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\n UNITED STATES SECURITIES AND\n EXCHANGE COMMISSION\n
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\n Washington, D.C.\n 20549\n
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\n\n
\n Form 10-K\n
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\n\n\n\n\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
   
\n
\n þ\n
\n		\n \n\n ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE\n SECURITIES EXCHANGE ACT OF 1934\n
\n \n\n \n\n For the fiscal year ended\n July 31, 2006\n
\n
\n OR\n
\n
\n
\n o\n
\n		\n \n\n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE\n SECURITIES EXCHANGE ACT OF 1934\n
\n \n\n \n\n For the transition period\n from          \n to\n \n
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\n Commission file number 1-14959\n
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\n\n
\n BRADY CORPORATION\n
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\n (Exact name of registrant as\n specified in charter)\n
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\n\n\n\n\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n
   
\n Wisconsin\n\n \n\n 39-0178960\n
\n (State or other jurisdiction\n of
\n incorporation or organization)\n		\n \n\n (IRS Employer Identification\n No.)\n \n
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\n 6555 West Good Hope Road,\n
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\n Milwaukee, WI 53223\n
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\n (Address of principal executive\n offices) (Zip Code)\n
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\n (414) 358-6600\n
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\n (Registrant’s telephone\n number, including area code)\n
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\n Securities registered pursuant to Section 12(b) of the\n Act:\n
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\n\n\n\n\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
   
\n
\n Title of each class\n
\n		\n \n\n
\n Name of each exchange on which\n registered\n
\n
 \n
\n Class A Nonvoting Common\n Stock, Par Value $.01 per share\n\n \n\n New York Stock\n Exchange\n \n
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\n Securities registered pursuant to Section 12(g) of the\n Act:\n
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\n None\n
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\n\n
\n Indicate by check mark if the registrant is a well-known\n seasoned issuer, as defined in Rule 405 of the Securities\n Act.  Yes þ     No o\n \n
\n\n
 
\n\n
\n Indicate by check mark if the registrant is not required to file\n reports pursuant to Section 13 or Section 15(d) of the\n Act.  Yes o     No þ\n \n
\n\n
 
\n\n
\n Indicate by check mark whether the registrant (1) has filed\n all reports required to be filed by Section 13 or 15(d) of\n the Securities Exchange Act of 1934 during the preceding\n 12 months (or for such shorter period that the registrant\n was required to file such reports), and (2) has been\n subject to such filing requirements for the past\n 90 days.  Yes þ     No o\n \n
\n\n
 
\n\n
\n Indicate by check mark if disclosure of delinquent filers\n pursuant to Item 405 of\n Regulation S-K\n is not contained herein, and will not be contained, to the best\n of the registrant’s knowledge, in definitive proxy or\n information statements incorporated by reference in\n Part III of this\n Form 10-K\n or any amendment to this\n Form 10-K.  þ\n \n
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\n\n
\n Indicate by check mark whether the registrant is a large\n accelerated filer, an accelerated filer, or a non-accelerated\n filer. See definition of “accelerated filer and large\n accelerated filer” in\n Rule 12b-2\n of the Exchange Act. (Check one):\n
\n\n
 
\n\n
\n Large accelerated\n filer þ          \n Accelerated\n filer o          Non-accelerated\n filer o\n \n
\n\n
 
\n\n
\n Indicate by check mark whether the registrant is a shell company\n (as defined in\n Rule 12b-2\n of the\n Act).  Yes o     No þ\n \n
\n\n
 
\n\n
\n The aggregate market value of the non-voting common stock held\n by non-affiliates of the registrant as of January 31, 2006\n was approximately $1,652,282,432 (based on closing sale price of\n $39.77 per share on that date as reported for the New York\n Stock Exchange). As of September 29, 2006, there were\n outstanding 50,192,742 shares of Class A Nonvoting\n Common Stock (the “Class A Common Stock”), and\n 3,538,628 shares of Class B Common Stock. The\n Class B Common Stock, all of which is held by affiliates of\n the registrant, is the only voting stock.\n
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Table of Contents

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\n\n INDEX\n
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\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
       
\n \n\n \n\n \n\n \n\n Page\n
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\n PART I\n
\n
\n\n\n\n\n \n\n Business\n\n \n\n I-1\n \n
\n\n \n\n\n \n\n General Development\n of Business\n\n \n\n I-1\n \n
\n\n \n\n\n \n\n Financial\n Information About Industry Segments\n\n \n\n I-1\n \n
\n\n \n\n\n \n\n Narrative\n Description of Business:\n\n \n\n I-1\n \n
\n\n \n\n\n \n\n Overview\n\n \n\n I-1\n \n
\n\n \n\n\n \n\n Competitive\n Strengths\n\n \n\n I-1\n \n
\n\n \n\n\n \n\n Key\n Strategies\n\n \n\n I-3\n \n
\n\n \n\n\n \n\n Products\n\n \n\n I-4\n \n
\n\n \n\n\n \n\n Marketing and\n Sales\n\n \n\n I-5\n \n
\n\n \n\n\n \n\n Brands\n\n \n\n I-6\n \n
\n\n \n\n\n \n\n Manufacturing\n Process and Raw Materials\n\n \n\n I-6\n \n
\n\n \n\n\n \n\n Technology and\n Product Development\n\n \n\n I-7\n \n
\n\n \n\n\n \n\n International\n Operations\n\n \n\n I-7\n \n
\n\n \n\n\n \n\n Competition\n\n \n\n I-7\n \n
\n\n \n\n\n \n\n Backlog\n\n \n\n I-8\n \n
\n\n \n\n\n \n\n Environment\n\n \n\n I-8\n \n
\n\n \n\n\n \n\n Employees\n\n \n\n I-8\n \n
\n\n \n\n\n \n\n Acquisitions\n\n \n\n I-8\n \n
\n\n \n\n\n \n\n Financial\n Information About Foreign and Domestic Operations and Export\n Sales\n\n \n\n I-8\n \n
\n\n \n\n\n \n\n Information\n Available on the Internet\n\n \n\n I-8\n \n
\n\n\n\n\n \n\n Risk\n Factors\n\n \n\n I-9\n \n
\n\n\n\n\n \n\n Unresolved Staff\n Comments\n\n \n\n I-12\n \n
\n\n\n\n\n \n\n Properties\n\n \n\n I-12\n \n
\n\n\n\n\n \n\n Legal\n Proceedings\n\n \n\n I-12\n \n
\n\n\n\n\n \n\n Submission of\n Matters to a Vote of Security Holders\n\n \n\n I-12\n \n
\n \n
\n\n
\n\n\n\n\n \n\n Market for the\n Registrant’s Common Equity, Related Stockholder Matters and\n Issuer Purchases of Equity Securities\n\n \n\n II-1\n \n
\n\n\n\n\n \n\n Selected Financial\n Data\n\n \n\n II-2\n \n
\n\n\n\n\n \n\n Management’s\n Discussion and Analysis of Financial Condition and Results of\n Operations\n\n \n\n II-3\n \n
\n\n\n\n\n \n\n Quantitative and\n Qualitative Disclosures About Market Risk\n\n \n\n II-13\n \n
\n\n\n\n\n \n\n Financial\n Statements and Supplementary Data\n\n \n\n II-14\n \n
\n\n\n\n\n \n\n Changes In and\n Disagreements With Accountants on Accounting and Financial\n Disclosure\n\n \n\n II-47\n \n
\n\n\n\n\n \n\n Controls and\n Procedures\n\n \n\n II-47\n \n
\n\n\n\n\n \n\n Other\n Information\n\n \n\n II-49\n \n
\n \n
\n\n
\n\n\n\n\n \n\n Directors and\n Executive Officers of the Registrant\n\n \n\n III-1\n \n
\n\n\n\n\n \n\n Executive\n Compensation\n\n \n\n III-5\n \n
\n\n \n\n\n \n\n Summary\n Compensation Table\n\n \n\n III-5\n \n
\n\n \n\n\n \n\n Stock\n Options\n\n \n\n III-6\n \n
\n\n \n\n\n \n\n Common Stock Price\n Performance Graph\n\n \n\n III-8\n \n
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\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
       
\n \n\n \n\n \n\n \n\n Page\n
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\n\n \n\n\n \n\n Compensation of\n Directors\n\n \n\n III-8\n \n
\n\n \n\n\n \n\n Termination of\n Employment and Change in Control Arrangements\n\n \n\n III-8\n \n
\n\n \n\n\n \n\n Compensation\n Committee Interlocks and Insider Participation\n\n \n\n III-9\n \n
\n\n \n\n\n \n\n Funded Retirement\n and 401(k) Plans\n\n \n\n III-9\n \n
\n\n \n\n\n \n\n Deferred\n Compensation Arrangements\n\n \n\n III-9\n \n
\n\n \n\n\n \n\n Compensation\n Committee Report on Executive Compensation\n\n \n\n III-10\n \n
\n\n\n\n\n \n\n Security Ownership\n of Certain Beneficial Owners and Management and Related\n Stockholder Matters\n\n \n\n III-12\n \n
\n\n\n\n\n \n\n Certain\n Relationships and Related Transactions\n\n \n\n III-14\n \n
\n\n\n\n\n \n\n Principal\n Accounting Fees and Services\n\n \n\n III-15\n \n
\n \n
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\n\n\n\n\n \n\n Exhibits, Financial\n Statement Schedules\n\n \n\n IV-1\n \n
\n\n\n \n\n IV-5\n \n
 Revolving Credit Facility Credit Agreement
 Subsidiaries
 Consent of Deloitte & Touche LLP
 Certification
 Certification
 Section 1350 Certification
 Section 1350 Certification
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\n\n PART I\n
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\n Brady Corporation and Subsidiaries are referred to herein as the\n “Company,” “Brady,” or “we”.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 1.  \n\n Business\n
\n\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (a)  \n\n General\n Development of Business\n
\n\n
 
\n\n
\n The Company, a Wisconsin corporation founded in 1914, currently\n operates 65 manufacturing or distribution facilities in\n Australia, Belgium, Brazil, Canada, China, Denmark, France,\n Germany, India, Italy, Korea, Malaysia, Mexico, Norway,\n Singapore, Slovakia, Sweden, Thailand, the United Kingdom and\n the United States. The Company also sells through subsidiaries\n or sales offices in these countries, with additional sales\n through a dedicated team of international sales representatives\n in Hong Kong, Japan, the Netherlands, the Philippines, Spain,\n Taiwan and Turkey. The Company further markets its products to\n parts of Eastern Europe, the Middle East, Africa and Russia. The\n Company’s corporate headquarters are located at\n 6555 West Good Hope Road, Milwaukee, Wisconsin 53223, and\n the telephone number is\n (414) 358-6600.\n The Company’s Internet address is\n http://www.bradycorp.com.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (b) \n\n Financial\n Information About Industry Segments\n
\n\n
 
