisitions completed since August 1, 2005 as listed above as though the transactions had occurred on August 1, 2004.

	Three Months Ended April 30,				Nine Months Ended April 30,
	2006		2005		2006		2005
Net Sales
As reported	$	266,494	$	209,766	$	730,103	$	606,401
Pro forma		267,778		235,753		773,372		678,451
Net Income
As reported	$	30,246	$	24,956	$	81,698	$	65,892
Pro forma		30,909		26,486		83,666		66,722
Per Class A Nonvoting Common Share:
Basic Earnings per share
As reported	$	0.62	$	0.51	$	1.67	$	1.35
Pro forma		0.63		0.54		1.71		1.37
Diluted Earnings per share
As reported	$	0.61	$	0.50	$	1.64	$	1.32
Pro forma		0.62		0.53		1.67		1.34
Per Class B Voting Common Share:
Basic Earnings per share
As reported	$	0.62	$	0.51	$	1.65	$	1.33
Pro forma		0.63		0.54		1.69		1.35
Diluted Earnings per share
As reported	$	0.61	$	0.50	$	1.62	$	1.31
Pro forma		0.62		0.53		1.66		1.33

These unaudited pro forma results have been prepared for comparative purposes only and primarily include adjustments for amortization arising from the valuation of intangible assets, interest expense on debt issued in connection with the acquisitions, and the related income tax adjustments. The pro forma information is not necessarily indicative of the results that would have occurred had the acquisitions occurred at the beginning of the periods presented, nor is it necessarily indicative of future results.

11

NOTE F — Segment Information

          The Company’s reportable segments are geographical regions that are each managed separately. The Company has three reportable segments: Americas, Europe and Asia. Following is a summary of segment information for the three and nine months ended April 30, 2006 and 2005:

									Corporate
									and
	Americas		Europe		Asia		Subtotals		Eliminations			Totals
Three months ended April 30, 2006:
Revenues from external customers	$	137,438	$	80,420	$	48,636	$	266,494	$	—		$	266,494
Intersegment revenues		12,152		1,052		964		14,168		(14,168	)		—
Profit (loss)		35,026		21,304		12,397		68,727		(2,724	)		66,003
Three months ended April 30, 2005:
Revenues from external customers	$	109,058	$	71,452	$	29,256	$	209,766	$	—		$	209,766
Intersegment revenues		12,048		657		1,396		14,101		(14,101	)		—
Profit (loss)		28,155		21,563		7,778		57,496		(905	)		56,591
Nine Months Ended April 30, 2006:
Revenues from external customers	$	363,446	$	230,466	$	136,191	$	730,103	$	—		$	730,103
Intersegment revenues		42,560		3,199		4,778		50,537		(50,537	)		—
Profit (loss)		92,188		62,071		37,124		191,383		(7,741	)		183,642
Nine Months Ended April 30, 2005:
Revenues from external customers	$	309,762	$	206,865	$	89,774	$	606,401	$	—		$	606,401
Intersegment revenues		33,851		1,959		3,421		39,231		(39,231	)		—
Profit (loss)		73,966		61,296		25,397		160,659		(2,915	)		157,744

          Following is a reconciliation of segment profit to income before income taxes for the three and nine months ended April 30, 2006 and 2005:

	Three Months Ended April 30,						Nine Months Ended April 30,
	2006			2005			2006			2005
Total profit from reportable segments	$	68,727		$	57,496		$	191,383		$	160,659
Corporate and eliminations		(2,724	)		(905	)		(7,741	)		(2,915	)
Unallocated amounts:
Administrative costs		(20,947	)		(19,288	)		(61,885	)		(55,526	)
Interest-net		(3,784	)		(1,826	)		(7,694	)		(5,472	)
Foreign exchange		1,574			(211	)		1,635			35
Other		(837	)		(1,788	)		(2,228	)		(3,976	)
Income before income taxes		42,009			33,478			113,470			92,805
Income taxes		(11,763	)		(8,522	)		(31,772	)		(26,913	)
Net income	$	30,246		$	24,956		$	81,698		$	65,892

12

NOTE G — Stock-Based Compensation

          The Company has an incentive stock option plan under which the Board of Directors may grant non-qualified stock options to purchase shares of Class A Common Stock to employees. Additionally, the Company has a non-qualified stock option plan for non-employee directors under which shares of Class A Common Stock are available for grant. The options have an exercise price equal to the fair market value of the underlying stock at the date of grant and vest ratably over a three-year period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. Options issued under these plans, referred to herein as “service-based” awards, generally expire 10 years from the date of grant. During the fiscal years ended July 31, 2006, and 2005, certain executives and key management employees were issued stock options that vest upon meeting certain financial performance conditions in addition to the vesting schedule described above. These options, referred to herein as “performance-based” awards, expire 5 years from the date of grant.

          The Company has 11,550,000 shares of Class A Common Stock authorized for issuance upon exercise of non-qualified stock options or restricted stock under various incentive stock plans as of April 30, 2006. The Company uses treasury stock or will issue new Class A Common Stock to deliver shares under these plans.

          Effective August 1, 2005, the Company adopted SFAS No. 123(R), “Share Based Payment”. In accordance with this standard, the Company recognizes the compensation cost of all share-based awards on a straight-line basis over the vesting period of the award. Total stock compensation expense recognized by the Company during the three and nine months ended April 30, 2006, was $1,448 ($884 net of taxes) and $4,275 ($2,608 net of taxes), respectively. The Company expects that total stock compensation expense for the year ending July 31, 2006 will be approximately $5,800 on a pre-tax basis. As of April 30, 2006, total unrecognized compensation cost related to share-based compensation awards was approximately $10,909, net of estimated forfeitures, which the Company expects to recognize over a weighted-average period of approximately 1.9 years.

          The Company adopted the fair value recognition provisions of SFAS No. 123(R), using the modified-prospective-transition method. Under that transition method, compensation cost recognized in fiscal 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of August 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted subsequent to August 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). Results for prior periods have not been restated.

          Prior to August 1, 2005, the Company accounted for employee stock-based compensation under the intrinsic value method prescribed by Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees.” Under APB No. 25, no employee stock option based compensation expense was recorded in the income statement prior to August 1, 2005 for the service-based options. For performance-based options, the Company recorded compensation expense for changes in the market value of the underlying common stock under APB No. 25. Total stock compensation expense recognized by the Company during the three and nine months ended April 30, 2005 was $1,053 ($632, net of taxes) and $2,940 ($1,861, net of taxes), respectively. The compensation cost for these periods included expense for both performance stock options and restricted stock.

          The effect of adopting SFAS 123(R) is not significant to the financial statements due to the accounting treatment for performance options. Under APB No. 25, performance options require variable accounting and the amount expensed in the income statement is dependent on the stock price at the end of the period. If the Company had continued to account for share-based compensation under APB No. 25, the compensation expense charged to the income statement related to performance options would not have been materially different than the total stock-based compensation expense charged to the income statement under SFAS 123(R) for the three and nine month periods ended April 30, 2006.

13

          Had compensation cost for all options granted prior to August 1, 2005 been determined based on the fair value at grant date consistent with SFAS No. 123, the Company’s net income and income per share would have been as follows for the three and nine months ended April 30, 2005:

	Three Months Ended			Nine Months Ended
	April 30, 2005			April 30, 2005
Net income:
As reported	$	24,956		$	65,892
Stock-based compensation expense recorded, net of tax		632			1,861
Pro forma expense, net of tax		(1,100	)		(2,464	)
Pro forma	$	24,488		$	65,289
Net income per class A common share
Basic:
As reported	$	0.51		$	1.35
Pro forma adjustments		(0.01	)		(0.01	)
Pro forma	$	0.50		$	1.34
Diluted:
As reported	$	0.50		$	1.32
Pro forma adjustments		(0.01	)		(0.01	)
Pro forma	$	0.49		$	1.31
Net income per class B common share
Basic:
As reported	$	0.51		$	1.33
Pro forma adjustments		(0.01	)		(0.01	)
Pro forma	$	0.50		$	1.32
Diluted:
As reported	$	0.50		$	1.31
Pro forma adjustments		(0.01	)		(0.01	)
Pro forma	$	0.49		$	1.30

          The Company has estimated the fair value of its performance-based option awards granted after August 1, 2005 using the Black-Scholes option valuation model. The weighted-average assumptions used in the Black-Scholes valuation model as of April 30, 2006 are reflected in the following table:

Black-Scholes Option Valuation Assumptions	Performance-based options			Service-based options
Expected term (in years)		3.39			5.72
Expected volatility		31.10	%		34.56	%
Expected dividend yield		1.50	%		1.52	%
Risk-free interest rate		4.09	%		4.50	%
Weighted-average market value of underlying stock at grant date	$	33.89		$	37.64
Weighted-average exercise price	$	33.89		$	37.64
Weighted-average fair value of options granted during the period	$	8.34		$	13.10

14

The total fair value of stock options vested during the nine months ended April 30, 2006 and 2005 was approximately $3,100 for each period.

          The Company uses historical data regarding stock option exercise behaviors to estimate the expected term of options granted based on the period of time that options granted are expected to be outstanding. Expected volatilities are based on the historical volatility of the Company’s stock. The expected dividend yield is based on the Company’s historical dividend payments. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the grant date for the length of time corresponding to the expected term of the option. The market value is obtained by taking the average of the high and the low stock price on the date of grant.

          A summary of stock option activity under the Company’s share-based compensation plans for the nine months ended April 30, 2006 is presented below:

						Weighted
						Average
						Remaining		Aggregate
	Shares			Weighted Average		Contractual		Intrinsic
Options	(‘000s)			Exercise Price		Term (Years)		Value
Outstanding at July 31, 2005		3,529		$	18.41
New grants		914		$	36.30
Exercised		(470	)	$	14.81
Forfeited or expired		(29	)	$	22.29
Outstanding at April 30, 2006		3,944		$	22.95		7.3	$	52,334
Exercisable at April 30, 2006		1,950		$	17.22		5.9	$	36,574

          The weighted-average grant date fair value of options granted during the nine months ended April 30, 2006 and 2005 was $11.40 and $6.95, respectively. The total intrinsic value of options exercised during the nine months ended April 30, 2006 and 2005, based upon the average market price during the period, was approximately $10,752 and $13,558 respectively.

15

NOTE H — Debt

          On January 19, 2006, the Company’s unsecured $125 million multi-currency revolving loan agreement was amended to increase the available amount to $200 million. Under the five-year agreement, which has a final maturity date of March 31, 2009, the Company has the option to use either a base interest rate (based upon the higher of the federal funds rate plus one-half of 1% or the prime rate at Bank of America) or a Eurocurrency interest rate (at the LIBOR rate plus margin). A commitment fee is payable on the unused portion. The agreement requires the Company to maintain certain financial covenants. As of April 30, 2006, the Company was in compliance with the covenants of the agreement. The agreement restricts the amount of certain types of payments, including dividends, which can be made annually to $25 million plus 50% of the consolidated net income for the prior year. The Company believes that, based on historic dividend practice, this restriction would not affect its ability to follow a similar dividend practice in the future. As of April 30, 2006, there were no outstanding borrowings on the five-year revolving loan agreement.

          On February 14, 2006, the Company completed the private placement of $200 million in ten-year fixed notes at 5.3 percent interest to institutional investors. The notes will be amortized in equal installments over seven years, beginning in 2010. The notes have been fully and unconditionally guaranteed on an unsecured basis by the Company’s domestic subsidiaries. The Company intends to use the net proceeds of the offering to finance previously announced acquisitions and future acquisitions, and for general corporate purposes. This private placement was exempt from the registration requirements of the Securities Act of 1933. The notes will not be registered for resale and may not be resold absent such registration or an applicable exemption from the registration requirements of the Securities Act of 1933 and applicable state securities laws.

NOTE I — Stockholders’ Investment

          In September 2005, the Company announced that the Board of Directors of the Company approved a share repurchase program for up to 800,000 shares of the Company’s Class A Common Stock during fiscal 2006. The share repurchase plan was implemented by purchasing shares on the open market or in privately negotiated transactions, with repurchased shares available for use in connection with the Company’s stock option plan and for other corporate purposes. As of January 31, 2006, the Company had completed the repurchase of all 800,000 shares of its Class A Common Stock for $26,495 under the repurchase plan approved by the Board of Directors.

          Additional treasury shares are held in the Company’s deferred compensation plan. During the nine months ended April 30, 2006, the total cost of treasury shares purchased by the deferred compensation plan was $804. The net cost of the Company’s Class A common shares held in the deferred compensation plan and accounted for as treasury shares as of April 30, 2006 was $1,853.

NOTE J — Employee Benefit Plans

          The Company provides postretirement medical, dental and vision benefits for all regular full and part-time domestic employees (including spouses) who retire on or after attainment of age 55 with 15 years of credited service. Credited service begins accruing at the later of age 40 or date of hire. All active employees first eligible to retire after July 31, 1992, are covered by an unfunded, contributory postretirement healthcare plan where employer contributions will not exceed a defined dollar benefit amount, regardless of the cost of the program. Employer contributions to the plan are based on the employee’s age and service at retirement.

          The Company accounts for postretirement benefits other than pensions in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other than Pensions.” The Company funds benefit costs on a pay-as-you-go basis. The components of net periodic benefit cost for fiscal 2006 and the amount that the Company expects to fund in fiscal 2006 are expected to be consistent with those reported thereto in Note 3 to the consolidated financial statements included in the Company’s latest annual report on Form 10-K for the year ended July 31, 2005.

16

NOTE K — Subsequent Events

          On April 7, 2006, the Company announced that it had signed a definitive agreement to acquire Tradex Converting AB, headquartered in Kungalv, Sweden. Tradex is a leading manufacturer and supplier of pressure sensitive, die-cut adhesive components for the mobile handset and electronics industries. Founded in 1965, Tradex had sales of approximately SEK 680 million (US $92.5 million based on exchange rates as of April 30, 2006) during the year ended December 31, 2005. On May 17, 2006, the Company announced that it had received regulatory approval to complete the acquisition and, on May 23, 2006, the Company completed the acquisition.

          On April 26, 2006, the Company announced that it had signed a definitive agreement to acquire Daewon Industry Corporation, based in Seoul, South Korea. Daewon is a manufacturer and supplier of pressure sensitive, die-cut adhesive components for the mobile handset and electronics industry. Founded in 1997, Daewon had fiscal 2005 sales of approximately $40 million. The acquisition is subject to customary regulatory approvals and is expected to close during the fourth quarter of fiscal 2006.

17

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(in thousands, except share and per share amounts)

Overview

          Brady is an international manufacturer and marketer of identification solutions and specialty materials which identify and protect premises, products, and people. Its products include high-performance labels and signs, printing systems and software, label-application and data-collection systems, safety devices and precision die-cut materials. Founded in 1914, the Company serves customers in electronics, telecommunications, manufacturing, electrical, construction, laboratory, education, governmental, public utility, computer, transportation and a variety of other industries. The Company manufactures and sells products domestically and internationally through multiple channels including direct sales, distributor sales, mail-order catalogs, telemarketing, retail, and electronic access through the Internet. The Company operates manufacturing facilities and/or sales offices in Australia, Belgium, Brazil, Canada, China, Denmark, England, France, Germany, Hong Kong, Hungary, India, Italy, Japan, Korea, Malaysia, Mexico, the Netherlands, Norway, the Philippines, Singapore, Slovakia, Spain, Sweden, Taiwan, Thailand, Turkey and the United States. The Company believes that its reputation for innovation, commitment to quality and service, and dedicated employees have made it a world leader in the markets it serves.