\n\n
\n The information required by this Item is provided in Note 7\n of the Notes to Consolidated Financial Statements contained in\n Item 8 — Financial Statements and Supplementary\n Data.\n
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\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (c) \n\n Narrative\n Description of Business\n
\n\n\n
 
\n\n
\n\n Overview\n
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\n\n
\n Brady Corporation is an international manufacturer and marketer\n of identification solutions and specialty products which\n identify and protect premises, products and people. Brady’s\n core capabilities in manufacturing, channel management, printing\n systems, precision engineering and materials expertise make it a\n leading supplier to the Maintenance, Repair and Operations\n (“MRO”) market and to the Original Equipment\n Manufacturing (“OEM”) market. The Company’s\n ability to provide customers with a broad range of\n differentiated solutions both through the organic development of\n it’s existing business and the acquisition of competing,\n complementary and adjacent businesses, its commitment to quality\n and service, its global footprint and its diversified sales\n channels have made it a world leader in its markets.\n
\n\n
 
\n\n
\n Brady manufactures and markets a wide range of products for use\n in diverse applications. Major product lines provided to the MRO\n market include facility identification, safety and complementary\n products, wire identification products and people identification\n products. Major product lines provided to the OEM market include\n high-performance identification products for product\n identification, work in process identification, bar code labels\n and precision die-cut components for mobile telecommunications\n devices, hard disk drives, medical devices and supplies and\n automotive electronics. Products are marketed through multiple\n channels, including distribution,\n business-to-business\n direct marketing and a direct sales force.\n
\n\n
 
\n\n
\n The need for the Company’s products is driven, in part, by\n customer specifications, by regulatory compliance requirements\n imposed by agencies such as the Occupational Safety &\n Health Administration (“OSHA”) and the Environmental\n Protection Agency (“EPA”) in the United States and\n other regulatory agencies around the world, or by the need to\n identify and track assets or to identify, direct, warn, inform,\n train and protect people or products. Brady serves customers in\n general manufacturing, maintenance and safety, process\n industries, construction, electrical, telecommunications,\n electronics, laboratory/healthcare, airline/transportation,\n security/brand education, governmental, public utility, and a\n variety of other industries. The Company has a broad customer\n base, with the largest customer representing approximately 7% of\n net sales.\n
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\n\n
\n\n Competitive\n Strengths\n
\n\n
 
\n\n
\n Brady’s vision is to be either first or second in terms of\n market share in every market served. The Company’s primary\n growth objectives are to build upon its leading market\n positions, to improve performance and profitability\n
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\n and to expand existing activities through a multi-prong approach\n that incorporates both organic growth, new product development\n and acquisitions.\n
\n\n
 
\n\n
\n The Company believes the following competitive strengths will\n allow it to achieve its strategy:\n
\n\n
 
\n\n
\n Leader in Fragmented Markets.  Brady competes\n in niche markets where it believes it is often the leading\n supplier with the manufacturing expertise, infrastructure,\n channels and sales resources necessary to provide the required\n product or comprehensive solution. For example, the Company\n believes it is the leading supplier of wire identification\n products to the North American MRO market and of precision\n die-cut components to the mobile telecommunications market. The\n Company believes its leadership positions make it a preferred\n supplier to many of its customers and enables it to be\n successful in its markets, which are generally fragmented and\n populated with smaller or regional competitors.\n
\n\n
 
\n\n
\n Differentiated Solutions and Commitment to\n Innovation.  The Company believes its\n sophisticated engineering and manufacturing capabilities, as\n well as outstanding materials expertise, give it a competitive\n advantage in supplying customized or high specification product\n solutions to meet individualized customer needs. The Company has\n been successful in identifying and incorporating innovative\n technologies to create integrated and precise solutions.\n Additionally, it is able to use its materials expertise and its\n investment in research and development to provide unique\n products to meet the demands of end-customers in new, faster\n growing markets adjacent to our traditional markets, such as\n laboratory identification. Brady’s commitment to product\n innovation is reflected in its research and development efforts\n that include approximately 200 employees primarily dedicated to\n research and development activities mainly in the United States,\n but also in Belgium, Germany, Singapore and China.\n
\n\n
 
\n\n
\n Operational Excellence.  Brady has achieved\n continuous improvement in operational productivity. It employs\n well-developed problem solving techniques and invests in\n state-of-the-art\n equipment to capture efficiencies. The Company is largely\n vertically integrated and designs, manufactures and markets a\n majority of the products it sells. The Company has invested\n heavily over the last several years to centralize its North\n American distribution network and to standardize its Systems,\n Applications, and Products for data processing (“SAP”)\n software applications. It has consistently generated positive\n cash flow from operations by continually reducing costs and\n optimizing inventory management and the efficiency of its\n manufacturing operations. In addition, the Company’s focus\n on operational excellence has helped it deliver superior EBITDA\n (earnings before interest, taxes, depreciation and amortization)\n as a percentage of sales and returns on invested capital as\n compared to similar companies in its markets.\n
\n\n
 
\n\n
\n Broad Customer Base and Geographic\n Diversity.  Brady believes its global\n infrastructure mitigates the impact of an economic downturn on\n our business in any particular country or region, enables it to\n act as a primary supplier to many of its global customers and\n provides a solid platform for further expansion. Sales from\n international operations increased from 44.4% of net sales in\n fiscal 2000 to 57.6% of net sales in fiscal 2006. The\n Company’s global presence benefits many of its customers\n who seek a single or primary supplier to meet their global\n design and manufacturing requirements. Brady has over 500,000\n end-customers that operate in over a dozen industries.\n
\n\n
 
\n\n
\n Disciplined Acquisition and Integration\n Strategy.  The Company has a dedicated team of\n experienced professionals that employ a disciplined acquisition\n strategy to acquire companies that yield sustainable shareholder\n value. It applies strict financial standards to evaluate all\n acquisitions using a model focused on return on invested\n capital. Since 1996, the Company has acquired and integrated\n 44 companies to expand geographic and market footprint,\n increase market share and add new technological capabilities.\n Brady believes its successful acquisition track record\n demonstrates its ability to identify and integrate acquisitions\n of companies that meet its selective criteria.\n
\n\n
 
\n\n
\n Channel Diversity and Strength.  Brady utilizes\n a wide range of channels to reach customers across a broad array\n of industries. It employs direct marketing expertise to meet its\n customers’ need for convenience. The Company also has\n long-standing relationships with, and is a preferred supplier\n to, many of its largest distributors. In addition, the Company\n employs a global sales team to support both distributors and end\n users and to serve their productivity, tracking and safety\n requirements. The Company believes its strong brands and\n reputation for quality,\n
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\n innovation and rapid delivery contribute to the popularity of\n its products with distributors, OEMs, resellers and other\n customers.\n
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\n\n
\n Deep and Talented Team.  The Company believes\n that its management team has substantial depth in critical\n operational areas and has demonstrated success in reducing\n costs, integrating acquisitions and improving processes through\n economic cycles. The international experience of its management\n team and its commitment to developing strong management teams in\n each of the local operations is a competitive advantage. In\n addition, the Company believes it employs a world-class team of\n people and dedicates significant resources to recruiting people\n committed to excellence and investing in their potential. The\n depth and breadth of knowledge within the entire organization\n strengthens relationships with its customers and suppliers and\n enables the Company to provide its customers with a high level\n of product and industry expertise.\n
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\n\n
\n\n Key\n Strategies\n
\n\n
 
\n\n
\n The Company’s primary growth objectives are to build upon\n its leading market positions, to improve its performance and\n profitability and to expand its existing activities through a\n multi-prong strategic approach that incorporates both organic\n growth and acquisitions. The Company’s key strategies\n include:\n
\n\n
 
\n\n
\n Capitalize on Growing Niche Markets.  The\n Company seeks to leverage its premier reputation, global\n footprint and strength in manufacturing and materials expertise\n to capitalize on growth in existing niche markets. Growth\n prospects in the MRO market are driven primarily by the general\n health of regional economies, changes in legal and regulatory\n compliance requirements and the increased need of customers to\n identify their assets and protect their employees. Demand for\n OEM products is primarily driven by the strength of various\n electronics markets, such as mobile telecommunications, disk\n drives and computers, as well as technological advances in these\n industries.\n
\n\n
 
\n\n
\n Increase Market Share.  Many Brady markets are\n fragmented and populated with smaller or regional competitors.\n The Company seeks to leverage its investment in new product\n development and its global sales, operations and distribution\n capabilities to increase market share, as well as expand its\n distribution channels to capture new customers. The Company\n employs a dedicated and experienced sales team that works\n closely with existing customers to identify and capture new\n opportunities. In addition, Brady plans to leverage the strength\n of its brands, the quality of its products and its long-standing\n relationships with key customers to build upon current market\n positions.\n
\n\n
 
\n\n
\n Enter New Markets.  The Company looks to\n leverage its quality products, global infrastructure, channel\n relationships and selling capabilities to effectively enter new\n markets, many of which are fragmented and populated with smaller\n competitors. For example, Brady is expanding its precision\n die-cut capabilities into the medical market and its\n identification solutions into the laboratory identification\n market. Through product innovation and development activities,\n Brady seeks to introduce new technologies and differentiated\n products as well as seek additional applications for products in\n existing and new markets. The Company reviews its product\n portfolio on a regular basis through its standardized review\n process in order to identify new product opportunities.\n
\n\n
 
\n\n
\n Expand Geographically.  Brady’s long-term\n strategy involves the pursuit of growth opportunities in a\n number of markets outside of the United States. The Company is\n committed to low-cost manufacturing and to being in close\n proximity to its customers. Brady currently operates in 28\n countries and employs approximately 3,600 people in developing\n regions. Brady has made strategic acquisitions and has invested\n heavily in its global infrastructure and flexible manufacturing\n capacity in order to follow its customers into new geographies.\n Brady’s regional management structure is a key component in\n effectively entering and competing in new geographies.\n
\n\n
 
\n\n
\n Pursue Strategic Acquisitions.  The Company\n intends to continue to make complementary strategic acquisitions\n to further its goal of strengthening its market positions and\n entering new markets and geographies. Brady works to drive\n substantial value creation through capitalizing on its\n acquisition and integration acumen.\n
\n\n
 
\n\n
\n Improve Profitability.  The Company plans to\n continue its focus on improving operating efficiency, reducing\n costs, and improving productivity and return on assets. In\n addition, each acquisition the Company makes provides additional\n opportunities to improve its performance as well as the\n performance of the acquired company. The Company often continues\n to realize synergies with acquired companies several years after\n the acquisition date.\n
\n\n

\n
\n I-3\n

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\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n Products\n
\n\n
 
\n\n
\n The Company is largely vertically integrated; designing,\n developing, coating and producing most of its identification\n signs, labels and printing systems. Brady materials are\n manufactured out of a variety of films, predominantly coated by\n Brady, for applications in the following markets: electronic,\n industrial, electrical, utility, laboratory, safety and\n security. Brady also manufactures specialty tapes and related\n products that are characterized by high-performance printable\n top coats and adhesives, most of which are formulated by the\n Company, to meet high-tolerance requirements of the industries\n in which they are used.\n
\n\n
 
\n\n
\n The Company’s stock and custom products consist of over\n 500,000 stock-keeping units, including complete identification\n systems used to create a safer work environment, improve\n operating efficiencies, and increase the utilization of assets\n through tracking and inventory process controls. Major product\n categories include: facility and safety signs and identification\n tags and markers, pipe and valve markers, asset identification\n tags, lockout/tagout products, security and traffic control\n products, and printing systems and software for creating safety\n and regulatory software, wire and cable markers,\n high-performance labels, laboratory identification labels and\n printing systems, stand-alone printing systems, bar-code and\n other software, automatic identification and data collection\n systems, personal identification products, and precision die-cut\n solutions.\n
\n\n
 
\n\n
\n Some of the Company’s stock products were originally\n designed, developed and manufactured as custom products for a\n specific customer. However, such products have frequently\n created wide industry acceptance and have become stock items\n offered by the Company through mail order and distributor sales.\n The Company’s most significant types of products are\n described below.\n
\n\n
 
\n\n
\n\n MRO\n Market Products\n
\n\n
 
\n\n
\n\n • Facility\n Identification\n
\n\n
 
\n\n
\n Informational signs and printers for use in a broad range\n of industrial, commercial, governmental and institutional\n applications. These signs are either self-adhesive or\n mechanically mounted, designed for both indoor and outdoor use\n and are manufactured to meet standards issued by the National\n Safety Council, OSHA and a variety of industry associations in\n the United States and abroad. The Company’s sign products\n include admittance, directional and exit signs; electrical\n hazard warnings; energy conservation messages; fire protection\n and fire equipment signs; hazardous waste labels; hazardous and\n toxic material warning signs; transformers and power pole\n markers; personal hazard warnings; housekeeping and operational\n warnings; pictograms; radiation and laser signs; safety\n practices signs and regulatory markings; photo luminescent\n (glow-in-the-dark)\n tapes.\n
\n\n
 
\n\n
\n Warehouse identification products including self-adhesive\n and self-aligning die-cut numbers and letters, labels, and tags\n used to locate and identify inventory in storage facilities such\n as warehouses, factories, stockrooms and other industrial\n facilities.\n
\n\n
 
\n\n
\n Pipe markers and valve tags including plastic or metal,\n self-adhesive or mechanically applied, stock or custom-designed\n pieces for the identification of pipes and control valves in the\n mechanical contractor and process industry markets. These\n products are designed to help identify and provide information\n as to the contents, direction of flow and special hazardous\n properties of materials contained in piping systems, and to\n facilitate repair or maintenance of the systems.\n
\n\n
 
\n\n
\n Asset-identification products that are an important part\n of an effective asset-management program in a wide variety of\n markets. These include self-adhesive or mechanically mounted\n labels or tags made of aluminum, brass, stainless steel,\n polycarbonate, vinyl, polyester, mylar and paper. These products\n are also offered in tamper-evident varieties, and can be custom\n designed to ensure brand protection from counterfeiting.\n
\n\n
 
\n\n
\n\n • Safety\n and Complementary Products\n
\n\n
 
\n\n
\n Lockout/tagout products — under OSHA\n regulations, all energy sources must be “locked out”\n while machines are being serviced or maintained to prevent\n accidental engagement and injury. The Company’s products\n allow its customers to comply with these regulations and to\n ensure worker safety for a wide variety of energy- and\n fluid-transmission systems and operating machinery.\n
\n\n

\n
\n I-4\n

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\n

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\n\n

\n\n
\n Security and traffic control products including a variety\n of security seals, parking permits and wristbands designed for\n visitor control in financial, governmental, educational and\n commercial facilities including meeting and convention sites.\n The Company also offers a wide variety of traffic control\n devices including traffic signs, directional and warning signs,\n parking tags and permits, barriers, cones and other products\n including barricading, visual warning systems, floor-marking\n products, safety badges, and first aid cabinets/kits, among\n others.\n
\n\n
 
\n\n
\n\n • Wire\n and Cable Identification\n
\n\n
 
\n\n
\n Brady manufactures a broad range of wire and cable-marking\n products, including labels, sleeves, software that allows\n customers to create their own labels, and printers to print and\n apply them. These products mark and identify wires, cables and\n their termination points to facilitate manufacturing,\n construction, repair or maintenance of equipment, and data\n communication and electrical wiring systems used in virtually\n every industrial, power and communication market.\n
\n\n
 
\n\n
\n\n • People\n Identification\n
\n\n
 
\n\n
\n Identification systems and products including photo ID card\n systems that combine biometrics, digital imaging and other\n technologies to positively identify people; self-expiring name\n tags which make use of migratory ink technology which, upon\n activation, starts a timed process resulting in an altered\n message, color or design to indicate expiration; and ID\n accessories including lanyards, badge holders, badge reels and\n attachments, as well as photo identification kits.\n
\n\n
 
\n\n
\n\n OEM\n Market Products\n
\n\n
 
\n\n
\n\n • High\n Performance Identification\n
\n\n
 
\n\n
\n Brady produces a complete line of label materials and printing\n systems to meet customers’ needs for identification\n requirements for product identification and bar coding that\n perform under harsh or demanding conditions, such as extreme\n temperatures, or environmental or chemical exposure. Brady\n prints stock and custom labels and also sells unprinted\n materials to enable customers to print their own labels.\n
\n\n
 
\n\n
\n\n • Precision\n Die-Cut Parts\n
\n\n
 
\n\n
\n The Company develops customized precision die-cut products that\n are used to seal, insulate, protect, shield or provide other\n mechanical performance properties in the assembly of electronic,\n telecommunications and other equipment, including cellular\n phones, personal data assistants, computer hard disk drives,\n computers and other devices. Solutions not only include the\n materials and converting, but also automatic placement and other\n value-added services. The Company also provides converting\n services to the medical market for materials used in in-vitro\n diagnostic kits and patient monitoring.\n
\n\n
 
\n\n
\n\n Other\n Products\n
\n\n
 
\n\n
\n The Company also designs and produces software for barcoding and\n inspection automation, industrial thermal-transfer printers and\n other electromechanical devices to serve the growing and\n specialized needs of customers in a wide variety of markets.\n Industrial labeling systems, software, tapes, ribbons and label\n stocks provide customers with the resources and flexibility to\n produce signs and labels on demand at their site. The Company\n also offers poster printers, laminators and supplies to\n education and training markets.\n
\n\n
 
\n\n
\n\n Marketing\n and Sales\n
\n\n
 
\n\n
\n Brady seeks to offer high quality products with rapid response\n and superior service so that it can provide solutions to\n customers that are better, faster and more economical than those\n available from the Company’s competitors. The Company\n markets and sells its products domestically and internationally\n through multiple channels including direct sales, distributors,\n mail-order-catalog marketing, retail, and electronic access\n through the Internet. The Company has long-standing\n relationships with a broad range of electrical, safety,\n industrial and other\n
\n\n

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\n I-5\n

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\n\n

\n\n
\n domestic and international distributors. The Company’s\n sales force seeks to establish and foster ongoing relationships\n with the end-users and distributors by providing technical\n application and product expertise.\n
\n\n
 
\n\n
\n The Company also direct markets certain products and those of\n other manufacturers by catalog sales and outbound telemarketing\n in both domestic and international markets. Such products\n include industrial and facility identification products, safety\n and regulatory-compliance products and original equipment\n manufacturer component products, among others. Catalog\n operations are conducted through offices in the United States,\n Australia, Brazil, Canada, England, France, Germany and Italy,\n and include foreign-language catalogs.\n
\n\n
 
\n\n
\n The Company’s products are sold in a wide variety of\n markets within the larger MRO and OEM markets, including\n electrical, electronic, telecommunications, governmental, public\n utility, commercial building, computer disk drive, construction,\n general manufacturing, laboratory, transportation equipment and\n education.\n
\n\n
 
\n\n
\n\n Brands\n
\n\n
 
\n\n
\n The Company’s products go to market under a variety of\n brand names. The Brady brand includes high-performance labels,\n printers, software, safety and facility identification products,\n lock-out/tag-out products, and precision die-cut parts and\n specialty materials. Other die-cut materials are marketed as\n Brandon, Balkhausen, ID Technologies, Tradex Converting or\n Daewon products. Safety and facility identification products are\n also marketed under the Safety Signs Service brand, with some\n lockout/tagout products offered under the Prinzing brand. In\n addition, safety identification is marketed under the\n Electromark brand; poster printers for education and government\n markets are offered under the Varitronics name brand; direct\n marketing safety and facility identification products are\n offered under the Seton, Emedco, Signals, Safetyshop and\n Personnel Concepts names; security and identification badges and\n systems are included in the Temtec, B.I.G.,\n Indenticard/Identicam, STOPware, J.A.M. Plastics, CIPI,\n PromoVision, and Quo-Luck brands; hand-held regulatory\n documentation systems are available under the Tiscor name; and\n automatic identification and bar code software is offered under\n the Teklynx brand.\n
\n\n
 
\n\n
\n\n Manufacturing\n Process and Raw Materials\n
\n\n
 
\n\n
\n The Company manufactures the majority of the products it sells,\n while purchasing certain items from other manufacturers.\n Products manufactured by the Company generally require a high\n degree of precision and the application of adhesives with\n chemical and physical properties suited for specific uses. The\n Company’s manufacturing processes include compounding,\n coating, converting, software development and printer design and\n assembly. The compounding process involves the mixing of\n chemical batches for primers, top coatings and adhesives. The\n coatings and adhesives are applied to a wide variety of\n materials including polyester, polyimide, cloth, paper, metal\n and metal foil. The converting process may include embossing,\n perforating, laminating, die cutting, slitting, and printing or\n marking the materials as required.\n
\n\n
 
\n\n
\n The Company produces the majority of the pressure sensitive\n materials through an integrated manufacturing process. These\n integrated manufacturing processes permit greater flexibility to\n meet customer needs in product design and manufacture, and an\n improved ability to provide specialized products designed to\n meet the needs of specific applications. Brady’s\n “cellular” manufacturing processes and\n “just-in-time”\n inventory control are designed to attain profitability in small\n orders by emphasizing flexibility and the maximization of assets\n through quick turnaround and delivery, balanced with\n optimization of lot sizes. Most of the Company’s\n manufacturing facilities have received ISO 9001 or 9002\n certification.\n
\n\n
 