          Sales for the quarter ended April 30, 2006, increased 27.0% to $266,494, compared to $209,766, in the same period last year. Base sales increased 11.8% compared to the same period in the prior year and acquisitions added 17.3%, while the effect of fluctuations in the exchange rates used to translate financial results into the United States Dollar reduced sales by 2.1%. The increase in base sales for the quarter ended April 30, 2006, was largely driven by a 48.9% increase in base sales in Asia, primarily due to growth in China, boosted by business transferred from Singapore. Additionally, the Company continues to experience solid growth in many of its mature markets in the Americas and Europe with base growth of 5.8% and 6.0%, respectively. Net income for the quarter ended April 30, 2006, was $30,246 or $0.61 per diluted Class A Common Share, which was up 21.2% from $24,956 or $0.50 per share reported in the third quarter of last fiscal year. Net income growth, driven primarily by increased business, increased slightly less than sales growth, due largely to the impact of acquisitions made within the last 12 months. In the last two fiscal years, acquired companies have tended to be less profitable than the Company’s base business. Purchase accounting can have immediate short-term impacts on acquisitions due to the valuation of backlog and manufactured profit on finished goods. Medium-term impacts include amortization on customer relationships, non-compete agreements and other intangible assets. These can negatively impact the profitability of acquisitions for a number of years. Expected synergies from the acquisitions generally take from several months to two years to realize. Initially the synergies may be negative as the Company normally invests in people and systems for the acquired companies.

          Sales for the nine months ended April 30, 2006, increased 20.4% to $730,103 compared to $606,401 in the same period last year. Base sales were up 9.5% for the period compared to the same period in fiscal 2005. Acquisitions added 12.2% to sales and the effect of exchange rates reduced sales by 1.3%. The base sales increase for the nine-month period ended April 30, 2006, was driven by increased demand in Asia as noted above and by strong performance in electrical and OEM markets in the Americas. Net income for the nine-month period was $81,698 or $1.64 per diluted Class A Common Share, up 24.0% from $65,892 or $1.32 per share reported in the same period of last year.

18

On May 17, 2006, the Company increased its annual guidance for fiscal 2006 increasing the sales range to $985 million to $995 million, up from the previous guidance of $980 million to $990 million, increasing the net income range to $103 million to $104 million, up from the previous guidance of $100 million to $103 million, and diluted earnings per share of $2.06 to $2.08 up from the previous guidance of $2.00 to $2.06. The Company expects capital expenditures to be approximately $32 million and depreciation and amortization to be approximately $32 million for the full fiscal year ending July 31, 2006. This guidance was issued before the closing of the acquisition of Tradex Converting AB and therefore does not include Tradex, nor does it include Daewon Industry Corp., which was announced in April 2006 and is awaiting government approval. Management believes this guidance is justified based on the Company’s strong performance in the first nine months of fiscal 2006 and acquisitions made this fiscal year, but notes that this guidance should be viewed in light of the various factors that could affect performance described in or incorporated by reference into this report, as well as the following factors:

§	The Company continues to experience pressure from suppliers who are attempting to raise their prices as well as customers seeking cost decreases.
§	The Company’s business operations and those of its customers and suppliers give rise to market risk exposure due to changes in foreign exchange rates. Fluctuations in the United States Dollar relative to other currencies may introduce some volatility with respect to the Company’s sales and net income guidance.
§	Management remains cautious regarding sales and net income growth in Europe, due to the uncertain economic environment in the region.
§	The Company continues its preparations for compliance with the European directive on Waste Electrical and Electronics Equipment (WEEE). The new directive requires that by July 2006 all electronic and electrical equipment be free of substances as defined in the new Restrictions on the Use of Hazardous Substances (RoHS) directive. The Company could incur additional costs of compliance or loss of sales, based on availability of compliant subcomponents and the finalization of globally implementing regulations.

          Looking long term, the Company intends to continue its growth strategies of developing proprietary products; making acquisitions that expand its product range, geographic presence, technical expertise or market penetration; and further improving processes to best serve customers. Going forward, business and market uncertainties may affect results. For a discussion of additional factors that could impact results, please refer to the risk factors contained in Item 1A of Part II of this report and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2005.

19

Results of Operations

          As noted in the overview section above, net sales were 27.0% higher for the three months ended April 30, 2006 than the same quarter of the previous year. The increase was comprised of an increase of 11.8% attributed to base sales, a decrease of 2.1% due to the effect of currencies on sales, and an increase of 17.3% due to the acquisitions of J.A.M. Plastics, Inc., Personnel Concepts, STOPware, Inc., TruMed Technologies, Inc. and IDenticard Systems, Inc. in the United States, Identicam Systems in Canada, Signs & Labels Ltd. in the United Kingdom, Texit Danmark AS in Denmark, Texit Norge AS in Norway, QDP Thailand and Technology Print Supplies Ltd and its associate, Technology Supply Media Co., Ltd. in Thailand and Accidental Health & Safety Pty. Ltd. and Trafalgar First Aid Pty. Ltd. in Australia. For the nine months ended April 30, 2006, sales were 20.4% higher than the same period of the previous year. The increase was comprised of an increase of 9.5% attributed to base sales, a decrease of 1.3% due to the effect of currencies on sales, and an increase of 12.2% due to the acquisitions listed above plus the acquisition of Electromark.

          Gross margin as a percentage of sales decreased from 54.3% to 52.8% for the quarter and from 53.5% to 52.3% for the nine-month period ended April 30, 2006, compared to the same periods of the previous year. The gross margin decline was due to a combination of the following factors:

§	The Company’s product mix is changing, with the faster growing OEM electronics business reducing gross margins overall. While gross margins are lower in the OEM business, selling, general, and administrative expenses are lower as well.
§	Acquired companies require some time to integrate and implement synergies required to achieve the same level of profitability of our existing businesses.
§	The Company’s investment in Bratislava, Slovakia is ahead of schedule and represents an investment in cost of goods sold due to startup costs.
§	The Company centralized its warehouse facilities in Milwaukee, Wisconsin, resulting in moving costs in the quarter ended April 30, 2006.

          Selling, general and administrative (“SG&A”) expenses as a percentage of sales decreased from 34.5% to 33.5% for the quarter and from 34.4% to 33.1% for the nine months ended April 30, 2006, compared to the same periods of the prior year. The decrease in SG&A as a percentage of sales was primarily due to an increase in the mix of business attributable to the OEM electronics business in Asia, which has lower SG&A expenses, offset by lower gross margins. Lower SG&A associated with acquired businesses also contributed to the decrease in SG&A as a percent of sales. In absolute dollars, SG&A increased $16,831 for the quarter and $33,208 for the nine months ended April 30, 2006, compared to the same periods in the prior year, primarily due to the addition of SG&A expenses associated with acquired businesses and increased sales volume.

          Research and development expenses as a percentage of sales decreased slightly from 2.8% to 2.7% for the quarter and from 2.9% to 2.8% for the nine months ended April 30, 2006, compared to the same periods of the previous year. In absolute dollars, research and development expenses increased from $5,941 to $7,314 for the quarter and from $17,744 to $20,677 for the nine months ended April 30, 2006, compared to the same periods in the prior year. New product development and customer support continues to be a major focus of the Brady management team.

          Investment and other income increased from $36 to $2,279 for the quarter and from $812 to $2,759 for the nine months ended April 30, 2006, compared to the same periods in the prior year. The increase was primarily due to a gain of approximately $1,500 on a currency option that the Company purchased to hedge against increases in the purchase price in U.S. dollar terms of Tradex as the transaction is denominated in Swedish Krona.

          Interest expense increased from $2,101 to $4,496 for the quarter and from $6,277 to $8,920 for the nine months ended April 30, 2006, compared to the same periods in the prior year. The increase in interest expense reflects the interest expense on the private placement of $200 million in ten-year notes that was completed in the third quarter of fiscal 2006.

20

          The Company’s effective tax rate was 28.0% for the nine months ended April 30, 2006, compared to 29.0% for the same period of the previous year. The improvement in the effective rate was due to a continuing shift to a higher percentage of the Company’s pre-tax income to lower tax rate countries.

          Net income as a percentage of sales decreased from 11.9% to 11.3% for the quarter and increased from 10.9% to 11.2% for the nine months ended April 30, 2006, compared to the same periods in the prior year. The decrease as a percentage of sales for the quarter was due to the lower gross margins discussed above, which were partially mitigated by lower SG&A and tax rates. The increase for the nine-month period was due to strong margin performance in the Americas region earlier in the Company’s current fiscal year.

21

Business Segment Operating Results

Management of the Company evaluates results based on the following geographic regions: Americas, Europe, and Asia.

													Corporate
													and
	Americas			Europe			Asia			Subtotals			Eliminations			Total
SALES TO EXTERNAL CUSTOMERS
Three months ended:
April 30, 2006	$	137,438		$	80,420		$	48,636		$	266,494			—		$	266,494
April 30, 2005		109,058			71,452			29,256			209,766			—			209,766
Nine months ended:
April 30, 2006	$	363,446		$	230,466		$	136,191		$	730,103			—		$	730,103
April 30, 2005		309,762			206,865			89,774			606,401			—			606,401
SALES GROWTH INFORMATION
Three months ended April 30, 2006:
Base		5.8	%		6.0	%		48.9	%		11.8	%		—			11.8	%
Currency		1.4	%		(8.4	%)		0.3	%		(2.1	%)		—			(2.1	%)
Acquisitions		18.8	%		15.0	%		17.1	%		17.3	%		—			17.3	%
Total		26.0	%		12.6	%		66.3	%		27.0	%		—			27.0	%
Nine months ended April 30, 2006:
Base		4.9	%		3.1	%		40.0	%		9.5	%		—			9.5	%
Currency		1.5	%		(6.5	%)		1.0	%		(1.3	%)		—			(1.3	%)
Acquisitions		10.9	%		14.8	%		10.7	%		12.2	%		—			12.2	%
Total		17.3	%		11.4	%		51.7	%		20.4	%		—			20.4	%
SEGMENT PROFIT (LOSS)
Three months ended:
April 30, 2006	$	35,026		$	21,304		$	12,397		$	68,727			($2,724	)	$	66,003
April 30, 2005		28,155			21,563			7,778			57,496			(905	)		56,591
Percentage increase (decrease)		24.4	%		(1.2	%)		59.4	%		19.5	%		201.0	%		16.6	%
Nine months ended:
April 30, 2006	$	92,188		$	62,071		$	37,124		$	191,383			($7,741	)	$	183,642
April 30, 2005		73,966			61,296			25,397			160,659			(2,915	)		157,744
Percentage increase		24.6	%		1.3	%		46.2	%		19.1	%		165.6	%		16.4	%

22

NET INCOME RECONCILIATION

	Three months ended:						Nine months ended:
	April 30,			April 30,			April 30,			April 30,
	2006			2005			2006			2005
Total profit for reportable segments	$	68,727		$	57,496		$	191,383		$	160,659
Corporate and eliminations		(2,724	)		(905	)		(7,741	)		(2,915	)
Unallocated amounts:
Administrative costs		(20,947	)		(19,288	)		(61,885	)		(55,526	)
Interest – net		(3,784	)		(1,826	)		(7,694	)		(5,472	)
Foreign exchange		1,574			(211	)		1,635			35
Other		(837	)		(1,788	)		(2,228	)		(3,976	)
Income before income taxes		42,009			33,478			113,470			92,805
Income taxes		(11,763	)		(8,522	)		(31,772	)		(26,913	)
Net income	$	30,246		$	24,956		$	81,698		$	65,892

          The Company evaluates regional performance using sales and segment profit. Allocation of resources is based on a range of financial and strategic factors. Segment profit or loss does not include certain administrative costs, interest, foreign exchange gain or loss, other expenses not allocated to a segment and income taxes.

Americas:

          Americas sales increased 26.0% for the quarter and 17.3% for the nine months ended April 30, 2006, compared to the same periods in the prior year. Base sales in local currency increased 5.8% in the quarter and 4.9% in the nine-month period. Sales were positively affected by fluctuations in the exchange rates used to translate financial results into United States currency, which increased sales within the region by 1.4% in the quarter and 1.5% for the nine-month period. Sales in the region were also aided by the acquisitions of J.A.M. Plastics, Inc., Personnel Concepts, STOPware, Inc., TruMed Technologies, Inc., IDenticard Systems, Inc. and Identicam Systems in Canada which increased sales by 18.8% for the quarter and 10.9% for the nine-month period. Base sales increased in both the Brady brand business and the direct marketing business. Within the Brady brand business, the growth was driven by solid gains in the electric utilities, safety and electrical markets. Sales in the direct marketing business, excluding the effect of acquisitions, were up slightly over the prior year as well. Regionally, Brazil and the U.S. contributed the majority of the growth in the quarter, while Canada and Mexico experienced modest growth rates.

          Segment profit for the region increased 24.4% to $35,026 from $28,155 for the quarter and 24.6% to $92,188 from $73,966 for the nine months ended April 30, 2006, compared to the same periods in the prior year. While the region continues to experience cost increases on many of its materials and utility costs, the impact on segment profit of the increase in volume has more than offset these cost increases. As expected, the recent acquisitions have reported an initial rate of profit that is below the average of the region. As the businesses continue to integrate and achieve synergies, profit levels are expected to increase, all other things being equal.

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Europe:

          Europe sales increased 12.6% for the quarter and 11.4% for the nine months ended April 30, 2006, compared to the same periods in the prior year. Base sales in local currency increased 6.0% in the quarter and 3.1% in the nine-month period. Sales were negatively affected by fluctuations in the exchange rates used to translate financial results into United States currency, which decreased sales within the region by 8.4% in the quarter and 6.5% in the nine-month period. The acquisition of Signs & Labels Ltd. in the United Kingdom, Texit Danmark AS in Denmark, and Texit Norge AS in Norway increased sales by 15.0% for the quarter and 14.8% for the nine-month period.

          The increase in base sales in the region for both the quarter and the nine-month period was driven by modest growth in the direct marketing business as a result of continuing to add new customers and expand product offerings. This growth was partially offset by a weakening in the U.K. manufacturing sector, a slight decline in the Brady brand business and the rationalization of certain unprofitable Brady brand product lines in the region.

          Segment profit for the region decreased 1.2% to $21,304 from $21,563 for the quarter and increased 1.3% to $62,071 from $61,296 for the nine months ended April 30, 2006, compared to the same periods of the prior year. The decrease for the quarter was primarily due to the impact of the stronger U.S. dollar and the profit dilution caused by the start-up of business in Slovakia. Segment profit for the nine-month period reflects the benefit of acquisitions and increased base profitability offset by investment in Slovakia.