\n\n
\n The materials used in the products manufactured by the Company\n consist primarily of plastic sheets and films, paper, metal and\n metal foil, cloth, fiberglass, inks, dyes, adhesives, pigments,\n natural and synthetic rubber, organic chemicals, polymers,\n solvents and electronic components and subassemblies. In\n addition the Company purchases finished products for resale. The\n Company purchases raw materials, components and finished\n products from many suppliers. Generally, the Company is not\n dependent upon any single supplier for most critical base\n materials or components. In some cases, the Company has chosen\n to sole source materials, components or finished items for\n design or cost reasons. In these cases, disruptions in supply\n could have an impact on results for a period of time. In most\n cases, these disruptions would simply require qualification of\n new suppliers and the disruption would be modest. In a few\n cases, the qualification process could be more costly or take a\n longer period of time. In the most\n
\n\n

\n
\n I-6\n

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\n

Table of Contents

\n\n

\n\n
\n dramatic of cases, such as a global shortage of a critical\n material or component, the financial impact could be significant.\n
\n\n
 
\n\n
\n\n Technology\n and Product Development\n
\n\n
 
\n\n
\n The Company focuses its research and development efforts on\n material development, printing systems design and software\n development. Material development involves the application of\n surface chemistry concepts for top coatings and adhesives\n applied to a variety of base materials. Systems design\n integrates materials, embedded software and a variety of\n printing technologies to form a complete solution for customer\n applications or the Company’s own production requirements.\n The Company’s research and development team also supports\n production and marketing efforts by providing application and\n technical expertise.\n
\n\n
 
\n\n
\n The Company possesses patents covering various aspects of\n adhesive chemistry, electronic circuitry, computer-generated\n wire markers, systems for aligning letters and patterns, and\n visually changing paper. Although the Company believes that its\n patents are a significant factor in maintaining market position\n for certain products, technology in the areas covered by many of\n the patents is evolving rapidly and may limit the value of such\n patents. The Company’s business is not dependent on any\n single patent or group of patents.\n
\n\n
 
\n\n
\n The Company conducts much of its research and development\n activities at the Frederic S. Tobey Research and Innovation\n Center (approximately 39,600 sq. ft.) in Milwaukee,\n Wisconsin. The Company spent approximately $30.4 million,\n $25.1 million and $23.0 million in fiscal 2006, 2005,\n and 2004, respectively, on its research and development\n activities. In fiscal 2006, approximately 180 employees were\n engaged in research and development activities for the Company.\n Additional research projects were conducted in Company\n facilities in other locations in the United States, Europe and\n Singapore and under contract with universities, other\n institutions and consultants.\n
\n\n
 
\n\n
\n The Company’s name and its registered trademarks are\n important to each of its business segments. In addition, the\n Company owns other important trademarks applicable to only\n certain of its products.\n
\n\n
 
\n\n
\n\n International\n Operations\n
\n\n
 
\n\n
\n In fiscal 2006, 2005, and 2004, sales from international\n operations accounted for 57.6%, 55.3%, and 55.2%, respectively,\n of the Company’s sales. Its global infrastructure includes\n subsidiaries in Australia, Belgium, Brazil, Canada, China,\n Denmark, France, Germany, Hong Kong, India, Italy, Japan, Korea,\n Luxembourg, Malaysia, Mexico, Norway, Singapore, Slovakia,\n Sweden, Thailand and the United Kingdom. Most of these locations\n manufacture or have the capability to manufacture certain of the\n products they sell. In addition, Brady has sales offices in the\n Netherlands, Philippines, Spain, Taiwan and Turkey. Brady\n further markets its products to parts of Eastern Europe, the\n Middle East, Africa and Russia.\n
\n\n
 
\n\n
\n\n Competition\n
\n\n
 
\n\n
\n The markets for all of the Company’s products are\n competitive. Brady believes that it is one of the leading\n domestic producers of self-adhesive wire markers, safety signs,\n pipe markers, precision die-cut materials and\n bar-code-label-generating software. Brady competes for business\n principally on the basis of production capabilities,\n engineering, and research and development capabilities,\n materials expertise, its global footprint, global account\n management where needed, customer service and price. Product\n quality is determined by factors such as suitability of\n component materials for various applications, adhesive\n properties, graphics quality, durability, product consistency\n and workmanship. Competition in many of its product markets is\n highly fragmented, ranging from smaller companies offering only\n one or a few types of products, to some of the world’s\n major adhesive and electrical product companies offering some\n competing products as part of their overall product lines. A\n number of Brady’s competitors are larger than the Company\n and have greater resources. Notwithstanding the resources of\n these competitors, management believes that Brady provides a\n broader range of identification solutions than any of them, and\n that its global infrastructure is a significant competitive\n advantage in serving large multi-national customers.\n
\n\n

\n
\n I-7\n

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\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n Backlog\n
\n\n
 
\n\n
\n As of July 31, 2006, the amount of the Company’s\n backlog orders believed to be firm was approximately\n $42.3 million. This compares with approximately\n $24.9 million and $23.2 million of backlog orders as\n of July 31, 2005 and 2004, respectively. Average delivery\n time for the Company’s orders varies from one day to one\n month, depending on the type of product, and whether the product\n is stock or custom-designed and manufactured. Average delivery\n time for the direct marketing business can be as low as the same\n day or the next day. The Company’s backlog of\n $42.3 million at July 31, 2006, represents\n approximately 1.75 weeks of the Company’s sales\n guidance for fiscal 2007.\n
\n\n
 
\n\n
\n\n Environment\n
\n\n
 
\n\n
\n At present, the manufacturing processes for our adhesive-based\n products utilize certain evaporative solvents, which, unless\n controlled, would be vented into the atmosphere. Emissions of\n these substances are regulated at the federal, state and local\n levels. We have implemented a number of systems and procedures\n to reduce atmospheric emissions\n and/or to\n recover solvents. Management believes we are substantially in\n compliance with all environmental regulations.\n
\n\n
 
\n\n
\n\n Employees\n
\n\n
 
\n\n
\n As of July 31, 2006, the Company employed approximately\n 7,000 individuals. Upon completing the acquisition of\n Comprehensive Identification Products, Inc. (“CIPI”)\n in August, the number of individuals employed increased to\n approximately 8,000. We have never experienced a material work\n stoppage due to a labor dispute, are not a party to any\n negotiated labor contracts, and consider our relations with\n employees to be excellent. The mix of employees is changing as\n we employ more people in developing countries where wage rates\n are lower and employee turnover tends to be higher than in\n developed countries.\n
\n\n
 
\n\n
\n\n Acquisitions\n
\n\n
 
\n\n
\n Information about the Company’s acquisitions is provided in\n Note 2 of the Notes to Consolidated Financial Statements\n contained in Item 8 — Financial Statements and\n Supplementary Data.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (d) \n\n Financial\n Information About Foreign and Domestic Operations and Export\n Sales\n
\n\n
 
\n\n
\n The information required by this Item is provided in Note 7\n of the Notes to Consolidated Financial Statements contained in\n Item 8 — Financial Statements and Supplementary\n Data.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (e) \n\n Information\n Available on the Internet\n
\n\n
 
\n\n
\n The Company’s Corporate Internet address is\n http://www.bradycorp.com. The Company makes available, free of\n charge, on or through its Internet website copies of its Annual\n Report on\n Form 10-K,\n Quarterly Reports on\n Form 10-Q,\n Current Reports on\n Form 8-K,\n Section 16 reports filed by the Company’s insiders,\n and amendments to all such reports as soon as reasonably\n practicable after such reports are electronically filed with or\n furnished to the SEC. We are not including the information\n contained on or available through our website as part of, or\n incorporating such information by reference into, this Annual\n Report on\n Form 10-K.\n
\n\n

\n
\n I-8\n

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\n

Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 1A.  \n\n Risk\n Factors\n
\n\n
 
\n\n
\n Before making an investment decision with respect to our\n stock, you should carefully consider the risks set forth below\n and all other information contained in this report. If any of\n the events contemplated by the following risks actually occur,\n then our business, financial condition or results of operations\n could be materially adversely affected.\n
\n\n
 
\n\n
\n\n Market\n demand for our products may be susceptible to fluctuations in\n the economy that may cause volatility in our results of\n operations.\n
\n\n
 
\n\n
\n Sales of our products may be susceptible to changes in general\n economic conditions, namely general downturns in the regional\n economies in which we compete. Our business in the MRO market\n tends to vary with the nominal GDP of the local economies in\n which we manufacture and sell. As a result, in periods of\n economic contraction, our business may not grow or may decline.\n In the OEM market, we have been adversely affected by reduced\n demand for our products due to downturns in the global economy\n as this is a more cyclical business than the MRO business. This\n cyclicality can result in higher degrees of volatility in our\n net sales and results of operations. These more volatile markets\n include, but are not limited to, mobile telecommunication\n devices, hard disk drives and electronics in personal computers\n and personal digital assistants.\n
\n\n
 
\n\n
\n\n Our\n current and future success could be impacted by our ability to\n effectively integrate acquired companies and manage our\n growth.\n
\n\n
 
\n\n
\n Our growth has and will continue to place significant demands on\n our management and operational and financial resources. Since\n the beginning of fiscal year 2004, we have acquired\n 19 companies. These recent and future acquisitions will\n require integration of sales and marketing, information\n technology, finance and administrative operations and\n information of the newly acquired business. The successful\n integration of acquisitions will require substantial attention\n from our management and the management of the acquired\n businesses, which could decrease the time they have to serve and\n attract customers. We cannot assure that we will be able to\n successfully integrate these recent or any future acquisitions,\n that these acquisitions will operate profitably or that we will\n be able to achieve the financial or operational success expected\n from the acquisitions. Furthermore, our rapid growth in recent\n periods, our anticipated geographic expansion, and our planned\n expansion through additional acquisitions present challenges to\n maintain the internal control and disclosure control standards\n applicable to public companies under the Sarbanes-Oxley Act of\n 2002. Our financial condition, cash flows and operational\n results could be adversely affected if we do not successfully\n integrate the newly acquired businesses or if our other\n businesses suffer on account of our increased focus on the newly\n acquired businesses.\n
\n\n
 
\n\n
\n\n If we\n fail to develop new products or our customers do not accept the\n new products we develop, our business could be affected\n adversely.\n
\n\n
 
\n\n
\n Development of proprietary products is key to the success of our\n core growth and our high gross margins now and in the future.\n Therefore, we must continue to develop new and innovative\n products and acquire and retain the necessary intellectual\n property rights in these products on an ongoing basis. If we\n fail to make innovations, or the market does not accept our new\n products, then our financial condition and results of operations\n could be adversely affected. We continue to invest in the\n development and marketing of new products. These expenditures do\n not always result in products that will be accepted by the\n market. Failure to develop successful new products may also\n cause our customers to buy from a competitor or may cause us to\n lower our prices in order to compete. This could have an adverse\n impact on our profitability.\n
\n\n
 