          The Slovakia operations started manufacturing in the second quarter of fiscal 2006, supplying subcontract customers in the mobile telephone industry. Production capacity will be increased over the next two quarters.

Asia:

          Asia sales increased 66.3% for the quarter and 51.7% for the nine months ended April 30, 2006, compared to the same periods in the prior year. Base sales in local currency increased 48.9% in the quarter and 40.0% in the nine-month period compared to the same periods last year. Sales were also affected by fluctuations in the exchange rates used to translate financial results into United States currency, which increased sales within the region by 0.3% in the quarter and 1.0% for the nine-month period. The acquisitions of QDP Thailand, Technology Print Supply and Technology Supply Media in Thailand and Accidental Health & Safety Pty. Ltd. and Trafalgar First Aid Pty. Ltd. in Australia increased sales by 17.1% for the quarter and 10.7% for the nine-month period. The base sales increase was largely attributable to sales in China due to continued growth in the region. Additionally, the Australia direct marketing and safety businesses continued their strong growth over the prior year.

          Segment profit for the region was up 59.4% to $12,397 from $7,778 for the quarter and 46.2% to $37,124 from $25,397 for the nine months ended April 30, 2006, compared to the same periods in the prior year. The increase in profit was due primarily to increased sales volume. The Company continues to face significant pressure on gross margins due to increases in raw material prices from suppliers and cost reduction demands from customers.

          The Company continues to expand its management and sales teams in India and has begun the process of establishing a manufacturing presence in the Indian market. The Company expects to have an operational manufacturing facility in India by the first half of its next fiscal year. The Company has received positive signals from key customers indicating that its presence in India is important to their growth plans.

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Financial Condition

          The Company’s current ratio as of April 30, 2006, was 2.5 compared to 1.9 at July 31, 2005. Cash and cash equivalents were $90,314 at April 30, 2006, compared to $72,970 at July 31, 2005. Additionally, there was $30,000 of short-term investments outstanding at April 30, 2006, compared to $7,100 outstanding at July 31, 2005, consisting of investments in auction rate securities. Working capital increased $107,332 during the nine months ended April 30, 2006, to $248,892 from $141,560 at July 31, 2005. Accounts receivable increased $43,509 for the nine months due to increased sales volume, acquisitions and foreign currency translation. Inventories increased $23,117 for the nine-month period, due to acquisitions and planned increases in inventory levels in Asia to meet demand and in North America to meet demand for sales initiatives. The net increase in current liabilities was $8,826 for the nine-month period. The increase was due primarily to liabilities assumed from the acquired businesses.

          Cash flow from operating activities totaled $63,330 for the nine months ended April 30, 2006, compared to $81,997 for the same period last year. The decrease was primarily the result of an increase in accounts receivable balances, increased inventories, and a decrease in income taxes payable due to foreign and domestic tax payments. These decreases were partially offset by a $15,806 increase in net income. In accordance with the adoption of SFAS No. 123(R), “Share Based Payment” on August 1, 2005, the Company has classified the income tax benefit from the exercise of stock options subsequent to adoption as a financing cash inflow. Prior to adoption, this tax benefit was recorded in cash flows from operations and totaled $3,707 and $4,747 for the nine months ended April 30, 2006 and 2005, respectively.

          The acquisitions of businesses used $155,283 of cash for the nine months ended April 30, 2006. Capital expenditures were $26,291 for the nine months ended April 30, 2006, compared to $14,411 in the same period last year, driven by the expansion of the Company’s warehouse facility in Milwaukee, Wisconsin, continued expansion in Asia, and new facilities in Slovakia and in Canada. Net cash provided by financing activities was $163,577 for the nine months ended April 30, 2006, due to the proceeds from a private placement of $200 million in ten year notes that was completed on February 16, 2006, cash proceeds from the exercise of stock options and the income tax benefit associated with those stock option exercises, partially offset by the repurchase of stock and the payment of dividends. Net cash used in financing activities for the same period last year was $1,296 related to the payment of dividends to the Company’s stockholders, offset by cash proceeds from the exercise of stock options.

          On March 31, 2004, the Company entered into an unsecured $125 million multi-currency revolving loan agreement with a group of five banks. On January 19, 2006, the agreement was amended to increase the available amount to $200 million. Under the five-year agreement, which has a final maturity date of March 31, 2009, the Company has the option to use either a base interest rate (based upon the higher of the federal funds rate plus one-half of 1% or the prime rate at Bank of America) or a Eurocurrency interest rate (at the LIBOR rate plus margin). A commitment fee is payable on the unused portion. The agreement requires the Company to maintain certain financial covenants. As of April 30, 2006, the Company was in compliance with the covenants of the agreement. The agreement restricts the amount of certain types of payments, including dividends, which can be made annually to $25 million plus 50% of the consolidated net income for the prior year. The Company believes that, based on historic dividend practice, this restriction would not affect its ability to follow a similar dividend practice in the future. As of April 30, 2006, there were no outstanding borrowings on the five-year revolving loan agreement.

          On June 30, 2004, the Company completed a debt offering of $150 million of 5.14% unsecured senior notes due in 2014 in an offering exempt from the registration requirements of the Securities Act of 1933. The notes will be amortized over seven years beginning in 2008, with interest payable on the notes semiannually on June 28 and December 28. The debt has certain prepayment penalties for repaying the debt prior to its maturity date. The agreement also requires the Company to maintain a financial covenant. As of April 30, 2006, the Company was in compliance with this covenant.

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          On February 14, 2006, the Company completed a private placement of $200 million in ten-year fixed notes at 5.3% interest to institutional investors. The notes will be amortized in equal installments over seven years, beginning in 2010. The notes have been fully and unconditionally guaranteed on an unsecured basis by the Company’s domestic subsidiaries. The Company intends to use the net proceeds of the offering to finance previously announced acquisitions and future acquisitions, and for general corporate purposes. This private placement was exempt from the registration requirements of the Securities Act of 1933. The notes will not be registered for resale and may not be resold absent such registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. The agreement also requires the Company to maintain a financial covenant. As of April 30, 2006, the Company was in compliance with this covenant.

          During the nine months ended April 30, 2006, the Company completed the 60,000 square foot expansion of an existing facility in Milwaukee, Wisconsin. The approximately $10 million project resulted in the consolidation of the warehouse and distribution services of several Brady facilities and will provide increased distribution efficiencies and improved logistics for customers.

          In September 2005, the Company announced that the Board of Directors of Brady Corporation approved a share repurchase program for up to 800,000 shares of the Company’s Class A Common Stock during fiscal 2006. The share repurchase plan was implemented by purchasing shares on the open market or in privately negotiated transactions, with repurchased shares available for use in connection with the Company’s stock option plan and for other corporate purposes. During the nine months ended April 30, 2006, the Company reacquired 800,000 shares of its Class A Common Stock for $26,495 under the repurchase plan approved by the Board of Directors. Additional treasury shares with a cost of $804 were purchased on behalf of the participants of the Company’s deferred compensation plan.

          On November 10, 2005, the Securities and Exchange Commission (“SEC”) declared effective the Company’s shelf registration statement on Form S-3, which will allow the Company to issue and sell, from time to time in one or more offerings, up to an aggregate of $400 million of Class A Common Stock and debt securities as it deems prudent or necessary to raise capital at a later date. The Company plans to use the proceeds from any future offerings under the shelf registration for general corporate purposes, including, but not limited to, acquisitions, capital expenditures and refinancing of debt.

          Management believes the Company’s continued positive cash flow and available borrowings will enable the Company to execute a long-term strategy, which includes investments that expand the Company’s current market share, open new markets and geographies, develop new products and distribution channels and continue to improve the Company’s processes. This strategy also includes executing key acquisitions.

Subsequent Events Affecting Financial Condition

          On April 7, 2006, the Company announced that it had signed a definitive agreement to acquire Tradex Converting AB, headquartered in Kungalv, Sweden. Tradex is a leading manufacturer and supplier of pressure sensitive, die-cut adhesive components for the mobile handset and electronics industries. Founded in 1965, Tradex had sales of approximately SEK 680 million (US$92.5 million based on exchange rates as of April 30, 2006) during the year ended December 31, 2005. On May 17, 2006, the Company announced that it had received regulatory approval to complete the acquisition, and on May 23, 2006, the Company completed the acquisition.

          On April 26, 2006, the Company announced that it has signed a definitive agreement to acquire Daewon Industry Corporation, based in Seoul, South Korea. Daewon is a manufacturer and supplier of pressure sensitive, die-cut adhesive components for the mobile handset and electronics industry. Founded in 1997, Daewon had fiscal 2005 sales of approximately $40 million. The acquisition is subject to customary regulatory approvals and is expected to close during the fourth quarter of fiscal 2006.

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          Off-Balance Sheet Arrangements — The Company does not have material off-balance sheet arrangements or related-party transactions. The Company is not aware of factors that are reasonably likely to adversely affect liquidity trends, other than the risk factors described in this and other Company filings. However, the following additional information is provided to assist those reviewing the Company’s financial statements.

          Purchase Commitments — The Company has purchase commitments for materials, supplies, services, and property, plant and equipment as part of the ordinary conduct of its business. In the aggregate, such commitments are not in excess of current market prices and are not material to the financial position of the Company. Due to the proprietary nature of many of the Company’s materials and processes, certain supply contracts contain penalty provisions for early termination. The Company does not believe a material amount of penalties will be incurred under these contracts based upon historical experience and current expectations.

          Other Contractual Obligations — The Company does not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity.

          Related-Party Transactions — The Company does not have any related-party transactions that materially affect the results of operations, cash flow or financial condition.

Critical Accounting Estimates

          The Company accounts for stock-based compensation in accordance with SFAS No. 123(R), Share-Based Payment. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date and estimating the amount of share-based awards that are expected to be forfeited requires judgment. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be impacted.

Non-GAAP Financial Measures

          The Company presents EBITDA because its investors and lenders view this as an important indicator of the operational strength of its business. However, the EBITDA measure presented for the Company may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.

          EBITDA represents net income before interest, income taxes and depreciation and amortization. EBITDA is not a calculation based on U.S. generally accepted accounting principles (U.S. GAAP). The amounts included in the EBITDA calculation, however, are derived from amounts included in the Company’s consolidated statements of income, which form part of its historical consolidated financial statements. EBITDA should not be considered as an alternative to net income or operating income as an indicator of the Company’s operating performance, or as an alternative to operating cash flows as a measure of liquidity.

          The table below reconciles the Company’s net income, calculated according to U.S. GAAP, to EBITDA.

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	7/31/2001		7/31/2002		7/31/2003		7/31/2004
EBITDA
Net Income	$	27,546	$	28,253	$	21,420	$	50,871
Income Expense		418		82		121		1,231
Income Taxes		17,244		14,882		11,035		19,456
Depreciation and amortization		22,646		16,630		17,771		20,190
EBITDA (non-GAAP measure)	$	67,854	$	59,847	$	50,347	$	91,748

Fiscal 2005

							9 Months
	Q1		Q2		Q3		YTD		Q4		Total
EBITDA
Net Income	$	20,357	$	20,579	$	24,956	$	65,892	$	16,055	$	81,947
Interest Expense		2,139		2,037		2,101		6,277		2,126		8,403
Income Taxes		9,580		8,811		8,522		26,913		6,558		33,471
Depreciation and amortization		6,775		6,478		6,738		19,991		6,831		26,822
EBITDA (non-GAAP measure)	$	38,851	$	37,905	$	42,317	$	119,073	$	31,570	$	150,643

Fiscal 2006

							9 Months
	Q1		Q2		Q3		YTD		Q4		Total
EBITDA
Net Income	$	30,198	$	21,254	$	30,246	$	81,698			$	81,698
Interest Expense		1,989		2,435		4,496		8,920				8,920
Income Taxes		12,334		7,675		11,763		31,772				31,772
Depreciation and amortization		7,360		7,194		9,419		23,973				23,973
EBITDA (non-GAAP measure)	$	51,881	$	38,558	$	55,924	$	146,363	$	—	$	146,363

Forward-Looking Statements

      The Company believes that certain statements in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other statements located elsewhere in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements related to future, not past, events included in this report, including, without limitation, statements regarding the Company’s future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “project” or “plan” or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions and other factors, some of which are beyond the Company’s control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For the Company, uncertainties arise from future financial performance of major markets the Company serves, which include, without limitation, telecommunications, manufacturing, electrical, construction, laboratory, education, governmental, public utility, computer, transportation; difficulties in making and integrating acquisitions; risks associated with newly acquired businesses; the Company’s ability to retain significant contracts and customers; future competition; the Company’s ability to develop and successfully market new products; changes in the supply of, or price for, parts and components; increased price pressure from suppliers and customers; interruptions to sources of supply; environmental, health and safety compliance costs and liabilities; the Company’s ability to realize cost savings from operating initiatives; the Company’s ability to attract and retain key talent; difficulties associated with exports; risks associated with international operations; fluctuations in currency rates versus the US dollar; technology changes; potential write-offs of the Company’s substantial intangible assets; risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products; business interruptions due to implementing business systems; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature contained from time to time in the Company’s U.S. Securities and Exchange Commission filings, including, but not limited to, those factors listed in the “Risk Factors” section located in Item 1A of Part II of this Quarterly Report on Form 10-Q. These uncertainties may cause the Company’s actual future results to be materially different than those expressed in the Company’s forward-looking statements. The Company does not undertake to update its forward-looking statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          The Company’s business operations give rise to market risk exposure due to changes in foreign exchange rates. To manage that risk effectively, the Company enters into hedging transactions, according to established guidelines and policies that enable it to mitigate the adverse effects of this financial market risk.

          The global nature of the Company’s business requires active participation in the foreign exchange markets. As a result of investments, production facilities and other operations on a global scale, the Company has assets, liabilities and cash flows in currencies other than the U.S. Dollar. The primary objective of the Company’s foreign-exchange risk management is to minimize the impact of currency movements on intercompany transactions and foreign raw-material imports. To achieve this objective, the Company hedges a portion of known exposures using forward contracts. Main exposures are related to transactions denominated in the Euro, Canadian Dollar, Australian Dollar and Swedish Krona. The risk of these hedging instruments is not material to the consolidated financial statements of the Company. In the third quarter of fiscal 2006, the Company purchased a currency option to hedge against increases in the purchase price in U.S. dollar terms of Tradex Converting AB, as the transaction is denominated in Swedish Krona. A gain of approximately $1.5 million was recorded in fiscal 2006 related to this option.

          The Company is exposed to interest rate risk through its corporate borrowing activities. The objective of the Company’s interest rate risk management activities is to manage the levels of the Company’s fixed and floating interest rate exposure to be consistent with the Company’s preferred mix. The interest rate risk management program may include entering into approved interest rate derivatives when there is a desire to modify the Company’s exposure to interest rates. As of April 30, 2006, the Company has not entered into any interest rate derivatives.

ITEM 4. CONTROLS AND PROCEDURES

          The Company maintains disclosure controls and procedures designed to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act’’) as of the end of the period covered by this report (the “Evaluation Date’’). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to the Company required to be included in the Company’s periodic filings under the Exchange Act.