\n\n
\n\n We may\n be adversely impacted by an inability to identify and complete\n acquisitions.\n
\n\n
 
\n\n
\n A large part of our growth since fiscal 2003 has come through\n acquisitions and a key component of our growth strategy is based\n upon acquisitions. We may not be able to identify acquisition\n targets or successfully complete acquisitions in the future due\n to the absence of quality companies, economic conditions, or\n price expectations from sellers. If we are unable to complete\n additional acquisitions, our growth may be limited.\n
\n\n

\n
\n I-9\n

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Table of Contents

\n\n

\n\n
\n\n We\n operate in highly competitive niche markets within the OEM\n market and may be forced to cut our prices or incur additional\n costs to remain competitive, which may have a negative impact on\n our profitability.\n
\n\n
 
\n\n
\n We face substantial competition, particularly in the OEM markets\n we serve. Competition may force us to cut our prices or incur\n additional costs to remain competitive. We compete on the basis\n of production capabilities, engineering and R&D\n capabilities, materials expertise, our global footprint,\n customer service and price. Present or future competitors may\n have greater financial, technical or other resources which could\n put us at a disadvantage in the affected business by threatening\n our market shares in some markets or reducing our profit margins.\n
\n\n
 
\n\n
\n\n Our\n goodwill or other intangible assets may become impaired, which\n may negatively impact our results of operations.\n
\n\n
 
\n\n
\n We have a substantial amount of goodwill and other intangible\n assets on our balance sheet as a result of our acquisitions. As\n of July 31, 2006, we had $587.6 million of goodwill on\n our balance sheet, representing the excess of the total purchase\n price for our acquisitions over the fair value of the net assets\n we acquired, and $134.1 million of other intangible assets,\n primarily representing the fair value of the customer\n relationships, patents and trademarks we acquired in our\n acquisitions. At July 31, 2006, goodwill and other\n intangible assets represented approximately 53% of our total\n assets. We evaluate this goodwill annually for impairment based\n on the fair value of each geographic operating segment and we\n assess the impairment of other intangible assets quarterly based\n upon the expected cash flows of the acquisition. These\n valuations could change if there were to be future changes in\n our capital structure, cost of debt, interest rates, capital\n expenditures, or our ability to perform in accordance with our\n forecasts. If this estimated fair value changes in future\n periods, we may be required to record an impairment charge\n related to goodwill or other intangible assets, which would have\n the effect of decreasing our earnings or increasing our losses\n in such period.\n
\n\n
 
\n\n
\n\n We\n increasingly conduct a sizable amount of our manufacturing\n outside of the United States, which may present additional risks\n to our business.\n
\n\n
 
\n\n
\n As a result of our strong growth in developing economies,\n particularly in Asia, a significant portion of our sales is\n attributable to products manufactured outside of the United\n States. More than half of our 8,000 employees and more than half\n of our manufacturing locations are located outside of the United\n States. Our international operations are generally subject to\n various risks including political, economic and societal\n instability, the imposition of trade restrictions, local labor\n market conditions, the effects of income taxes, and differences\n in business practices. We may incur increased costs and\n experience delays or disruptions in product deliveries and\n payments in connection with international manufacturing and\n sales that could cause loss of revenue. Unfavorable changes in\n the political, regulatory and business climate in countries\n where we have operations could have a material adverse effect on\n our financial condition, results of operations and cash flows.\n
\n\n
 
\n\n
\n\n We\n have a concentration of business with several large key\n customers in the OEM market and loss of one or more of these\n customers could significantly affect our results of\n operations.\n
\n\n
 
\n\n
\n Several of our large key customers in the OEM market,\n specifically the precision die-cut business, together comprise a\n significant portion of our revenues. As a result of our\n acquisition of Tradex Converting AB in May 2006, our largest\n customer represents approximately 7% of our net sales. Our\n dependence on these large customers makes our relationships with\n these customers important to our business. We cannot assure you\n that we will be able to maintain these relationships and retain\n this business in the future. Because these large customers\n account for such a significant portion of our revenues, they\n possess relatively greater capacity to negotiate a reduction in\n the prices we charge for our products. If we are unable to\n provide products to our customers at prices acceptable to them,\n some of our customers may in the future elect to shift some or\n all of this business to competitors or to other sources. The\n loss of or reduction of business from one or more of these large\n key customers could have a material adverse impact on our\n financial condition and results of operations.\n
\n\n

\n
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\n\n

\n\n
\n\n Foreign\n currency fluctuations could adversely affect our sales and\n profits.\n
\n\n
 
\n\n
\n More than half of our revenues are derived outside of the United\n States. As such, fluctuations in foreign currency can have an\n adverse impact on our sales and profits as amounts that are\n measured in foreign currency are translated back to\n U.S. dollars. Any increase in the value of the\n U.S. dollar in relation to the value of the local currency\n will adversely affect our revenues from our foreign operations\n when translated into U.S. dollars. Similarly, any decrease\n in the value of the U.S. dollar in relation to the value of\n the local currency will increase our development costs in our\n foreign operations, to the extent such costs are payable in\n foreign currency, when translated into U.S. dollars. During\n fiscal year 2006, the strengthening U.S. dollar versus all\n other currencies reduced sales by approximately\n $3.7 million.\n
\n\n
 
\n\n
\n\n We\n depend on our key personnel and the loss of these personnel\n could have an adverse effect on our operations.\n
\n\n
 
\n\n
\n Our success depends to a large extent upon the continued\n services of our key executives, managers and other skilled\n personnel. We cannot assure you that we will be able to retain\n our key officers and employees. The departure of our key\n personnel without adequate replacement could severely disrupt\n our business operations. Additionally, we need qualified\n managers and skilled employees with technical and manufacturing\n industry experience to operate our business successfully. If we\n are unable to attract and retain qualified individuals or our\n costs to do so increase significantly, our operations would be\n materially adversely affected.\n
\n\n
 
\n\n
\n\n We may\n be unable to successfully implement anticipated changes to our\n information technology system.\n
\n\n
 
\n\n
\n We are now in the process of upgrading certain portions of our\n information technology. Part of this upgrade includes an\n accelerated implementation of an SAP platform in our facilities\n in China, Europe, Malaysia and Singapore. To date, we have\n completed the implementation at one facility in China and in\n India. We expect that this implementation of the SAP platform\n will enable us to more effectively and efficiently manage our\n supply chain and business processes. Our failure to successfully\n manage this process or implement these upgrades as scheduled\n could cause us to incur unexpected costs or to lose customers or\n sales, which could have a material adverse effect on our\n financial results.\n
\n\n
 
\n\n
\n\n The\n increase in our level of indebtedness could adversely affect our\n financial health and make us vulnerable to adverse economic\n conditions.\n
\n\n
 
\n\n
\n We have incurred indebtedness to finance acquisitions and for\n other general corporate purposes. Any increase in our level of\n indebtedness could have important consequences, such as:\n
\n\n
 
\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
  • \n\n it may be difficult for us to fulfill our obligations under our\n credit or other debt agreements;\n
 
  • \n\n it may be more challenging or costly to obtain additional\n financing to fund our future growth;\n
 
  • \n\n we may be more vulnerable to future interest rate fluctuations;\n
 
  • \n\n we may be required to dedicate a substantial portion of our cash\n flows to service our debt, thereby reducing the amount of cash\n available to fund new product development, capital expenditures,\n working capital and other general corporate activities;\n
 
  • \n\n it may place us at a competitive disadvantage relative to our\n competitors that have less debt; and\n
 
  • \n\n it may limit our flexibility in planning for and reacting to\n changes in our business.\n
\n\n
 
\n\n
\n\n Environmental,\n health and safety laws and regulations could adversely affect\n our business.\n
\n\n
 
\n\n
\n Our facilities and operations are subject to numerous laws and\n regulations relating to air emissions, wastewater discharges,\n the handling of hazardous materials and wastes, manufacturing\n and disposal of certain materials, and regulations otherwise\n relating to health, safety and the protection of the\n environment. Our products may also be governed by regulations in\n the countries where they are sold. As a result, we may need to\n devote management time or expend significant resources on\n compliance, and we have incurred and will continue to incur\n capital and other\n
\n\n

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\n I-11\n

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\n\n

\n\n
\n expenditures to comply with these regulations. Any significant\n costs may have a material adverse impact on our financial\n condition, results of operations or cash flows. Further, these\n laws and regulations are constantly evolving and it is\n impossible to predict accurately the effect they may have upon\n our financial condition, results of operations or cash flows.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 1B.  \n\n Unresolved\n Staff Comments\n
\n\n
 
\n\n
\n None.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 2.  \n\n Properties\n
\n\n
 
\n\n
\n The Company currently operates 65 manufacturing or distribution\n facilities in the following regions:\n
\n\n
 
\n\n
\n Americas:  Seventeen are located in the United\n States; three each in Brazil and Mexico; and two in Canada.\n
\n\n
 
\n\n
\n Europe:  Four are located in France; three each\n in Germany and in the United Kingdom; two in Sweden; and one\n each in Belgium, Denmark, Italy, Norway and Slovakia.\n
\n\n
 
\n\n
\n Asia-Pacific:  Nine are located in China; five\n in Australia; three in Thailand; two each in Korea and\n Singapore; and one each in India and Malaysia.\n
\n\n
 
\n\n
\n The Company’s present operating facilities contain a total\n of approximately 3.0 million square feet of space, of which\n approximately 2.2 million square feet is leased. The\n Company believes that its equipment and facilities are modern,\n well maintained and adequate for present needs.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 3.  \n\n Legal\n Proceedings\n
\n\n
 
\n\n
\n The Company is, and may in the future be, party to litigation\n arising in the normal course of business. The Company is not\n currently a party to any material pending legal proceedings.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 4.  \n\n Submission\n of Matters to a Vote of Security Holders\n
\n\n
 
\n\n
\n None\n
\n\n

\n
\n I-12\n

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Table of Contents

\n\n

\n\n
 
\n\n
\n\n PART II\n
\n\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 5.  \n\n Market\n for Registrant’s Common Equity, Related Stockholder Matters\n and Issuer Purchases of Equity Securities\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (a) \n\n Market\n Information\n
\n\n
 