          There have not been any changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

Before making an investment decision with respect to our stock, you should carefully consider the risks set forth below, and all other information contained in this report. If any of the events contemplated by the following risks actually occur, then our business, financial condition or results of operations could be materially adversely affected. As a result of these and other factors, the value of our Class A Common Stock could decline and you may lose all or part of your investment.

Risks Related to Our Business

Market demand for our products may be susceptible to fluctuations in the economy that may cause volatility in our results of operations.

     Sales of our products may be susceptible to changes in general economic conditions, namely general downturns in the regional economies in which we compete. Our business in the MRO market tends to vary with the nominal GDP of the local economies in which we manufacture and sell. As a result, in periods of economic contraction, our business may not grow or may decline. In the OEM market, we have been adversely affected by reduced demand for our products due to downturns in the global economy as this is a more cyclical business than the MRO business. This cyclicality can result in higher degrees of volatility in our net sales and results of operations. These more volatile markets include, but are not limited to, mobile phones, hard disk drives and electronics in personal computers and personal digital assistants.

Our current and future success could be impacted by our ability to integrate effectively acquired companies and manage our growth.

     Our growth has placed and will continue to place significant demands on our management and operational and financial resources. Since April 2003, we have acquired nineteen companies. These recent and any future acquisitions will require integration of sales and marketing, information technology, finance and administrative operations of the newly acquired business. The successful integration of acquisitions will require substantial attention from our management and the management of the acquired businesses, which could decrease the time they have to serve and attract customers. We cannot assure you that we will be able to integrate successfully these recent or any future acquisitions, that these acquisitions will operate profitably or that we will be able to achieve the financial or operational success expected from the acquisitions. Furthermore, our rapid growth in recent periods, our anticipated geographic expansion, and our planned expansion through additional acquisitions present challenges to maintain the internal control and disclosure control standards applicable to public companies under the Sarbanes-Oxley Act of 2002. Our financial condition, cash flows and operational results could be adversely affected if we do not successfully integrate newly acquired businesses.

If we fail to develop new products or our customers do not accept the new products we develop, our business could be affected adversely.

     Development of proprietary products is essential to the success of our core growth and our high gross margins now and in the future. Therefore, we must continue to develop new and innovative products on an ongoing basis. If we fail to make innovations, or the market does not accept our new products, then our financial condition and results of operations could be adversely affected. We continue to invest significant dollars in the development and marketing of new products. These expenditures do not always result in products that will be accepted by the market. Failure to develop successful new products may also cause our customers to buy from a competitor or may cause us to lower our prices in order to compete. This could have an adverse impact on our profitability.

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We may be adversely impacted by an inability to identify and complete acquisitions.

A large part of our growth since fiscal 2003 has come through acquisitions and a key component of our growth strategy is based upon acquisitions. We may not be able to identify acquisition targets or successfully complete acquisitions in the future due to the absence of quality companies, economic conditions, or price expectations from sellers. If we are unable to complete additional acquisitions, our growth may be limited.

We operate in highly competitive niche markets within the OEM market and may be forced to cut our prices or incur additional costs to remain competitive, which may have a negative impact on our profitability.

We face substantial competition particularly in the OEM markets we serve. Competition may force us to cut our prices or incur additional costs to remain competitive. We compete on the basis of production capabilities, engineering and R&D capabilities, materials expertise, our global footprint, customer service and price. Present or future competitors may have greater financial, technical or other resources which could put us at a disadvantage in the affected business by threatening our market shares in some markets or reducing our profit margins.

Our goodwill or other intangible assets may become impaired, which may negatively impact our results of operations.

We have a substantial amount of goodwill and other intangible assets on our balance sheet as a result of our acquisitions. As of April 30, 2006, we had $453 million of goodwill on our balance sheet, representing the excess of the total purchase price paid for our acquisitions over the fair value of the net assets we acquired, and $95 million of other intangible assets, primarily representing the fair value of the customer relationships, patents and trademarks we acquired in our acquisitions. At April 30, 2006, goodwill and other intangible assets represented approximately 48% of our total assets. We evaluate this goodwill annually for impairment based on the fair value of each geographic operating segment, and we assess the impairment of other intangible assets quarterly based upon the expected cash flows of the acquisition. These valuations could change if there were to be future changes in our capital structure, cost of debt, interest rates, capital expenditures, or our ability to perform in accordance with our forecasts. If this estimated fair value changes in future periods, we may be required to record an impairment charge related to goodwill or other intangible assets, which would have the effect of decreasing our earnings or increasing our losses in such period.

We increasingly conduct a sizable amount of our manufacturing outside of the United States, which may present additional risks to our business.

     As a result of our strong growth in developing economies, particularly in Asia, a significant portion of our sales is attributable to products manufactured outside of the United States, especially in China. More than half of our 6,600 employees and more than half of our manufacturing locations are located outside of the United States. Our international operations are generally subject to various risks including political, economic and societal instability, the imposition of trade restrictions, local labor market conditions, the effects of income taxes, and differences in business practices. We may incur increased costs and experience delays or disruptions in product deliveries and payments in connection with international manufacturing and sales that could cause loss of revenue. Unfavorable changes in the political, regulatory and business climate in countries where we have operations could have a material adverse effect on our financial condition, results of operations and cash flows.

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We have a concentration of business with several large key customers in the OEM market and loss of one or more of these customers could significantly affect our results of operations.

     Several of our large key customers in the OEM market, specifically the precision die-cut business, together comprise a significant portion of our revenues. Our dependence on these large customers makes our relationships with these customers important to our business. We cannot assure you that we will be able to maintain these relationships and retain this business in the future. Because these large customers account for such a significant portion of our revenues, they possess relatively greater capacity to negotiate a reduction in the prices we charge for our products. If we are unable to provide products to our customers at prices acceptable to them, some of our customers may in the future elect to shift some or all of this business to competitors or to other sources. The loss of or reduction of business from one or more of these large key customers could have a material adverse impact on our financial condition and results of operations.

Foreign currency fluctuations could adversely affect our sales and profits.

     More than half of our revenues are derived outside of the United States. As such, fluctuations in foreign currency can have an adverse impact on our sales and profits as amounts that are measured in foreign currency are translated back to U.S. dollars. Any increase in the value of the U.S. dollar in relation to the value of the local currency will adversely affect our revenues from our foreign operations when translated into U.S. dollars. Similarly, any decrease in the value of the U.S. dollar in relation to the value of the local currency will increase our development costs in our foreign operations, to the extent such costs are payable in foreign currency, when translated into U.S. dollars. Through the first nine months of fiscal 2006, the strengthening U.S. dollar versus European currencies has reduced sales by approximately $13.4  million.

We depend on our key personnel and the loss of these personnel could have an adverse effect on our operations.

     Our success depends to a large extent upon the continued services of our key executives, managers and other skilled personnel. We cannot assure you that we will be able to retain our key officers and employees. The departure of our key personnel without adequate replacement could severely disrupt our business operations. Additionally, we need qualified managers and skilled employees with technical and manufacturing industry experience to operate our business successfully. If we are unable to attract and retain qualified individuals or our costs to do so increase significantly, our operations could be adversely affected.

We may be unable to implement successfully anticipated changes to our information technology system.

     We anticipate upgrading certain portions of our information technology in the near future. Part of this upgrade will include an accelerated implementation of an SAP platform in our facilities in China, Europe, India, Malaysia and Singapore. We expect that this implementation of the SAP platform will enable us to more effectively and efficiently manage our supply chain and business processes. Our failure to successfully manage this process or implement these upgrades as scheduled could cause us to incur unexpected costs or to lose customers or sales, which could have a material adverse effect on our financial results.

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The increase in our level of indebtedness could adversely affect our financial health and make us vulnerable to adverse economic conditions.

     We have incurred indebtedness to finance acquisitions and for other general corporate purposes. Any increase in our level of indebtedness could have important consequences, such as:

• It may be difficult for us to fulfill our obligations under our credit or other debt agreements;

• It may be more challenging or costly to obtain additional financing to fund our future growth;

• We may be more vulnerable to future interest rate fluctuations;

• We are required to dedicate a substantial portion of our cash flows to service our debt, thereby reducing the amount of cash available to fund new product development, capital expenditures, working capital and other general corporate activities;

• It may place us at a competitive disadvantage relative to our competitors that have less debt; and

• It may limit our flexibility in planning for and reacting to changes in our business.

Environmental, health and safety laws and regulations could adversely affect our business.

     Our facilities and operations are subject to numerous laws and regulations relating to air emissions, wastewater discharges, the handling of hazardous materials and wastes, manufacturing and disposal of certain materials, and regulations otherwise relating to health, safety and the protection of the environment. As a result, we may need to devote management time or expend significant resources on compliance, and we have incurred and will continue to incur capital and other expenditures to comply with these regulations. Any material costs may have a material adverse impact on our financial condition, results of operations or cash flows. Further, environmental laws and regulations are constantly evolving and it is impossible to predict accurately the effect they may have upon our financial condition, results of operations or cash flows.

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ITEM 6. EXHIBITS

     (a) Exhibits

2.1	Share Sale and Purchase Agreement of Tradex Holding AB
31.1	Rule 13a-14(a)/15d-14(a) Certification of Frank M. Jaehnert
31.2	Rule 13a-14(a)/15d-14(a) Certification of David Mathieson
32.1	Section 1350 Certification of Frank M. Jaehnert
32.2	Section 1350 Certification of David Mathieson

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

SIGNATURES

	BRADY CORPORATION
Date: May 30, 2006	/s/ F. M. Jaehnert
	F. M. Jaehnert
	President & Chief Executive Officer
Date: May 30, 2006	/s/ David Mathieson
	David Mathieson
	Vice President & Chief Financial Officer
	(Principal Accounting Officer)
	(Principal Financial Officer)

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EX-2.1

EXHIBIT 2.1

SHARE SALE AND PURCHASE AGREEMENT

Between

EQT II BV
and
the Minority Shareholders
on the one hand

and

Brady GmbH on the other hand

regarding

the sale and purchase of all outstanding instruments issued by

Tradex Holding AB

Advokatfirman Hammarskiöld & Co
Skeppsbron 42
PO Box 2278
SE-103 17 Stockholm

2

TABLE OF CONTENTS

Section		Page
1.	DEFINITIONS AND INTERPRETATIONS		6
2.	SALE AND PURCHASE		16
3.	PURCHASE PRICE		16
4.	CONDITION PRECEDENT		21
5.	COMPLETION		22
6.	REPRESENTATIONS AND WARRANTIES OF THE VENDORS		24
7.	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER		39
8.	INDEMNIFICATION		39
9.	COSTS AND EXPENSES		44
10.	CONFIDENTIALITY		44
11.	ANNOUNCEMENTS		45
12.	ASSIGNMENTS		45
13.	ENTIRE AGREEMENT AND AMENDMENTS		45
14.	NOTICES		46
15.	INVALIDITY		47
16.	WAIVER		47
17.	GOVERNING LAW AND DISPUTES		47

 3

SHARE SALE AND PURCHASE AGREEMENT

This Share Sale and Purchase Agreement is made on the 7^th day of April 2006 by and between on the one hand;

1.	EQT II BV (hereinafter for itself referred to as “EQT BV”), a company incorporated under the laws of the Netherlands, whose registered office is Strawinskylaan 1159, 1077XX Amsterdam, the Netherlands, for itself as shareholder in the Company (as defined herein) and in its capacity as investment manager and asset manager for EQT II Non-Registered Partnership (hereinafter for itself referred to as the “Fund”) and as representative of the Fund and of those shareholders in the Company listed in Exhibit A, (EQT BV, the Fund and the shareholders in the Company as set out in Exhibit A are hereinafter together referred to as the “EQT Investors”); and
2.	Those shareholders in the Company listed in Exhibit B (hereinafter for themselves referred to as the “Minority Shareholders”) (EQT BV and the Minority Shareholders hereinafter collectively referred to as the “Vendors”), and on the other hand
3.	Brady GmbH, corp. reg. no. HRB 32127, a company incorporated under the laws of Germany, whose registered office is at Otto-Hahn Strasse 5-7, 63225 Langen, Germany (hereinafter referred to as the “Purchaser”).

WHEREAS;

A. Tradex Holding AB, corp. reg. no. 556523-6881, a company incorporated under the laws of Sweden, whose registered office is Bultgatan 31, 442 40 Kungälv, Sweden (hereinafter referred to as the “Company”) has issued Instruments (as defined herein) in the form of shares in the Company, Warrants (as defined herein) and Convertible Loans (as defined herein) that give the right to call for the issue of or conversion of debt into new shares in the Company to the Participants. Apart from 216,000 Warrants and 161,900 Convertible Loans held by Tradex AB, following repurchases made under the Management Incentive Programme, the Warrants and Convertible Loans are owned

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by the participants in the Management Incentive Programme (as defined herein) as set out in Exhibit C (hereinafter for themselves referred to as “the Participants”). Immediately subsequent to execution of this Agreement, arrangements will be made for the transfer to EQT BV of the Warrants and Convertible Loans held by the Participants. At Completion Date the Participants’ Warrants and Convertible Loans will be transferred from EQT BV to the Purchaser, unless those Convertible Loans have at that time been converted into shares in the Company prior to Completion, in which case all such shares will be included among the Shares (as defined herein) transferred to the Purchaser.

B.	The object of the Company’s business is to, through directly or indirectly owned subsidiaries, develop, produce and sell converted components primarily intended for the cellular telephone industry and application systems for such components, as well as other activities comparable therewith.
C.	The Purchaser desires to purchase and the Vendors wish to sell all of the Instruments on the terms and conditions set out in this Agreement.

NOW THEREFORE THE PARTIES HEREBY AGREE as follows:

1.	DEFINITIONS AND INTERPRETATIONS
1.1	In this Agreement and in the Exhibits hereto, which shall form part of this Agreement, the following words and expressions shall have the meanings respectively set out opposite them;

“Accounting Principles”	shall mean the accounting principles applied by the Company and Tradex Converting, such principles are set out in the Company’s and Tradex Converting’s annual accounts for the financial years 2004 and 2005 which have been provided to the Purchaser;
“Accounts”	shall mean the annual audited accounts of the Company and each of the Subsidiaries, where such annual audited accounts are required to be

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	prepared, for the financial years 2004 and 2005;
“Adjusted Ceiling”	shall have the meaning set out in Section 8.1 (ii) below;
“Agreement”	shall mean this Share Sale and Purchase Agreement and all the exhibits attached hereto, each of which constitutes an integral part of this Agreement;
“Bank Debt”	shall mean that part of the Debt, which is financed by Nordea Bank;
“Business Day”	shall mean a day on which banks are open for business in Stockholm (excluding Saturdays, Sundays and public holidays);
“Cash”	shall mean amounts standing to the credit of any Group Company on any bank account, securities or other instruments for cash placement or hedging (including unrealised gains under hedging instruments) held by any Group Company and petty cash and other physical cash held by any Group Company, including, for the avoidance of doubt, all amounts held on bank accounts by the Subsidiaries in China;
“Ceiling”	shall have the meaning set out in Section 8.1 (i) below;
“Claim”	shall mean a claim made by the Purchaser against the Vendors under this Agreement;
“Company”	shall have the meaning set out in the introductory paragraph (A) above;

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“Completion”	shall mean the completion of this Agreement in accordance with Section 5 below;
“Completion Balance Sheet”	shall mean the document set out in Section 3.4 below in the form attached hereto as Exhibit 1.1(a) and l.l(c);
“Completion Date”	shall mean the date following from Section 5.1 below;
“Condition Precedent”	shall have the meaning set out in Section 4 below;
“Convertible Loans”	shall mean all convertible loans issued by the Company as part of the Management Incentive Programme (including the creditors’ rights pertaining thereto);
“Debt”	shall mean the consolidated interest bearing debt of the Group, less the debt pertaining to the Convertible Loans, but including any other liabilities or obligations for borrowed money, evidenced by notes, bonds, debentures, guarantees, letters of credit or similar obligations, secured by liens or for capitalized lease obligations and include all associated principal, interest and prepayments and other penalties, charges, expenses and fees;
“Deficiency”	shall mean any deficiency, liability, claim, damage, Third Party Claim, or any loss or expense suffered or incurred by the Company or any of the Subsidiaries, after reduction of any tax effect in accordance with Section 8 below, caused by a breach of any of the Warranties or covenants or other undertakings under this Agreement;
“Deposit”	shall have the meaning set out in Section 3.8.1 below;

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“Directors”	shall mean the board members of the Company and Tradex Converting appointed by the Vendors, directly or indirectly, as set out in Exhibit l.l(b);
“Disclosure Letter”	shall mean the disclosure letter issued by the Vendors as set out in Exhibit 6;
“Employees”	shall mean the employees employed by any Group Company;
“Enterprise Value”	shall mean SEK 1.1 billion (SEK 1,100,000,000);
“Environmental Laws”	shall mean any laws, statutes, directives or regulations relating to pollution or protection of the public health and the environment, including laws, rules, statutes, directives, regulations, policies or guidelines relating to emissions, discharges, releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including without limitation ambient air, surface water, ground water or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, industrial, toxic or hazardous substances or waste in the jurisdictions where the Group Companies carry on operations whether sales and marketing or manufacturing or both;
“EQT BV”	shall have the meaning set out in the introductory paragraph (1) above;
“EQT Investors”	shall have the meaning set out in the introductory paragraph (1) above;

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“Escrow Account”	shall mean the account set out in Section 5.3 (i) below;
“Escrow Account and Pledge Agreement”	shall mean the agreement substantially in the form as set out in Exhibit 5.3 (i);
“Escrow Bank”	shall mean Skandinaviska Enskilda Banken;
“Estimated Cash”	shall mean the Signing Date estimate of the Cash as of the Completion Date;
“Estimated Debt”	shall mean the Signing Date estimate of the Debt as of the Completion Date;
“Estimated Net Debt”	shall mean the Estimated Debt less the Estimated Cash as set out in Exhibit 1.1(c);
“Estimated Net Worth”	shall mean the estimate on Signing Date of the Net Worth as of the Completion Date calculated in a manner consistent with the calculation of the Net Worth (as of 31 December 2005) and as set out in Exhibit l.l(d);
“Estimated Net Worth Adjustment”	shall mean the difference between the Net Worth (as of 31 December 2005) and the Estimated Net Worth;
“Final Net Worth”	shall mean the Final Net Worth as of the Completion Date calculated in a manner consistent with the calculation of the Net Worth (as of 31 December 2005) and as determined in accordance with the procedure set out in Sections 3.4-3.7;
“Fund”	shall have the meaning set out in the introductory paragraph (1) above;
“Final Purchase Price”	shall mean the final purchase price for the

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	Instruments as set out in Section 3.1;
“GAAP”	shall mean generally accepted accounting principles in Sweden;
“Group Companies”	shall mean the Company and its directly or indirectly owned Subsidiaries (including Tradex AB);
“Group Company”	shall mean any of the Group Companies;
“Half-year Accounts”	shall mean the half-year accounts for the Company, and Tradex Converting, if any, for the the half-year of financial years 2004 and 2005;
“Instruments”	shall mean the Shares, Warrants and Convertible Loans issued by the Company held by the EQT Investors, the Minority Shareholders, the Participants and Tradex AB;
“Intellectual Property Rights”	shall mean all registered patents, trademarks, service marks, business and trade names, designs, patterns, trade dress, logos;
“Intellectual Property”	shall mean (i) the documented know-how (meaning in this context a secret and specified know how of a method or process relating to the Group Companies’ operations), inventions, trade secrets, (ii) documented technology (meaning in this context a secret and specified technology relating to the Group Companies’ operations) (iii) copyrights (including rights in computer software), software and software licences, all source and object code, algorithms, websites, domain names, (iv) proprietary and confidential customer lists, proprietary processes and formulae, and (v) development tools and confidential business information data;

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“Interim Management Accounts”	shall mean the monthly management accounts (including but not limited to a balance sheet and income statement), where available, for the Company and Tradex Converting for the period from 1 January 2006 through the Completion Date;
“Key Excecutive”	shall mean Hans Eriksson (CEO), Henrik Johansson (COO), Ola Sjölin (Area Manager APAC), Ted Düring (Area Manager Europe) and Magnus Tedestedt (Area Manager Americas);
“Loss”	shall mean the net effect of an annualized recurring loss of operating profits on a Group level during the period between the date of this Agreement and the Completion Date as compared with the Company’s EBITA on a Group level during the fiscal year 2005 according to the Company’s audited Accounts. The net effect is determined after the Company takes such measures to reinstate the Group Companies to a position and earnings comparable to the positions during the fiscal year 2005. For purposes of clarification, a Loss shall exclude customary changes in the business operations due to variations in order cycles or their equivalent;
“Management Incentive Programme”	shall mean the management incentive programme implemented on the basis of Warrants and Convertible Loans issued by the Company;
“Material Contracts”	shall mean the contracts of the Company or its Subsidiaries which are listed in Exhibit 6.8.1 hereto;
“Minority Shareholders”	shall have the meaning set out in the introductory paragraph (2) above;

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“Net Debt”	shall mean the Debt as of Completion Date less the Cash as of Completion Date, calculated in accordance with Exhibit 1.1 (c);
“Net Worth”	shall mean the Total Assets less the Total Liabilities (excluding the Net Debt however as of 31 December 2005) of the Group Companies as of 31 December 2005 according to the Companies audited Accounts and as set out in Exhibit 1.1 (a);
“Net Worth Adjustment”	shall mean the recalculation of the Purchase Price by a SEK by SEK change in the Final Net Worth (on Completion Date) as compared to the Net Worth (on 31 December 2005) as calculated and determined in accordance with the procedure set out in Sections 3.4-3.7;
“Participants”	shall have the meaning set out in the introductory paragraph (A) above;
“Party”	shall mean the Vendors or the Purchaser, “Parties” shall mean the Vendors and the Purchaser collectively;
“Preliminary Purchase	shall mean the Enterprise Value of SEK 1.1
Price”	billion less the Estimated Net Debt;
“Purchase Price”	shall mean the Enterprise Value of SEK 1.1 billion less the Net Debt;
“Purchaser”	shall have the meaning set out in the introductory paragraph (3) above;
“Related Party”	shall mean the Vendors and the board members and directors of the Group Companies;
“SEK”	shall mean the lawful currency of Sweden from

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	time to time;
“Shares”	shall mean all the shares of the Company;
“Subsidiaries”	shall mean the companies listed in Exhibit 1.1(e);
“Signing Date”	shall mean the date first above written;
“Tax”	shall mean all taxes, levies, charges, fees including but not limited to income taxes, corporation tax, capital gain tax, transfer tax, social security fees, duties, sales tax, value added tax, stamp duty, payroll taxes and duties, property taxes, employment related taxes for which the Group Companies are liable, including any withholding tax and any other taxes which may be payable to or imposed by any tax authority together with any interest, penalties or additions to tax;
“Third Party Claim”	shall mean any claim by a third party (including by tax authorities and other governmental authorities) against the Company or any of the Subsidiaries;
“Tradex AB”	shall mean the Company’s Swedish sub-subsidiary Tradex AB, with corp. reg. no. 556545-4443;
“Tradex Converting”	shall mean the Company’s Swedish sub-subsidiary AB Tradex Converting, with corp. reg. no. 556204-4767;
“Vendors”	shall have the meaning set out in the introductory paragraph (2) above and EQT BV shall for the purpose of this Agreement be considered to own the Instruments owned by the EQT Investors;

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“Vendors’ knowledge”	shall mean the actual knowledge of the Directors and the Key Excecutives after due inquiry into the relevant subject matter;
“Warranties”	shall mean the warranties and representations set out in Section 6 below; and
“Warrants”	shall mean all Warrants issued by the Company as part of the Management Incentive Programme.

1.2 The following provisions shall apply to the construction and interpretation of this Agreement and its Exhibits:

(a)	References to statutes, acts and the like of whatever jurisdiction shall include any modification, re-enactment or extension thereof whether made before or after the signing of this Agreement and any orders, regulations, instruments or other subordinate legislation made thereunder in force from time to time;
(b)	The masculine gender shall include the feminine and neuter and the singular number shall include the plural and vice versa;
(c)	References to persons shall include bodies, corporate entities, firms, unincorporated associations and partnerships;
(d)	The headings are inserted for convenience only and shall not affect the construction of this Agreement;
(e)	References to Sections, sub-sections and Exhibits are to the Sections and sub-sections of and Exhibits to this Agreement and include documents, etc. referred to in such Sections, sub-sections and Exhibits.

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2.	SALE AND PURCHASE
2.1	Subject to the terms of this Agreement, the Vendors shall sell all of the Instruments to the Purchaser and the Purchaser shall purchase all of the Instruments from the Vendors on the Completion Date.
2.2	The Instruments shall be sold free from all liens and encumbrances and together with all accrued benefits and rights pertaining thereto.
3.	PURCHASE PRICE
3.1	The Final Purchase Price for the Instruments consists of:

(i)	the Purchase Price;
	plus
(ii)	the Net Worth Adjustment.

3.2 At the Completion the following shall be paid by the Purchaser in SEK in immediately available funds:

(i)	the Preliminary Purchase Price (of which an amount corresponding to SEK ninety (90) million shall be paid to the pledged Escrow Account in accordance with Section 3.8.1 below);
	plus
(ii)	the Estimated Net Worth Adjustment SEK eight million seven hundred and forty seven thousand (8,747,000) (to be paid to the Escrow Account in accordance with Section 3.8.1 below);
	plus
(iii)	the Bank Debt at the Completion Date to be paid to Nordea Bank.

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3.2.1	The Preliminary Purchase Price shall be adjusted on a SEK by SEK basis for any difference between the Estimated Net Debt and the Net Debt as of the Completion Date, in accordance with the procedure set out in Sections 3.4-3.7 below.
3.3	The Estimated Net Worth Adjustment shall be adjusted on a SEK by SEK basis for any difference between the Estimated Net Worth Adjustment and the Net Worth Adjustment as of the Completion Date in accordance with the procedure set out in Sections 3.4-3.7 below.
3.4	Subsequent to Completion, the Purchaser shall prepare the Completion Balance Sheet showing (i) the Final Net Worth and the Net Worth Adjustment, and (ii) the Net Debt. The Completion Balance Sheet shall be based on the un-audited consolidated management accounts prepared by the Company as of the Completion Date.
3.4.1	The un-audited consolidated management accounts shall be prepared in accordance with the Accounting Principles and procedures used by the Company when preparing its audited annual accounts and Group Company accounts for 2005, provided, that such accounting principles and procedures are in accordance with Swedish GAAP consistently applied. The un-audited consolidated management accounts shall be delivered to the Purchaser by the Company no later than thirty (30) days after the Completion Date.
3.4.2	The Purchaser shall deliver the Completion Balance Sheet to the Vendors within fifteen (15) days after receipt of the un-audited, consolidated management accounts from the Group Companies.
3.5	Within fifteen (15) days after the delivery of the Completion Balance Sheet to the Vendors by the Purchaser, the Vendors shall notify the Purchaser in writing if it approves the Completion Balance Sheet and (i) the Net Worth Adjustment, and (ii) the Net Debt which follows therefrom without amendments or if not, specify the reason therefore. Unless the Vendors objects to the Completion Balance Sheet within such time period, the Completion Balance Sheet and (i) the Net Worth Adjustment, and (ii) the Net Debt, which follows there from shall at the

16

	expiry of such time period become final and binding upon the Parties for the purpose of this Agreement.
3.6	If the Parties are unable to resolve any objections notified in accordance with Section 3.5 above within twenty (20) days after the expiration of the fifteen (15) day period provided for in Section 3.5 and should the dispute concern an amount not exceeding SEK ten (10) million the dispute and the overall determination of the Completion Balance Sheet and the (i) Net Worth Adjustment, and (ii) the Net Debt, which follows there from shall be submitted to a single auditor of a reputable public accounting firm to be agreed between the Parties or in default of agreement appointed by the Arbitration Institute of the Stockholm Chamber of Commerce. Should the dispute concern an amount equal to or in excess of SEK ten (10) million, then either Party may refer the matter and the overall determination of the Completion Balance Sheet and (i) the Net Worth Adjustment, and (ii) the Net Debt, which follows there from to arbitration pursuant to Section 17 below. Any determination in accordance with this Section 3.6 shall be final and binding on the Parties.
3.7	When the Completion Balance Sheet and (i) the Net Worth Adjustment, and (ii) the Net Debt, which follows there from have become final and binding upon the Parties for the purpose of this Agreement as set out in Sections 3.5 or 3.6, the adjustment as set out below in this Section shall take place. If the amount of the Final Net Worth is at least SEK five (5) million below the Net Worth, an amount equal to the difference in excess of SEK 5 million between the amount of the Final Net Worth and the Net Worth shall be released to the Purchaser from the Escrow Account within five Business Days following such determination of the Net Worth Adjustment and the remaining amount of the deposited Estimated Net Worth Adjustment standing on the Escrow Account shall immediately be released from the Escrow Account to the Vendors. If the difference is so great that the amount of the deposited Estimated Net Worth Adjustment standing on the Escrow Account does not suffice to pay the Purchaser, the surplus amount shall be released to the

17

	Purchaser from the remaining amount deposited by the Purchaser in the Escrow Account.
	If the amount of the Net Worth Adjustment is greater than the Estimated Net Worth Adjustment an amount equal to the Estimated Net Worth Adjustment shall immediately be released to the Vendors from the Escrow Account and in addition an amount equal to the difference between the amount of the Net Worth Adjustment and the Estimated Net Worth Adjustment shall be paid by the Purchaser to the Vendors in SEK within five Business Days following such determination of the Net Worth Adjustment.
	If the Net Debt is greater than the Estimated Net Debt, then the difference shall be paid to the Purchaser by the Vendors and if the Net Debt is less than the Estimated Net Debt, then the difference shall be paid to the Vendors by the Purchaser.
	If Completion takes place more than ten (10) weeks after the Signing Date the following shall take place :
	The amount of the difference between the Net Worth Adjustment and the Estimated Net Worth Adjustment, resulting in a payment to either the Vendors or the Purchaser, as set out above in this Section 3.7, shall be capped at SEK fifty (50) million.
	The amount of the difference between the Net Debt and the Estimated Net Debt, resulting in a payment to either the Vendors or the Purchaser, as set out above in this Section 3.7, shall also be capped at SEK fifty (50) million.
3.8	Escrow Account
3.8.1	The Purchaser shall at Completion Date make a cash deposit of SEK ninety (90) million (the “Deposit”) into the Escrow Account under an Escrow Account and Pledge Agreement with the Escrow Bank and the Deposit shall be pledged to the Purchaser.