\n\n
\n Brady Corporation Class A Nonvoting Common Stock trades on\n the New York Stock Exchange under the symbol BRC. The quarterly\n stock price history on the New York Stock Exchange is as follows\n for each of the quarters in the fiscal years ended July 31:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                         
\n \n\n \n\n 2006\n\n \n\n \n\n 2005(1)\n\n \n\n \n\n 2004(1)\n\n \n
\n \n\n \n\n High\n\n \n\n \n\n Low\n\n \n\n \n\n High\n\n \n\n \n\n Low\n\n \n\n \n\n High\n\n \n\n \n\n Low\n\n \n
 \n
\n
\n 4th Quarter\n \n
\n		\n \n\n $\n\n 42.79\n\n \n\n \n\n $\n\n 32.94\n\n \n\n \n\n $\n\n 34.96\n\n \n\n \n\n $\n\n 28.80\n\n \n\n \n\n $\n\n 23.24\n\n \n\n \n\n $\n\n 18.14\n\n \n
\n
\n 3rd Quarter\n \n
\n		\n \n\n $\n\n 40.49\n\n \n\n \n\n $\n\n 34.67\n\n \n\n \n\n $\n\n 35.70\n\n \n\n \n\n $\n\n 26.30\n\n \n\n \n\n $\n\n 20.44\n\n \n\n \n\n $\n\n 17.45\n\n \n
\n
\n 2nd Quarter\n \n
\n		\n \n\n $\n\n 39.98\n\n \n\n \n\n $\n\n 28.20\n\n \n\n \n\n $\n\n 32.22\n\n \n\n \n\n $\n\n 26.75\n\n \n\n \n\n $\n\n 21.73\n\n \n\n \n\n $\n\n 16.99\n\n \n
\n
\n 1st Quarter\n \n
\n		\n \n\n $\n\n 34.22\n\n \n\n \n\n $\n\n 26.98\n\n \n\n \n\n $\n\n 27.49\n\n \n\n \n\n $\n\n 21.01\n\n \n\n \n\n $\n\n 18.24\n\n \n\n \n\n $\n\n 15.84\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
\n (1) \n Adjusted for a\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004.
\n\n
 
\n\n
\n There is no trading market for the Company’s Class B\n Voting Common Stock.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (b) \n\n Holders\n
\n\n
 
\n\n
\n As of September 29, 2006, there were 697 Class A\n Common Stock shareholders of record and approximately 4,000\n beneficial shareholders. There are 3 Class B Common Stock\n shareholders.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (c) \n\n Issuer\n Purchases of Equity Securities\n
\n\n
 
\n\n
\n The Company did not repurchase any of its equity securities in\n the fourth quarter of fiscal 2006.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (d) \n\n Dividends\n
\n\n
 
\n\n
\n The Company has followed a practice of paying quarterly\n dividends on outstanding common stock. Before any dividend may\n be paid on the Class B Common Stock, holders of the\n Class A Common Stock are entitled to receive an annual,\n noncumulative cash dividend of $0.01665 per share (subject\n to adjustment in the event of future stock splits, stock\n dividends or similar events involving shares of Class A\n Common Stock). Thereafter, any further dividend in that fiscal\n year must be paid on all shares of Class A Common Stock and\n Class B Common Stock on an equal basis. The Company’s\n revolving credit agreement restricts the amount of certain types\n of payments, including dividends, which can be made annually to\n $50 million plus 75% of the consolidated net income for the\n prior fiscal year. The Company believes that based on its\n historic dividend practice, this restriction will not impede it\n in following a similar dividend practice in the future.\n
\n\n
 
\n\n
\n During the two most recent fiscal years and for the first\n quarter of fiscal 2007, the Company declared the following\n dividends per share on its Class A and Class B Common\n Stock for the years ended July 31:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                                     
\n \n\n \n\n Year
\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n Ending
\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n 2007\n\n \n\n 2006\n\n \n\n 2005\n
\n \n\n \n\n
\n 1st Qtr\n
\n		\n \n\n 1st Qtr\n\n \n\n 2nd Qtr\n\n \n\n 3rd Qtr\n\n \n\n 4th Qtr\n\n \n\n 1st Qtr\n\n \n\n 2nd Qtr\n\n \n\n 3rd Qtr\n\n \n\n 4th Qtr\n
 \n
\n
\n Class A\n \n
\n		\n \n\n $\n\n 0.14\n\n \n\n \n\n $\n\n 0.13\n\n \n\n \n\n $\n\n 0.13\n\n \n\n \n\n $\n\n 0.13\n\n \n\n \n\n $\n\n 0.13\n\n \n\n \n\n $\n\n 0.11\n\n \n\n \n\n $\n\n 0.11\n\n \n\n \n\n $\n\n 0.11\n\n \n\n \n\n $\n\n 0.11\n\n \n
\n
\n Class B\n \n
\n		\n \n\n \n\n 0.123\n\n \n\n \n\n \n\n 0.113\n\n \n\n \n\n \n\n 0.13\n\n \n\n \n\n \n\n 0.13\n\n \n\n \n\n \n\n 0.13\n\n \n\n \n\n \n\n 0.093\n\n \n\n \n\n \n\n 0.11\n\n \n\n \n\n \n\n 0.11\n\n \n\n \n\n \n\n 0.11\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Dividends in the above table have been adjusted for a\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004.\n
\n\n

\n
\n II-1\n

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Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 6.  \n\n Selected\n Financial Data\n
\n\n
 
\n\n
\n\n CONSOLIDATED\n STATEMENTS OF INCOME AND SELECTED FINANCIAL DATA
\n Years Ended July 31, 2002 through 2006\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                     
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n\n \n\n 2003\n\n \n\n \n\n 2002\n\n \n
\n \n\n \n\n (In thousands, except per share amounts)\n\n \n
 \n
\n
\n Operating Data\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net Sales\n
\n		\n \n\n $\n\n 1,018,436\n\n \n\n \n\n $\n\n 816,447\n\n \n\n \n\n $\n\n 671,219\n\n \n\n \n\n $\n\n 554,866\n\n \n\n \n\n $\n\n 516,962\n\n \n
\n
\n Gross Margin\n
\n		\n \n\n \n\n 525,755\n\n \n\n \n\n \n\n 433,276\n\n \n\n \n\n \n\n 345,361\n\n \n\n \n\n \n\n 279,149\n\n \n\n \n\n \n\n 260,776\n\n \n
\n
\n Operating Expenses:\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Research and development\n \n
\n		\n \n\n \n\n 30,443\n\n \n\n \n\n \n\n 25,078\n\n \n\n \n\n \n\n 23,028\n\n \n\n \n\n \n\n 18,873\n\n \n\n \n\n \n\n 17,271\n\n \n
\n
\n Selling, general and administrative\n \n
\n		\n \n\n \n\n 338,796\n\n \n\n \n\n \n\n 285,746\n\n \n\n \n\n \n\n 248,171\n\n \n\n \n\n \n\n 219,861\n\n \n\n \n\n \n\n 199,282\n\n \n
\n
\n Restructuring charge —\n net\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 3,181\n\n \n\n \n\n \n\n 9,589\n\n \n\n \n\n \n\n 2,720\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total operating expenses\n \n
\n		\n \n\n \n\n 369,239\n\n \n\n \n\n \n\n 310,824\n\n \n\n \n\n \n\n 274,380\n\n \n\n \n\n \n\n 248,323\n\n \n\n \n\n \n\n 219,273\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Operating Income\n
\n		\n \n\n \n\n 156,516\n\n \n\n \n\n \n\n 122,452\n\n \n\n \n\n \n\n 70,981\n\n \n\n \n\n \n\n 30,826\n\n \n\n \n\n \n\n 41,503\n\n \n
\n
\n Other (Expense)\n Income:\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Investment and other\n income — net\n \n
\n		\n \n\n \n\n 2,403\n\n \n\n \n\n \n\n 1,369\n\n \n\n \n\n \n\n 577\n\n \n\n \n\n \n\n 1,750\n\n \n\n \n\n \n\n 1,714\n\n \n
\n
\n Interest expense\n \n
\n		\n \n\n \n\n (14,231\n\n )\n\n \n\n \n\n (8,403\n\n )\n\n \n\n \n\n (1,231\n\n )\n\n \n\n \n\n (121\n\n )\n\n \n\n \n\n (82\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net other (expense) income\n \n
\n		\n \n\n \n\n (11,828\n\n )\n\n \n\n \n\n (7,034\n\n )\n\n \n\n \n\n (654\n\n )\n\n \n\n \n\n 1,629\n\n \n\n \n\n \n\n 1,632\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Income before income taxes\n \n
\n		\n \n\n \n\n 144,688\n\n \n\n \n\n \n\n 115,418\n\n \n\n \n\n \n\n 70,327\n\n \n\n \n\n \n\n 32,455\n\n \n\n \n\n \n\n 43,135\n\n \n
\n
\n Income Taxes\n
\n		\n \n\n \n\n 40,513\n\n \n\n \n\n \n\n 33,471\n\n \n\n \n\n \n\n 19,456\n\n \n\n \n\n \n\n 11,035\n\n \n\n \n\n \n\n 14,882\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net Income\n
\n		\n \n\n $\n\n 104,175\n\n \n\n \n\n $\n\n 81,947\n\n \n\n \n\n $\n\n 50,871\n\n \n\n \n\n $\n\n 21,420\n\n \n\n \n\n $\n\n 28,253\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net Income Per Common\n Share — (Diluted):\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class A nonvoting\n \n
\n		\n \n\n $\n\n 2.07\n\n \n\n \n\n $\n\n 1.64\n\n \n\n \n\n $\n\n 1.07\n\n \n\n \n\n $\n\n 0.46\n\n \n\n \n\n $\n\n 0.60\n\n \n
\n
\n Class B voting\n \n
\n		\n \n\n $\n\n 2.05\n\n \n\n \n\n $\n\n 1.63\n\n \n\n \n\n $\n\n 1.05\n\n \n\n \n\n $\n\n 0.44\n\n \n\n \n\n $\n\n 0.59\n\n \n
\n
\n Cash Dividends on:\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class A common stock\n \n
\n		\n \n\n $\n\n 0.52\n\n \n\n \n\n $\n\n 0.44\n\n \n\n \n\n $\n\n 0.42\n\n \n\n \n\n $\n\n 0.40\n\n \n\n \n\n $\n\n 0.38\n\n \n
\n
\n Class B common stock\n \n
\n		\n \n\n $\n\n 0.50\n\n \n\n \n\n $\n\n 0.42\n\n \n\n \n\n $\n\n 0.40\n\n \n\n \n\n $\n\n 0.39\n\n \n\n \n\n $\n\n 0.37\n\n \n
\n
\n Balance Sheet at\n July 31:\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Working capital\n \n
\n		\n \n\n $\n\n 240,537\n\n \n\n \n\n $\n\n 141,560\n\n \n\n \n\n $\n\n 131,706\n\n \n\n \n\n $\n\n 123,878\n\n \n\n \n\n $\n\n 135,764\n\n \n
\n
\n Total assets\n \n
\n		\n \n\n \n\n 1,365,186\n\n \n\n \n\n \n\n 850,147\n\n \n\n \n\n \n\n 697,900\n\n \n\n \n\n \n\n 449,519\n\n \n\n \n\n \n\n 420,525\n\n \n
\n
\n Long-term obligations, less\n current maturities\n \n
\n		\n \n\n \n\n 350,018\n\n \n\n \n\n \n\n 150,026\n\n \n\n \n\n \n\n 150,019\n\n \n\n \n\n \n\n 568\n\n \n\n \n\n \n\n 3,751\n\n \n
\n
\n Stockholders’ investment\n \n
\n		\n \n\n \n\n 746,046\n\n \n\n \n\n \n\n 497,274\n\n \n\n \n\n \n\n 403,315\n\n \n\n \n\n \n\n 338,961\n\n \n\n \n\n \n\n 324,242\n\n \n
\n
\n Cash Flow Data:\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net cash provided by operating\n activities\n \n
\n		\n \n\n \n\n 114,896\n\n \n\n \n\n \n\n 119,103\n\n \n\n \n\n \n\n 87,646\n\n \n\n \n\n \n\n 57,316\n\n \n\n \n\n \n\n 54,251\n\n \n
\n
\n Depreciation and amortization\n \n
\n		\n \n\n \n\n 35,144\n\n \n\n \n\n \n\n 26,822\n\n \n\n \n\n \n\n 20,190\n\n \n\n \n\n \n\n 17,771\n\n \n\n \n\n \n\n 16,630\n\n \n
\n
\n Capital expenditures\n \n
\n		\n \n\n \n\n (39,410\n\n )\n\n \n\n \n\n (21,920\n\n )\n\n \n\n \n\n (14,892\n\n )\n\n \n\n \n\n (14,438\n\n )\n\n \n\n \n\n (13,095\n\n )\n
\n\n
\n\n
\n\n