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3.8.2 Withdrawals from the Escrow Account may only be made as follows:

(a)	Upon determining the Net Worth Adjustment as set out in Section 3.7 an amount equal to all or part of the Estimated Net Worth Adjustment (including interest thereon) may be released to the Vendors upon their request to the Bank in accordance with what is set out in Section 3.7;
(b)	Upon determining the Net Worth Adjustment as set out in Section 3.7 an amount equal to all or part of the Estimated Net Worth Adjustment or a greater amount corresponding to the Net Worth Adjustment (including interest thereon) may be released to the Purchaser upon his request to the Bank in accordance with what is set out in Section 3.7;
(c)	Following the Completion Date, the Purchaser may request the Escrow Bank’s release of amounts in the Escrow Account required to satisfy Claims made not later than 18 months following Completion Date and which have been finally settled;
(d)	After 18 months from the Completion Date, the Vendors may request the Escrow Bank’s release of an amount up to 50 % of the original Deposit less any Claims made, provided that the amount remaining on the Escrow Account following such withdrawal is sufficient to cover the amount of Claims made by the Purchaser and which have not been settled;
(e)	Following Completion Date, the Purchaser may request the Escrow Bank’s release of an amount up to the balance amount on the Escrow Account to satisfy environmental or Tax Claims made not later than 24 months following the Completion Date and which have been finally settled; and
(f)	After 24 months from the Completion Date, the Vendors may request the Escrow Bank’s release of the remaining amount in the Escrow Account, provided the Purchaser has not made any Claims which have not been finally settled, in which case,

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however, the part of the balance amount exceeding the amount of the Claims may be released. Upon settlement of all outstanding Claims the balance amount shall be released in accordance with such settlement.

4.	CONDITION PRECEDENT
4.1	The obligations of the Purchaser to complete the purchase of the Instruments under this Agreement are conditional upon the satisfaction or waiver, on or prior to the Completion Date, of the obtaining of clearance or a decision not to take any further action from the competition authority and other authorities relevant for the transaction under this Agreement, as listed in Exhibit 4.1.
4.2	The Purchaser shall be responsible for the preparation of necessary notifications to those authorities described in Exhibit 4.1 and for any costs and expenses incurred in relation to such notifications. The Purchaser undertakes to submit the necessary notifications as soon as possible and to use all reasonable efforts to do so within five (5) Business Days after the Signing Date. The Purchaser will use all reasonable endeavours to fulfil or procure the fulfilment of the condition set out in Section 4.1 above and will notify the Vendors in writing, immediately after it becomes aware of the satisfaction of such condition. The Vendors shall provide all necessary assistance and undertake all reasonable actions the Purchaser may require in relation to the preparation of notifications and filings provided for herein.
4.3	In the event the relevant competition or other authorities would not be prepared to give its clearance to the sale and purchase contemplated herein, the Purchaser undertakes to negotiate in good faith with the relevant authorities in order to obtain clearance and to take all measures reasonably required by the relevant competition authorities so that the said sale and purchase will not be prohibited or restricted in any material way. The Vendors shall upon the reasonable request of the Purchaser assist and if required participate in all negotiations with the relevant competition authorities.

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5.	COMPLETION
5.1	Completion shall take place, unless otherwise agreed in writing between the Parties, at the offices of Hammarskiöld & Co in Stockholm, Sweden before 10 a.m. five (5) Business Days from the date upon which the Condition Precedent in Section 4.1 is satisfied, deemed to be satisfied or waived (the “Completion Date”). If Completion has not occurred on or before June 30, 2006 this Agreement shall automatically become null and void and neither Party shall have any claims against each other by reason thereof.
5.2	At the Completion Date the Vendors shall:

(i)	in exchange for the payments to be made in accordance with Section 5.3 below, cause the transfer of all the Instruments (less those instruments held by Tradex AB) to the securities account designated by the Purchaser;
(ii)	cause the Directors to resign from the board of the Company and Tradex Converting;
(iii)	deliver a legal opinion from a reputable Dutch law firm confirming EQT BV’s legal status and authority to sign this Agreement and the Escrow Account and Pledge Agreement;
(iv)	deliver all other documents required to be delivered to the Purchaser under this Agreement to complete the transactions contemplated hereby and such further documents as the Purchaser may reasonably require in connection with the Completion; and
(v)	certify that all claims and debts pertaining to the Related Parties have been finally settled.

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5.3 At the Completion Date, the Purchaser shall pay the Preliminary Purchase Price and the Estimated Net Worth Adjustment as follows:

(i)	make payment in cash of the Deposit of SEK ninety (90) million into a specified interest bearing account (the “Escrow Account”) with the Escrow Bank, to be held as collateral for Claims under the Agreement, and to be held, disbursed and administrated in accordance with the terms of a separate agreement (the “Escrow Account and Pledge Agreement”) between EQT BV, the Purchaser and the Escrow Bank, substantially in the form set out in Exhibit 5.3 (i);
(ii)	make a cash deposit of the Estimated Net Worth Adjustment to the Escrow Account; and
(iii)	pay to EQT BV, as representative of all the Vendors, the remaining part of the Preliminary Purchase Price, in immediately available funds in accordance with EQT BV’s transfer instructions to be provided to the Purchaser not later than five (5) Business Days prior to the Completion Date.

5.4

At the Completion Date, the Purchaser shall refinance or pay off the Bank Debt.

5.5

At the Completion Date, the Vendors shall cause a shareholders meeting and a board meeting to be held by the Company and the Group Companies allowing the Purchaser to appoint new directors and deputy directors and to appoint company signatories. The Purchaser shall prepare the minutes of said meetings as well as the necessary ancillary documentation, and the Purchaser shall procure that the documentation, immediately following said meetings, is submitted to and received by the Swedish Companies Registration Office. The resigning directors shall have no claims against the Company and the Group Companies other than salary under any employment contracts with the Company or the Group Companies. This shall be evidenced by resignation letters in form and substance satisfactory to the Purchaser.

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5.6	At the next annual general meeting of the Company and the Subsidiaries, the Purchaser undertakes to grant the Directors and any such other directors as listed in Exhibit 5.6 and who have retired in connection with the Completion or otherwise during the last fiscal year, discharge from liability for their administration until the Completion Date (or the earlier date of the retirement), however, provided that, in the auditors’ reports for the relevant period, the auditors of the Company and the Subsidiaries do not recommend against such discharges.
5.7	Should the Vendors fail to effect the registration of any Instruments (such Instruments hereinafter referred to as “Incomplete Instruments”) in the securities account as provided for in Section 5.2 (i) above, the Purchaser may withhold such part of the Purchase Price that corresponds to the value of the respective Incomplete Instrument, which values are set out in Exhibit 5.7.
	Upon the registration subsequent to the Completion Date of any Incomplete Instruments in the name of the Purchaser, then the Purchaser shall immediately release and pay to the Vendors the part of the Purchase Price withheld in respect of that Incomplete Instrument.
	The Purchaser shall at the Vendors’ resonable request give assistance and provide information to the Vendors for the Vendors’ transfer of the Incomplete Instruments to the Purchaser and for the Vendors’ verification of the number of Incomplete Instruments.
	In the event that the Vendors fail to effect the registration of at least ninety (90) per cent of the Instruments at the Completion Date in the securities account as provided for in Section 5.2 (i) above, the Purchaser shall have the right to rescind this Agreement.
6.	REPRESENTATIONS AND WARRANTIES OF THE VENDORS
	Subject to matters disclosed to the Purchaser in this Agreement and its Exhibits and in the Disclosure Letter, Exhibit 6, issued by the Vendors, the Vendors, on a pro rata basis in proportion to their ownership interests in the Instruments, make representations and warranties (the

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“Warranties”) in favour of the Purchaser with respect to the issues mentioned below in this Section 6, all of which, including matters disclosed to the Purchaser in this Agreement and its Exhibits, and in the Disclosure Letter, Exhibit 6, are true, complete and accurate as of the date hereof and will be true, complete and accurate as well as of the Completion Date. Vendors shall update the Disclosure Letter against the Warranties up to the Completion Date with regard to circumstances occurring after the Signing Date.

If such updated disclosures contain a Loss, the Purchaser shall have the following rights:

(i) if the Loss is less than SEK eight (8) million below EBITA 2005 according to the Company’s audited Accounts on a Group level, the Purchaser has no other rights or remedies other than those which exist if a breach of a Warranty has occurred;

(ii) if the Loss is between SEK eight (8) million and SEK 25 million below EBITA 2005 according to the Company’s audited Accounts on a Group level, the Purchaser has a right to negotiate a corresponding adjustment of the Purchase Price, such negotiation regarding adjustment to be conducted in good faith and failing agreement, will give the Purchaser and the Vendors the right to rescind this Agreement; and

(iii) if the Loss is more than SEK 25 million below EBITA 2005 according to the Company’s audited Accounts on a Group level, or in the case of (a) a loss of the trading relationship with Nokia (b) a loss of the W.L.Gore supply agreement or (c) a major loss of operation in China including but not limited to a major loss of the Langfang factory work force, the Purchaser and the Vendors shall have the right to rescind the Agreement with neither Party having any claims against each other by reason thereof. Should the Purchaser make use of its rights under (ii) above, that shall (provided the use of such rights lead to a payment or other settlement or a rescission) exclude the Purchaser from any right to make a Claim under the Warranties in respect of the Loss. For the avoidance of doubt, the events under (a), (b), (c) above are not Warranties.

Each Vendor shall be solely responsible for a breach of Warranty regarding title, authority, enforceability and registered share capital as

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	set out in Sections 6.1.1, 6.2.1, 6.3.1 and 6.3.2 in respect of its respective Instruments. For the avoidance of doubt, no matters, occurrences or events other than those disclosed in the Agreement (including but not limited to the limitations in Section 8) and its Exhibits and in the Disclosure Letter, shall in any way affect the Vendors’ liabilities under the Warranties of this Agreement.
6.1	Share Capital and the Company
6.1.1	The Company and its Subsidiaries have the fully paid-up share capital as set out in Exhibit 6.1.1 hereto. The Shares and, except as set out in Exhibit 6.1.1, the shares of the Subsidiaries are fully paid and the Shares are registered in the name of the Vendors and the shares of the Subsidiaries are registered in the name of the respective companies set out in Exhibit 6.1.1.
6.1.2	There is no agreement or commitment outstanding which calls for the allotment, issue or transfer of or accords to any person the right to call for the allotment or issue or transfer of, any shares (including the Shares) or securities of the Company or any of the Subsidiaries, except as set out in the Management Incentive Programme and in this Agreement.
6.1.3	The Company is duly organised and validly existing under the relevant laws of Sweden and has the full power and authority under its articles of association to carry on its business as currently conducted. The Subsidiaries are duly organised and validly existing under the relevant laws in the respective jurisdictions where they are incorporated and have the full power and authority under their articles of association to carry on their businesses as currently conducted.
6.1.4	The Subsidiaries are direct or indirect subsidiaries of the Company.
6.1.5	None of the Vendors or the Group Companies has filed (or has had filed against it) a petition in bankruptcy, or is insolvent within the meaning of applicable laws, rules, regulations or similar requirements. None of the Vendors or the Group Companies has initiated any proceedings with respect to a compromise or arrangement with their

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	creditors or for the dissolution, liquidation or reorganisation of the Vendors or the Group Companies, or the winding up or cessation of the business or affairs of the Vendors or the Group Companies. No receiver or administration receiver or liquidator has been appointed in respect of the Vendors or the Group Companies or any of their material assets and no execution has been levied upon any of their material assets.
6.2	Title to Instruments
6.2.1	Each of the Vendors is the legal owner of its respective Instruments.
6.2.2	The Instruments are fully paid, free from all liens, charges and other encumbrances, except as set out in Exhibit 6.2.2.
6.3	Capacity
6.3.1	Each of the Vendors warrant that it has the powers to enter into and to perform its obligations under this Agreement which, when executed, will constitute binding obligations of each of the Vendors in accordance with its terms.
6.3.2	Each of the Vendors warrants that it is neither prohibited nor restrained by its by-laws, articles of association or similar document, or by any agreements to which it is a party, from entering into this Agreement and consummating the transactions contemplated hereby, and this Agreement and the transactions related hereto have been duly authorised by all necessary corporate actions of the Vendors.
6.4	Accounts, Half-year Accounts and Interim Management Accounts
6.4.1	Except as set out in Exhibit 6.4.1, the annual audited accounts for the fiscal years 2004 and 2005 of the Company for itself and on a Group level and Tradex Converting will in all material respects conform with the Swedish Book Keeping Act and be in accordance with the Accounting Principles, GAAP, the Swedish Annual Accounts Act and the Recommendations issued by the Swedish Financial Accounting Standards Council, and the Accounts present a true and fair view of the financial position and the results of operations of the respective Group

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	Company they relate to as of the respective dates and for the periods referred to in such Accounts and conform in all material respects with the local GAAP in their respective jurisdictions.
6.4.2	The Half-year Accounts and the Interim Management Accounts are, to the best of the Vendors’ knowledge, complete in all material respects and have been prepared in accordance with the procedures as set out in Exhibit 6.4.2, established by the Company and, if applicable, by Tradex Converting, for such Half-year Accounts and Interim Management Accounts.
6.5	Books and Records
	Except as set out in Exhibit 6.5, the statutory books and records (including all register and minute books) of the Company and its Subsidiaries have been properly kept and are maintained by the respective Group Company in a complete form and contain a legally accurate and complete record of the kind of matters required to be dealt with in those books.
6.6	Conduct of Business until Completion
	The Company and its Subsidiaries have from 1 January 2006 until Signing Date carried on their respective businesses in the ordinary and usual course following past practice and as presently conducted in a consequent manner and will from Signing Date until Completion Date carry on their respective businesses in the ordinary and usual course following past practice and as presently conducted in a consequent manner.
	There has not been any material adverse change in the financial condition of the Group Companies during said periods and except as set out in Exhibit 6.6, the Company and the Subsidiaries have not and will not during the said periods, other than within the ordinary course of business:

(i) enter into any obligation in excess of SEK 1 million;

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(ii)	dispose of any asset, right, lease, licence or like item in excess of SEK 1 million;
(iii)	change the method of accounting practice or policy in the Group Companies;
(iv)	amend the articles of association of the Group Companies;
(v)	change the share capital of the Group Companies;
(vi)	change or amend any Material Contract;
(vii)	declare or pay any dividends or make any other distribution with respect to the Shares or any shares of the Group Companies;
(viii)	enter into any borrowing or lending arrangements aside from trade payables or receivables incurred or entered into in the ordinary course of business;
(ix)	make any payments to any employee or other person with a relation to the Group Companies outside the ordinary course of business;
(x)	enter into any other transactions in excess of SEK 1 million outside of the ordinary course of business of the Group Companies;
(xi)	omit to inform the Purchaser about actual knowledge obtained during said periods regarding release or emission of hazardous substances by third parties polluting premises or real properties owned, leased or used by the Group Companies, however, for the avoidance of doubt, the Vendors shall have no liability whatsoever for the pollution of the premises or real properties owned, leased or used by the Group Companies, by third parties;
(xii)	omit to inform the Purchaser of a Loss as set out in Section 6 in this Agreement.

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6.7	Insurance
	The Company and the Subsidiaries have the insurance policies as set out in Exhibit 6.7A. The policies provide adequate insurance coverage for the assets and the operations of each of the Group Companies. All insurance policies are fully in force and effect (or will be in full force and effect following renewal in accordance with what is set out in Exhibit 6.7A), and will continue to be so through the Completion Date. There has been no written notice of cancellation of theses policies, except as set out in Exhibit 6.7 B, and nothing has been omitted or done, which might make any of the insurance policies void or voidable. All insurance claims in excess of SEK 500,000 made or pending since January 1, 2003 are set out in Exhibit 6.7C. All premiums due have been paid.
6.8	Material Contracts
6.8.1	Exhibit 6.8.1 lists all agreements involving any of the Group Companies in excess of SEK two (2) million per year, excluding for the avoidance of doubt any component quotations and offers, hereinafter referred to as the “Material Contracts”. All Material Contracts are valid and in full force and effect and constitute legal, valid and binding obligations of the Company and each Subsidiary (as appropriate). Neither the Company nor the Subsidiaries have received, and neither the Company nor the Subsidiaries have given, written notice of termination of any Material Contract and to the best of Vendors’ Knowledge no oral notice of such termination has been received.
6.8.2	To the best of the Vendors’ knowledge, the Company or the Subsidiaries or the other parties to a Material Contract are not in any material way in default under any Material Contract, which is currently in force.
6.8.3	Neither the Company nor any Subsidiary has manufactured, sold, or provided any product or service which did not comply with all laws and regulations in force and applicable at the time of the manufacture, sale, or provision, or which has given rise to any product liability claims

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	under any applicable product liability statutes. There is not presently nor has there been since January 1, 2003 any material failure or defect in any product sold by the Company or any Subsidiary in relation to their respective business that has required or that, to the best of the Vendors’ knowledge, will require a general recall or replacement campaign with respect to such product.
6.9	Assets
	Each Group Company has good and marketable title to all of its owned assets, free and clear of any and all liens, and, except as set out in Exhibit 6.9A, is in sole possession of, and has sole control of, its owned assets. Except as disclosed in Exhibit 6.9B, none of the assets used by the Group Companies is leased, rented, licensed, or otherwise not owned by the Group Companies. The assets owned or used by the Group Companies include all of the assets which are necessary for the operation of the Group Companies business as now conducted.
	All of the fixed assets and other tangible properties and assets owned or used by the Group Companies include all of the fixed assets and other tangible properties and assets which are necessary for the operation of the businesses of the Group Companies as currently conducted and are in such good operating condition and repair as considered normal in the kind of business in which the Group Companies are active, normal wear and tear also excepted, and such assets and their use conform in all material respects to applicable laws and regulations required for their operation.
6.10	Licenses and Permits
	The Company and the Subsidiaries have all and are in material compliance with, the necessary licences, irrespective of their kind, permits and authorisations to carry on their respective businesses as presently conducted and, the Company or the Subsidiaries have not received any written notices of non-compliance or that any such necessary license, permit or authorisation is being revoked, withdrawn or not renewed, except as set out in Exhibit 6.10.

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6.11	Real Estate
	The Company or its Subsidiaries do not own any real property. Exhibit 6.11A sets forth a true and complete list of all premises and real properties leased by the Company or its Subsidiaries (the “Real Property Leases”) and the terms thereof. Neither the Company nor any Subsidiary is in default under any Real Property Lease and no written claim of any default thereunder has been received by the Company or any Subsidiary, which has not been cured. All rent and other sums and charges payable by the Company or any Subsidiary under any of the Real Property Leases are current. To the best of the Vendors’ knowledge, all and any obligations of the Group Companies to keep and maintain the premises and real properties in good condition and repair have been fulfilled, and except as set out in Exhibit 6.11B, the Group Companies have fulfilled their obligations in respect of maintenance and care of the premises or real estate in accordance with their obligations under the Real Property Leases, normal wear and tear excepted. All requirements of the Group Companies pertaining to the Real Property Leases have been met and there are no claims or requirements against the Group Companies in respect of a failure to meet such requirements, and the premises and real properties are in such good operating condition and repair, as considered normal in the kind of business in which the Group Companies are active, normal wear and tear excepted,. Except as disclosed in Exhibit 6.11C, none of the Real Property Leases expire according to its terms, prior to or within six (6) months of the Completion Date.
6.12	Litigation
	Other than in respect of normal debt collection proceedings, neither the Company nor the Subsidiaries are engaged in any litigation or arbitration, whether as a plaintiff, defendant or otherwise and, to the best of the Vendors’ knowledge, no litigation or arbitration, by or against the Company or the Subsidiaries, exceeding SEK 400,000 is threatened, except as set out in Exhibit 6.12.

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6.13	Intellectual Property
6.13.1	The Intellectual Property Rights set out in Exhibit 6.13.1 comprise all Intellectual Property Rights that are owned or used by the Company and the Subsidiaries. The Company and each Subsidiary owns, uses, licenses or otherwise possesses valid rights to use, the Intellectual Property Rights and the Intellectual Property used in, or reasonably required for the conduct of the business operations of the Company and each Subsidiary as presently conducted. All documentation pertaining to the Intellectual Property Rights and Intellectual Property (if documented) remains with the respective Group Company.
6.13.2	Neither the Company nor the Subsidiaries have been notified in writing, or, to the best of the Vendors’ Knowledge, orally, of any third party challenging the validity of any Intellectual Property Rights or Intellectual Property and neither has received any written claim whether for infringement, damages or otherwise made by any third party which relates to the use of the Intellectual Property Rights or the Intellectual Property by the Company or the Subsidiaries, except as set out in Exhibit 6.13.2 hereto.
6.13.3	Neither the Company nor the Subsidiaries have granted any licence in respect of any Intellectual Property Right or Intellectual Property, except as set out in Exhibit 6.13.3.
6.13.4	All persons retained or employed by the Company and Tradex Converting who, in the course of their work for the Company and Tradex Converting will or might reasonably be expected to contribute to the creation or development of Intellectual Property Rights, are bound by rules under Swedish law and applicable collective bargaining agreements whereby all Intellectual Property Rights which such persons may contribute to, produce or develop during their work for the Company or Tradex Converting vests in the Company or Tradex Converting in accordance with said law or collective bargaining agreements and each Group Company has ensured to acquire from each present or past Employee, all such rights that are embraced by the relevant legislation or collective bargaining agreements.

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6.14	Employment and Pension Agreement
6.14.1	There is no pending, or to the best of the Vendors’ knowledge threatened claim or labour litigation in respect of the Company or the Subsidiaries and no strike by the Employees, except as set out in Exhibit 6.14.1.
6.14.2	To the extent required by applicable law in the relevant jurisdictions and the Accounting Principles, provisions have been made in the Accounts or in the Completion Balance Sheet, for the pension undertakings to be paid to current or former directors or other Employees of the Company and the Subsidiaries. Neither the Company nor any Subsidiary has any current, future or contingent liability for pensions or related retirement benefits, which are not either fully insured by a third party, fully funded or fully provisioned in the Accounts or in the Completion Balance Sheet.
6.14.3	Exhibit 6.14.3 lists all Employees with a salary in excess of SEK 500,000 per year including all material benefits properly and completely set out. All such Employees are employed on normal conditions including work hours, salaries and benefits.
6.14.4	Exhibit 6.14.4 contains a true and complete description or copies of the collective bargaining agreements and employee benefit plans (if any) to which the Company or any Subsidiary is bound. Said agreements are in full force and effect, and neither the Company nor any Subsidiary is in default under them. All financial liabilities and obligations arising out of the employee benefit plans, if any, are fully accounted for in the Accounts or in the Completion Balance Sheet where such accounting is legally required in the respective jurisdictions.
6.14.5	All liabilities to all Employees and former employees for all periods prior to the Completion Date (except for accrued or not yet due current remuneration), whether by virtue of laws, rules, regulations, contracts or otherwise, have been fully satisfied and discharged, including without limitation, severance or other termination payments due to any former employees of the Company or any Subsidiary, except as reserved in the Accounts or in the Completion Balance Sheet.

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6.14.6	Since January 1, 2006, neither the Company nor any Subsidiary has granted any general wage increase, or adopted any bonus, profit sharing, pension, savings or other employee benefit plan or amendment thereto or entered into any employment contracts, except in the ordinary course of business or as set out in Exhibit 6.14.6.
6.14.7	All agreements with Employees are in compliance with applicable laws in the respective jurisdiction where the Employee in question is employed, except as set out in Exhibit 6.14.7.
6.15	Tax Returns
	The Company and the Subsidiaries have duly filed on a timely basis all Tax returns and Tax related documents required to be filed and each of such returns or documents completely and accurately reflects the facts regarding the income, properties, operations, status or other information required to be shown therein and is not, to the best of the Vendors’ knowledge, disputed. There are no Tax audits pending, or to the best of the Vendors’ knowledge threatened, with respect to the Company and the Subsidiaries, except as set out in Exhibit 6.15.
6.16	Payment of Taxes
	The Company and the Subsidiaries have duly paid or accrued for all Taxes required to be paid except for such, if any, as are being contested in good faith by appropriate proceedings, and the Company and the Subsidiaries have not received any notice about any payment of penalty or interest in connection with any claim for Taxes, except as is set out in Exhibit 6.16.

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6.17	Environmental Issues
6.17.1	No civil, criminal or administrative actions, investigations, revisions or other proceedings have been taken or made relating to the Company’s or the Subsidiaries’ manufacture, processing, distribution, storage, disposal, transport, or handling, or emission, discharge or release into the environment, of any pollutant, contaminant, chemical, or industrial, toxic or hazardous substance or waste or any other material, the presence of which requires investigation or disclosure under Environmental Laws of the Company’s or the Subsidiaries’ businesses and to the best of Vendors’ knowledge no such actions, investigations, revisions or other proceedings may be expected.
6.17.2	The Company and the Subsidiaries have obtained all permits, licenses and other authorizations which are required for the operation of the Company’s and each Subsidiary’s business under any Environmental Law.
6.17.3	The Company and each Subsidiary is in material compliance with all terms and conditions of the permits, licenses, decrees, judgments, orders, authorizations required under any Environmental Laws.
6.17.4	There is no environmental claim pending, or, to the Vendors’ knowledge, threatened, against the Group Companies, or any material obligation concerning environmental claims, in relation to a third party who stores on behalf of the Group Companies, or receives from the Group Companies deposits or disposals of, hazardous substances. The Group Companies have not received any written or, to the Vendor’s knowledge, oral communication that alleges that any of the Group Companies, their assets, properties or premises or operations is or was claimed to be in violation of or in non-compliance with or that any of the Group Companies is responsible or potentially responsible for the investigation or remediation of hazardous substances under any Environmental Laws.
6.17.5	There has been no release or emission of any hazardous substances by any of the Group Companies or any employee or representative of the

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	Group Companies from any premises or real properties owned, leased or used by the Group Companies. To the best of Vendors’ knowledge, there has not since 31 December 2004 and up to the Signing Date been any release or emission of any hazardous substances by any third party on any real estate owned, leased or operated by the Group Companies, however, for the avoidance of doubt, the Vendors shall have no liability whatsoever for such release or emission by any third parties.
6.18	No Violation/Change of Control
	Neither this Agreement, nor the transactions contemplated herein are in violation of the by-laws or other organizational instruments of the Company or any Subsidiary or will, in accordance with any agreement, constitute a breach of or an event of default under such agreement to which the Vendors, the Company or any Subsidiary is a party, or will, in accordance with its terms modify in any material way the rights and obligations of any of the parties thereto except as set out in Exhibit 6.18.
6.19	Compliance with Law
6.19.1	The Company and each Subsidiary is in material compliance with and has, to the best of the Vendors’ knowledge, at all times been in material compliance with, and is not in default or violation in any material respect of any applicable law, in the respective jurisdiction for the Company and each respective Subsidiary and in jurisdictions where products are sold or marketed by the Group Companies (including but not limited to any Environmental Laws, product liability laws and the WEEE Directive (if applicable)), regulation, permit or ordinance affecting its properties, assets or the operation of its businesses. The Company and each Subsidiary have obtained or presented, as the case may be, the necessary confirmations regarding RoHS complicance with regard to the following suppliers listed in Exhibit 6.19.1.
6.20	Transactions with Related Parties
6.20.1	Except for transactions on arm’s length or in the ordinary course, the Company, Tradex Converting and other Subsidiaries are not parties to

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	any transaction or proposed transaction, including, without limitation, the leasing of property, the purchase or sale of raw materials or finished goods, the furnishing of services or the borrowing or lending of money, with any Vendor or director or employee, agent, or consultant of the Company or Tradex Converting or a third party owned or controlled by an Employee, except as set forth on Exhibit 6.20.1 hereto. There is no Employee that owns or has any ownership interest in any corporation or entity which is in competition with the Company’s business.
6.20.2	Except for the ordinary course payment of salary and the provision of employee benefits, no Group Company, has any obligations to any Vendor or Employee and no Vendor or Employee has any obligations to any Group Company, except as set forth in Exhibit 6.20.2.
6.20.3	None of the Group Companies or any of their respective directors or employees has, to the best of the Vendors’ knowledge, engaged in conduct that would violate the anti-bribery provisions of the U.S. Foreign Corrupt Practices Act, as amended.
6.21	Brokers and Related Parties
	No broker, finder, investment banker is entitled to any brokerage fee, finder’s fee or other fee from the Company or any Subsidiary in connection with the transaction contemplated by this Agreement.
6.22	No Untrue Statements
	No statement by the Vendors contained in this Agreement and its Exhibits contains or will contain any untrue or misleading statement and to the best of the Vendors’ knowledge no material fact or circumstance has been omitted which will render such statements untrue or misleading. All information communicated by the Vendors to the Purchaser is accurate.
6.23	Indemnity
	There are no Taxes payable by the Company in relation to the granting, sale or exercise of the Instruments by the Employees.