\n
\n II-2\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 7.  \n\n Management’s\n Discussion and Analysis of Financial Condition and Results of\n Operations\n
\n\n
 
\n\n
\n\n Overview\n
\n\n
 
\n\n
\n In fiscal 2006, the Company posted record sales of\n $1,018.4 million and record net income of\n $104.2 million, an increase of 24.7% and 27.1%,\n respectively, over fiscal 2005. The increase was the result of\n disciplined execution of the Company’s business plan and\n successful integration of acquisitions, aided by a good economy.\n Changes in foreign exchange rates had minimal impact on the\n results for fiscal 2006.\n
\n\n
 
\n\n
\n Of the 24.7% increase in sales, organic growth accounted for\n 9.2%, acquisitions added 16.0%, and foreign currency lowered\n sales by 0.5%. Americas sales increased 19.4%, European sales\n rose 16.3%, and sales from the Asia-Pacific operations increased\n 61.4%.\n
\n\n
 
\n\n
\n Net income for fiscal 2006 rose 27.1% to $104.2 million or\n $2.07 per diluted share of Class A Common Stock,\n compared to $81.9 million, or $1.64 per diluted share\n of Class A Common Stock in fiscal 2005.\n
\n\n
 
\n\n
\n In fiscal 2006, the Company continued to focus on leveraging its\n strengths and continued its drive to become the number one or\n number two leader in the markets that it serves. Acquisitions\n focused on businesses that management understands well in order\n to deepen market penetration or expand the Company’s global\n footprint. The Company also invested in expanding many of its\n global operations with new equipment and capacity.\n
\n\n
 
\n\n
\n Brady acquired 11 companies in fiscal 2006 —\n businesses that span the globe from the Americas to Europe to\n Asia-Pacific. We have added strategically driven acquisitions in\n people identification in the United States, wire identification\n in Europe and precision die cut businesses that give us a global\n leadership position in the mobile handset market, new\n capabilities in the hard disk drive market and strengthen our\n relatively small position in the medical converting market. We\n also strengthened our MRO business in Australia with two\n complementary acquisitions there.\n
\n\n
 
\n\n
\n Brady completed the addition of 90,000 square feet to its\n corporate headquarters in Milwaukee, Wisconsin for a\n consolidated warehouse and distribution center. Other\n accomplishments in fiscal 2006 included the opening of a new\n plant in Bratislava, Slovakia and continued expansion in India\n and China. Brady strives to employ the same high safety and\n environmental standards across the globe regardless of lesser\n government requirements in some areas.\n
\n\n
 
\n\n
\n To fund this continued organic and acquisition growth, Brady\n completed its first secondary stock offering to the public,\n which generated approximately $157.7 million in cash. Brady\n remains a financially strong company, with a solid balance sheet\n and cash flow. In September 2006, the Company announced that it\n will be increasing the cash dividend payment for the\n 21st straight year.\n
\n\n

\n
\n II-3\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n Results\n of Operations\n
\n\n
 
\n\n
\n\n Year\n Ended July 31, 2006, Compared to Year Ended July 31,\n 2005\n
\n\n
 
\n\n
\n The comparability of the operating results for the fiscal years\n ended July 31, 2006 to July 31, 2005 has been\n significantly impacted by the following acquisitions completed\n in fiscal 2006.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
     
\n
\n Acquisitions:\n
\n		\n \n\n
\n Segment\n
\n		\n \n\n
\n Date Completed\n
\n
 \n
\n
\n STOPware, Inc.\n (“Stopware”)\n \n
\n		\n \n\n Americas\n \n\n \n\n August 2005\n \n
\n
\n Texit Danmark AS and Texit Norge AS\n \n
\n		\n \n\n Europe\n \n\n \n\n September 2005\n \n
\n
\n (collectively “Texit”)\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n TruMed Technologies, Inc.\n (“TruMed”)\n \n
\n		\n \n\n Americas\n \n\n \n\n October 2005\n \n
\n
\n QDP Thailand Co., Ltd\n (“QDPT”)\n \n
\n		\n \n\n Asia-Pacific\n \n\n \n\n October 2005\n \n
\n
\n J.A.M. Plastics Inc.\n (“J.A.M.”)\n \n
\n		\n \n\n Americas\n \n\n \n\n December 2005\n \n
\n
\n Personnel Concepts\n \n
\n		\n \n\n Americas\n \n\n \n\n January 2006\n \n
\n
\n IDenticard Systems, Inc. and\n Identicam Systems\n \n
\n		\n \n\n Americas\n \n\n \n\n February 2006\n \n
\n
\n (collectively\n “Identicard”)\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n Accidental Health &\n Safety Pty. Ltd and\n \n
\n		\n \n\n Asia-Pacific\n \n\n \n\n March 2006\n \n
\n
\n Trafalgar First Aid Pty. Ltd.\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n (collectively “Accidental\n Health”)\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n Tradex Converting AB\n (“Tradex”)\n \n
\n		\n \n\n Americas, Europe\n \n\n \n\n May 2006\n \n
\n \n\n \n\n and Asia-Pacific\n \n\n \n\n \n
\n
\n Carroll Australasia Pty. Ltd.\n (“Carroll”)\n \n
\n		\n \n\n Asia-Pacific\n \n\n \n\n June 2006\n \n
\n
\n Daewon Industry Corporation\n (“Daewon”)\n \n
\n		\n \n\n Asia-Pacific\n \n\n \n\n July 2006\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Sales for fiscal 2006 increased by $202.0 million, or 24.7%\n from fiscal 2005. Organic sales, defined as sales in the\n Company’s existing core businesses and regions (exclusive\n of acquisitions and foreign currency effects), increased\n $75.4 million or 9.2% for the same period. The acquisitions\n listed above increased sales by $130.3 million or 16.0% in\n fiscal 2006 compared to fiscal 2005. Fluctuations in the\n exchange rates used to translate financial results into the\n United States Dollar caused sales to drop by $3.7 million\n or 0.5% for the year.\n
\n\n
 
\n\n
\n The gross margin as a percentage of sales decreased from 53.1%\n in fiscal 2005 to 51.6% in fiscal 2006. The decrease was\n primarily due to a decline in Asia-Pacific attributable to\n unfavorable acquisition mix, a shift in the product mix towards\n OEM electronics and cost pressures not offset by sales price\n increases, and a decline in Europe due to acquisition mix,\n partially offset by an increase in the Americas due to sales\n price increases, cost reductions and favorable acquisition mix.\n
\n\n
 
\n\n
\n Research and development expenses grew to $30.4 million in\n fiscal 2006 from $25.1 million in fiscal 2005, but fell\n slightly as a percentage of sales from 3.1% in fiscal 2005 to\n 3.0% in fiscal 2006. Research and development spending increases\n of 21.4% were offset by a 24.7% increase in sales in fiscal\n 2006. New product development continues to be a major focus of\n the Brady management team.\n
\n\n
 
\n\n
\n Selling, general and administrative (“SG&A”)\n expenses of $338.8 million decreased as a percentage of\n sales from 35.0% in fiscal 2005 to 33.3% in fiscal 2006. The\n decrease was due primarily to cost efficiencies gained in the\n existing businesses in all regions driven by organic sales\n growth and cost control and a change in our business mix,\n partially offset by higher SG&A expenses from the\n acquisitions completed in fiscal 2006.\n
\n\n
 
\n\n
\n Operating income increased $34.1 million to\n $156.5 million in fiscal 2006. As a percentage of sales,\n operating income increased from 15.0% in fiscal 2005 to 15.4% in\n fiscal 2006. The majority of the increase was due to sales\n growth compounded by strong cost control. The existing\n businesses improved operating income as a percent of sales,\n which more than offset the negative impact from the acquisitions\n completed in the year.\n
\n\n
 
\n\n
\n Investment and other income increased $1.0 million in\n fiscal 2006 from the prior year, primarily due to a gain of\n approximately $1.5 million on a currency option that the\n Company purchased to hedge against increases in the purchase\n price in U.S. dollar terms of Tradex as the transaction was\n denominated in Swedish Krona.\n
\n\n

\n
\n II-4\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n Interest expense increased $5.8 million in fiscal 2006 due\n to the interest on the $200 million private placement that\n was completed in the third quarter of fiscal 2006. The full\n twelve month impact of this additional fixed debt will be\n $10.6 million.\n
\n\n
 
\n\n
\n The Company’s effective tax rate decreased from 29.0% for\n fiscal 2005 to 28.0% for fiscal 2006. The improvement in the\n effective rate was due to a continuing shift to a higher\n percentage of the Company’s pre-tax income to lower tax\n rate countries. An effective income tax rate of 28% is expected\n for fiscal 2007.\n
\n\n
 
\n\n
\n\n Year\n Ended July 31, 2005, Compared to Year Ended July 31,\n 2004\n
\n\n
 