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7.	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
7.1	The Purchaser is duly organised and validly existing under the laws of Germany, having all licenses, authorisations and corporate powers to carry on its business as now conducted and to enter into this Agreement, which, when executed, will constitute binding obligations on the Purchaser in accordance with its terms.
7.2	The Purchaser is neither prohibited nor restrained by its by-laws, articles of association or similar document, or by any agreements to which it is a party, from entering into this Agreement and consummating the transactions contemplated hereby, and this Agreement and the transactions related hereto have been duly authorised by all necessary corporate actions.
8.	INDEMNIFICATION
8.1	Any and all liability towards the Purchaser under the Warranties may only be directed against the Vendors. The Vendors are, subject to what is set out below in this Section 8, liable for breach of any of the Warranties on a pro rata basis in proportion to each respective Vendor’s ownership in the Instruments. For this purpose EQT BV shall be deemed to have the ownership interest of the Instruments owned by the EQT Investors and hence, with the exceptions herein stated, be fully liable for any breach of a Warranty pertaining to the portions of the respective EQT Investors. Each Vendor shall however be solely responsible for a breach of Warranty regarding title, authority, enforceability and registered share capital as set out in Sections 6.1.1, 6.2.1 and 6.3.1 and 6.3.2 in respect of its respective Instruments. Any compensation payable by the respective Vendors under this Agreement shall only be for a Deficiency and only in the form of a reduction of the Final Purchase Price corresponding to the Deficiency on a SEK per SEK basis after any reductions in accordance with this Section 8. The liability of any of the Vendors for breaches of the Warranties under Sections 6.1.1, 6.2.1 and 6.3.1 and 6.3.2 shall never exceed the part of the Final Purchase Price that each Vendor has received respectively.

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The Vendors’ aggregate liability to compensate the Purchaser under this Agreement for other breaches of warranties shall

(i)	during the first eighteen (18) months following Completion, not exceed the amount from time to time standing to the credit of the Escrow Account (the “Ceiling”); and
(ii)	during the period starting on the first day of the 19th month up to and including the last day of the 24th month following Completion, not exceed 50 per cent of the Deposit plus an amount corresponding to Claims notified to the Vendors in accordance with Section 8.8 during the first 18 months following Completion (the “Adjusted Ceiling”).

	For the avoidance of doubt, the Adjusted Ceiling shall never exceed the Ceiling, except for the indemnity in Section 6.23.
8.2	A claim for a breach of a Warranty may be made by the Purchaser for itself or on behalf of any of the Group Companies affected by the breach of the Warranty. Any compensation under a Claim may, at the Purchasers’ option, be payable to the Group Company that has suffered the loss for which a Claim has been lodged.
8.3	If any Deficiency referred to in this Section 8 is a Tax deductible item, or relates to an untaxed reserve, the reimbursement to the Purchaser shall be reduced by the Tax rate which is applicable in the respective jurisdiction of the Company or the Subsidiary in question at the time of the reimbursement.
8.4	In the event of a Claim being a result of a Tax liability in one fiscal year but the Company and/or a Subsidiary has a right to claim a Tax deduction in any of the following financial years, the Claim shall be reduced by an amount equal to that part of the Tax deduction which could be enjoyed immediately by the Company or the respective Subsidiary. The remaining amount which is not immediately Tax deductible shall, subject to the limitations set out in this Section 8, be paid as a Claim by the Vendors, however, the Vendors shall be entitled to be reimbursed for that part of the Claim for which the Company or

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	the respective Subsidiary in the future is entitled to a Tax deduction when the Company or the respective Subsidiary is entitled to the benefit of such Tax deduction.
8.5	The Purchaser shall not be entitled to make a Claim to the extent and to such amounts that a provision, reserve or accrual for the matter of the Deficiency or cost has been made prior to the Completion Date or the amount of such Deficiency is properly accrued in the Completion Balance Sheet.
8.6	No Claim may be made on facts or circumstances which the Purchaser or its advisors knew prior to the signing of the Agreement or as disclosed in this Agreement.
8.7	Other than in respect of breaches of the Warranties under Sections 6.1.1, 6.2.1 and 6.3.1 and 6.3.2 and 6.23, no Claim shall be brought by the Purchaser against the Vendors under the Warranties unless the Deficiencies amount to SEK eleven (11) million or more in the aggregate, in which case the Vendors shall be liable, subject also to the other limitations set out in this Section 8, for the amount of the Deficiencies less a deductible of SEK five and a half (5.5) million (“the skip”); and no single Deficiency which is less than SEK four hundred thousand (400,000) shall be taken into account.
8.8	No Claim shall be brought by the Purchaser against the Vendors in respect of any breach of the Warranties, unless notice in writing of any such Claim, accompanied by reasonable particulars thereof specifying the nature of the breach and, so far as practicable, the amount claimed in respect thereof, has been given to the Vendors not later than within sixty (60) Business Days from the date the Purchaser became aware of the circumstances giving rise to the Claim and in any event not later than eighteen (18) months after the Completion Date.
	In the case of Warranties of a Tax nature under Sections 6.15 and 6.16 such notice shall be given not later than sixty (60) Business Days from the date the relevant Tax authority has assessed a Tax and given notice thereof to the Purchaser, the Company or the respective Subsidiaries and in any event not later than twenty-four (24) months after

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	Completion Date. In the case of Warranties relating to environmental issues under Section 6.17 such notice shall be given not later than within sixty (60) Business Days from the date the Purchaser became aware of the of the circumstances giving rise to the Claim and in any event not later than twenty-four (24) months after the Completion Date.
8.9	No liability shall arise in respect of any breach of the Warranties;

(i)	if and to the extent that any Claim occurs as a result of any legislation not in force at the date of Completion, or which takes effect retroactively, or occurs as a result of any increase in the rate of Tax in force at the date of Completion or any change in the practice of the relevant Tax authorities;
(ii)	which would not have arisen but for an act, omission or transaction carried out by, at the request of or with the consent of the Purchaser, or persons deriving title from the Purchaser, the Company or the Subsidiaries after the Completion;
(iii)	in respect of any Deficiency or part thereof, which is recoverable under a policy of insurance and which remains in force after the Completion or should have been recoverable under a policy of insurance existing at the Completion if such insurance had continued to be in force after the Completion.

8.10 In case the Purchaser becomes aware of any Third Party Claim for which the Vendors may be liable, the Purchaser shall;

(i) as soon as reasonably practicable, but in no event later than sixty (60) Business Days after the date the Purchaser, the Company or a Subsidiary became aware of the Third Party Claim, give notice thereof to the Vendors provided, that the failure by the Purchaser to so notify or provide copies to the Vendors shall not relieve the Vendors from any liability to the Purchaser to the extent that the Purchaser can show that such failure shall not have materially prejudiced the defense of such Third-Party Claim;

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(ii)

take such action, as the Vendors may reasonably request to avoid, dispute, resist, appeal, compromise or defend such claim, with the proviso, however, that the Purchaser shall not, accept, pay, compromise or make any submission in respect of such claim, without the Vendors prior written consent thereto which consent shall not be unreasonably withheld or delayed; and

(iii)

subject to appropriate confidentiality undertakings, give the Vendors or the Vendors’ duly authorised representatives, reasonable access to the personnel of the Purchaser, the Company and/or the Subsidiaries, as the case may be, and reasonable access to any relevant premises, accounts, documents and records within their respective power, to enable the Vendors, or the Vendors’ duly authorised representatives, to examine such claim, premises, accounts, documents and records and to take copies or photocopies thereof at the Vendors’ expense for the sole purpose of conducting the defense.

8.11

In case a Third Party Claim would arise which could lead to a breach of the Warranties, any negotiations, dispute or litigation relating thereto with any third party may, upon the request by the Vendors, be handled by the Vendors on its own cost and risk, and the Purchaser may upon such request require that the Company and the Subsidiaries will grant to the Vendors the right to defend any such claim and to properly conduct any litigation resulting there from provided that no nomination of legal or other counsel or advisor, settlement or any other material understanding with the claimant or a third party will be made without the prior consultation with the Purchaser and provided that such settlement or material understanding with the claimant or a third party may not lead to negative consequences to the Purchaser’s business.

8.12

If the Vendors have made any payment to the Purchaser as a settlement of a Third Party Claim and subsequent thereto the Purchaser, the Company or the Subsidiaries have the right to recover from any third party any amount that has formed the basis of a Claim, then the Purchaser will inform the Vendors hereof and, upon request of the Vendors, either assign that right to the Vendors or, if the Vendors so direct, the Purchaser, the Company or the Subsidiaries will at the

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	discretion and cost of the Vendors, pursue the said right of recovery and account to the Vendors for any monies or other property recovered.
8.13	No claim shall be made against the Vendors in respect of any warranty, representation, indemnity, covenant, undertaking, liability under any statute or otherwise arising out of, or in connection with, the sale of the Instruments, except where the same is expressly contained in the Warranties or otherwise in this Agreement and the Purchaser confirms that it has only relied on the warranties, representations, indemnities , covenants, undertakings, liabilities expressly contained in the Warranties or in this Agreement.
8.14	The remedies provided to the Purchaser under this Agreement shall be exclusive and hence it is specifically agreed that the Vendors shall only be liable under the specific provisions hereunder and not under any statute including the Swedish Sale of Goods Act.
9.	COSTS AND EXPENSES
	Except as expressly otherwise provided herein, the Vendors and the Purchaser, respectively, shall bear their own costs and expenses incurred in connection with pursuing or consummating this Agreement and the transactions contemplated herein whether or not such transactions shall be completed, including, without limitation, all fees of its legal advisors, accountants and other advisors as well as any broker’s or finder’s fees.
10.	CONFIDENTIALITY
	The Vendors and the Purchaser undertake not to disclose the content of this Agreement or any other information, whether written or oral, including, without limitation, financial information, trade secrets, customer lists and other proprietary business information, regarding the Company or the Subsidiaries, which information is not known to the general public, unless (i) required to do so by law or stock exchange recommendations or regulations or (ii) such disclosure has been consented to by the Vendors or the Purchaser, as the case may be.

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	If this Agreement is terminated or becomes null and void, irrespective of the reason therefore, the confidentiality undertakings set out above shall nevertheless continue to apply to all such information and the Parties undertake not to use any such information for any purpose whatsoever and to return or destroy (such destruction to be confirmed in writing to the other Party) all documents received from the other Party.
11.	ANNOUNCEMENTS
	The Parties shall mutually determine the date and the form of any announcement of the Purchaser’s acquisition of the Instruments except as may be required by law or stock exchange recommendations or regulations in which case such Party undertakes to inform the other Party in advance in writing.
12.	ASSIGNMENTS
	This Agreement shall be binding upon, and inure to the benefit of the Parties and their respective successors and assignees but shall not be assignable by any of the Parties without the prior written consent of the other Party, except as set forth in this Section 12.
	Any affiliate of the Purchaser shall be allowed to substitute for the Purchaser in the Purchaser’s rights and obligations under this Agreement at any time. Substitution prior to Completion may only occur provided that the Purchaser shall have notified the Vendors in writing in advance of such substitution and have furnished a guarantee for the proper fulfilment of the substituting affiliate’s obligations hereunder and the Vendors shall have approved the said substitution in writing prior to the substitution date, which approval shall not be unreasonably withheld.
13.	ENTIRE AGREEMENT AND AMENDMENTS
13.1	This Agreement constitutes the entire understanding of the Parties and supersedes all prior agreements, covenants, arrangements, communications, representations or warranties, whether oral or written,

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	by any officer, employee, representative or advisor of either of the Parties, the Company or the Subsidiaries.
13.2	This Agreement may only be amended by an instrument in writing duly executed by the Parties. No change, termination or modification of any of the provisions of this Agreement shall be binding on the Parties, unless made in writing in accordance with this Section 13.2.
14.	NOTICES
	All notices, consents and other communications required or permitted under this Agreement shall be made in writing and be deemed to have been duly given by the Parties if addressed and delivered by registered mail to the addresses set forth below or to such other addresses as may be given by written notice in accordance with this Section 14.

If to the Vendors:

EQT II BV
Strawinskylaan 1159
1077XX Amsterdam
the Netherlands

with a copy to:

Advokatfirman Hammarskiöld & Co
Att: Peder Hammarskiöld
Box 2278
103 17 Stockholm, Sweden

If to the Purchaser:

Brady Corporation
Att: Roger Mair, Director Legal and Risk Management
6555 West Good Hope Road
Milwaukee, WI 53223
USA

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with a copy to:

Baker & McKenzie Advokatbyrå KB
Att: Advokat Leif Gustafsson
Linnegatan 18 P.O Box 5719
114 87 Stockholm, Sweden

15.	INVALIDITY
	If any term or provision in this Agreement shall be held to be illegal or unenforceable, in whole or in part, under any enactment or rule of law, such term or provision or part thereof shall to that extent be deemed not to form a part of this Agreement but the enforceability of the remainder of this Agreement shall not be affected.
16.	WAIVER
	No waiver by any of the Parties of any of the requirements hereof or of any of its rights hereunder shall have effect unless given in writing and signed by the duly authorised representatives of the other Parties.
17.	GOVERNING LAW AND DISPUTES
17.1	This Agreement shall be governed by and construed in accordance with the laws of Sweden.
17.2	Any dispute, controversy or claim arising out of or in connection with this Agreement, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce.
17.3	The place of arbitration shall be Stockholm, Sweden. The language to be used in the arbitration proceedings shall be English.

The Parties hereto have executed this Agreement on the day and year first written above in 8 original copies, of which the Parties hereto have taken one each.

Stockholm on 7 April 2006
EQT II BV for itself and as representative of the EQT Investors	BRADY GMBH
By power of attorney
/s/ Sjätte AP-Fonden	/s/ Frank M. Jaehnert
	BRADY CORPORATION guarantees the undertakings made by BRADY GMBH under this Agreement as for its own debt
	/s/ Frank M. Jaehnert
SJÄTTE AP-FONDEN	ENKLAVEN AB
By power of attorney
/s/ Sjätte AP-Fonden	/s/ Enklaven AB
Jan-Olov Witte	Kaj Thorén
/s/ Jan-Olov Witte	/s/ Kaj Thorén
Per Weijke
/s/ Per Weijke

EX-31.1

EXHIBIT 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

     I, Frank M. Jaehnert, certify that:

     (1) I have reviewed this quarterly report on Form 10-Q of Brady Corporation;

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

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

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

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

     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: May 30, 2006

/s/ FRANK M. JAEHNERT

Frank M. Jaehnert

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, David Mathieson, certify that:

     (1) I have reviewed this quarterly report on Form 10-Q of Brady Corporation;

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

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

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

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

     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: May 30, 2006

/s/ DAVID MATHIESON

David Mathieson

Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

SECTION 1350 CERTIFICATION

     Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Brady Corporation (the “Company”) certifies to his knowledge that:

     (1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended April 30, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in that Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company.

Date: May 30, 2006

/s/ FRANK M. JAEHNERT

Frank M. Jaehnert

President and Chief Executive Officer

     A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

EXHIBIT 32.2

SECTION 1350 CERTIFICATION

     Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Brady Corporation (the “Company”) certifies to his knowledge that:

     (1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended April 30, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in that Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company.

Date: May 30, 2006

/s/ DAVID MATHIESON

David Mathieson

Vice President and Chief Financial Officer

     A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.