\n\n
\n Sales for fiscal 2005 increased by $145.2 million or 21.6%\n from fiscal 2004. Base sales, defined as sales in the\n Company’s existing core businesses and regions (exclusive\n of acquisitions and foreign currency effects), increased\n $38.4 million or 5.7% for the same period. The acquisitions\n of ID Technologies (August 2004) in Singapore, Electromark\n (February 2005) in the United States, and Signs &\n Labels (June 2005) in the UK, increased sales by\n $85.5 million or 12.7% in fiscal 2005 compared to fiscal\n 2004. The results of the acquisition of Technology Print\n Supplies, Ltd., and its associate, Technology and Supply Media\n Co., Ltd. in Thailand had minimal impact on the 2005 results\n because they were purchased at the close of business on\n July 29, 2005. The increase in sales was also aided by the\n positive effect of fluctuations in the exchange rates used to\n translate financial results into the United States Dollar, which\n increased sales by $21.3 million or 3.2% for the year.\n
\n\n
 
\n\n
\n The gross margin as a percentage of sales increased from 51.5%\n in fiscal 2004 to 53.1% in fiscal 2005. The increase was\n primarily due to the following two factors:\n
\n\n
 
\n\n
\n 1. Improved product mix attributable to EMED products,\n which carry a higher gross margin; and\n
\n\n
 
\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
  2. \n\n Improvement in North American margins due to improved product\n mix and continued cost control efforts.\n
\n\n\n\n
\n This increase was partially offset by decreased margins due to\n increased sales in Asia-Pacific, where gross margins are lower\n due to a higher percentage of business coming from OEM\n electronics customers.\n
\n\n
 
\n\n
\n Research and development expenses as a percentage of sales fell\n from 3.4% in fiscal 2004 to 3.1% in fiscal 2005. Research and\n development spending increases of 8.9% were offset by a 21.6%\n increase in sales in fiscal 2005. Research and development\n spending was lower than expected in the first three quarters of\n fiscal 2005 as it took longer than expected to hire senior-level\n research and development personnel. In the fourth quarter of\n fiscal 2005, research and development spending increased 15.5%\n over the same period in fiscal 2004.\n
\n\n
 
\n\n
\n Selling, general and administrative expenses as a percentage of\n sales decreased to 35.0% in fiscal 2005 from 37.0% in fiscal\n 2004. The decrease was due primarily to the use of existing\n resources to service greater sales volume and the increasing\n sales in Asia-Pacific, which has lower selling, general and\n administrative costs than the other regions. Offsetting the\n sales volume increase were compliance costs related to the\n Sarbanes-Oxley Act of 2002.\n
\n\n
 
\n\n
\n Fiscal 2004 expenses included a before tax net restructuring\n charge of $3.2 million. Approximately $2.9 million of\n the charge related to severance costs for employees. The\n remaining amount was due to asset disposal at facilities,\n primarily in North America and Europe.\n
\n\n
 
\n\n
\n Operating income increased $51.5 million to\n $122.5 million in fiscal 2005. The majority of the increase\n was due to sales growth, strong cost control, the increased\n earnings of recent acquisitions, and the benefit of fluctuations\n in exchange rates. The 2004 operating income included\n $3.2 million of restructuring costs.\n
\n\n
 
\n\n
\n Investment and other income increased $0.8 million in\n fiscal 2005 from the prior year, primarily due to the net effect\n of foreign exchange rates on the Company’s hedge contracts\n and on short-term intercompany loans.\n
\n\n
 
\n\n
\n Interest expense increased $7.2 million in fiscal 2005 due\n to the interest on the debt related to the acquisition of EMED.\n Fiscal 2005 included a full year of interest, while fiscal 2004\n included less than three months.\n
\n\n
 
\n\n
\n The Company’s effective tax rate increased from 27.7% for\n fiscal 2004 to 29.0% for fiscal 2005. The fiscal 2004 effective\n tax rate included $3.0 million related to the completion of\n the federal income tax audit of fiscal years\n
\n\n

\n
\n II-5\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n 2000 through 2002. The improvement in the effective rate\n (excluding the tax audit adjustment) was due to a shift in a\n portion of the Company’s pre-tax income to lower tax\n countries.\n
\n\n
 
\n\n
\n\n Business\n Segment Operating Results\n
\n\n
 
\n\n
\n Management of the Company evaluates results based on the\n following geographic regions: Americas, Europe, and Asia-Pacific.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                         
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Corporate and
\n \n		\n \n\n \n\n \n\n \n
\n
\n (Dollars in thousands)\n
\n		\n \n\n Americas\n\n \n\n \n\n Europe\n\n \n\n \n\n Asia-Pacific\n\n \n\n \n\n Subtotals\n\n \n\n \n\n Eliminations\n\n \n\n \n\n Total\n\n \n
 \n
\n
\n SALES TO EXTERNAL\n CUSTOMERS\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Years ended:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n July 31, 2006\n \n
\n		\n \n\n $\n\n 498,916\n\n \n\n \n\n $\n\n 319,432\n\n \n\n \n\n $\n\n 200,088\n\n \n\n \n\n $\n\n 1,018,436\n\n \n\n \n\n \n\n —\n\n \n\n \n\n $\n\n 1,018,436\n\n \n
\n
\n July 31, 2005\n \n
\n		\n \n\n \n\n 417,780\n\n \n\n \n\n \n\n 274,691\n\n \n\n \n\n \n\n 123,976\n\n \n\n \n\n \n\n 816,447\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 816,447\n\n \n
\n
\n July 31, 2004\n \n
\n		\n \n\n \n\n 341,975\n\n \n\n \n\n \n\n 248,255\n\n \n\n \n\n \n\n 80,989\n\n \n\n \n\n \n\n 671,219\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 671,219\n\n \n
\n
\n SALES GROWTH\n INFORMATION\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Year ended July 31, 2006:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Organic\n \n
\n		\n \n\n \n\n 5.0\n\n %\n\n \n\n \n\n 4.2\n\n %\n\n \n\n \n\n 34.7\n\n %\n\n \n\n \n\n 9.2\n\n %\n\n \n\n \n\n —\n\n \n\n \n\n \n\n 9.2\n\n %\n
\n
\n Currency\n \n
\n		\n \n\n \n\n 1.5\n\n %\n\n \n\n \n\n (4.3\n\n )%\n\n \n\n \n\n 1.6\n\n %\n\n \n\n \n\n (0.5\n\n )%\n\n \n\n \n\n —\n\n \n\n \n\n \n\n (0.5\n\n )%\n
\n
\n Acquisitions\n \n
\n		\n \n\n \n\n 12.9\n\n %\n\n \n\n \n\n 16.4\n\n %\n\n \n\n \n\n 25.1\n\n %\n\n \n\n \n\n 16.0\n\n %\n\n \n\n \n\n —\n\n \n\n \n\n \n\n 16.0\n\n %\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n \n\n 19.4\n\n %\n\n \n\n \n\n 16.3\n\n %\n\n \n\n \n\n 61.4\n\n %\n\n \n\n \n\n 24.7\n\n %\n\n \n\n \n\n —\n\n \n\n \n\n \n\n 24.7\n\n %\n
\n
\n Year ended July 31, 2005:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Organic\n \n
\n		\n \n\n \n\n 4.4\n\n %\n\n \n\n \n\n 2.5\n\n %\n\n \n\n \n\n 21.4\n\n %\n\n \n\n \n\n 5.7\n\n %\n\n \n\n \n\n —\n\n \n\n \n\n \n\n 5.7\n\n %\n
\n
\n Currency\n \n
\n		\n \n\n \n\n 1.2\n\n %\n\n \n\n \n\n 6.0\n\n %\n\n \n\n \n\n 3.0\n\n %\n\n \n\n \n\n 3.2\n\n %\n\n \n\n \n\n —\n\n \n\n \n\n \n\n 3.2\n\n %\n
\n
\n Acquisitions\n \n
\n		\n \n\n \n\n 16.6\n\n %\n\n \n\n \n\n 2.2\n\n %\n\n \n\n \n\n 28.7\n\n %\n\n \n\n \n\n 12.7\n\n %\n\n \n\n \n\n —\n\n \n\n \n\n \n\n 12.7\n\n %\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n \n\n 22.2\n\n %\n\n \n\n \n\n 10.7\n\n %\n\n \n\n \n\n 53.1\n\n %\n\n \n\n \n\n 21.6\n\n %\n\n \n\n \n\n —\n\n \n\n \n\n \n\n 21.6\n\n %\n
\n
\n SEGMENT PROFIT\n (LOSS)\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Years ended:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n July 31, 2006\n \n
\n		\n \n\n $\n\n 122,525\n\n \n\n \n\n $\n\n 83,970\n\n \n\n \n\n $\n\n 49,316\n\n \n\n \n\n $\n\n 255,811\n\n \n\n \n\n $\n\n (10,633\n\n )\n\n \n\n $\n\n 245,178\n\n \n
\n
\n July 31, 2005\n \n
\n		\n \n\n \n\n 98,193\n\n \n\n \n\n \n\n 79,792\n\n \n\n \n\n \n\n 34,228\n\n \n\n \n\n \n\n 212,213\n\n \n\n \n\n \n\n (4,845\n\n )\n\n \n\n \n\n 207,368\n\n \n
\n
\n July 31, 2004\n \n
\n		\n \n\n \n\n 60,132\n\n \n\n \n\n \n\n 66,404\n\n \n\n \n\n \n\n 22,768\n\n \n\n \n\n \n\n 149,304\n\n \n\n \n\n \n\n (4,696\n\n )\n\n \n\n \n\n 144,608\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n NET\n INCOME RECONCILIATION
\n \n
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Years ended:\n\n \n
\n \n\n \n\n July 31,
\n \n		\n \n\n \n\n July 31,
\n \n		\n \n\n \n\n July 31,
\n \n		\n \n
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Total profit for reportable\n segments\n \n
\n		\n \n\n $\n\n 255,811\n\n \n\n \n\n $\n\n 212,213\n\n \n\n \n\n $\n\n 149,304\n\n \n
\n
\n Corporate and eliminations\n \n
\n		\n \n\n \n\n (10,633\n\n )\n\n \n\n \n\n (4,845\n\n )\n\n \n\n \n\n (4,696\n\n )\n
\n
\n Unallocated amounts:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Administrative costs\n \n
\n		\n \n\n \n\n (88,662\n\n )\n\n \n\n \n\n (84,916\n\n )\n\n \n\n \n\n (70,446\n\n )\n
\n
\n Interest (expense)\n income — net\n \n
\n		\n \n\n \n\n (14,231\n\n )\n\n \n\n \n\n (8,403\n\n )\n\n \n\n \n\n (1,231\n\n )\n
\n
\n Restructuring charge, net\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (3,181\n\n )\n
\n
\n Investment and other income\n \n
\n		\n \n\n \n\n 2,403\n\n \n\n \n\n \n\n 1,369\n\n \n\n \n\n \n\n 577\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Income before income taxes\n \n
\n		\n \n\n \n\n 144,688\n\n \n\n \n\n \n\n 115,418\n\n \n\n \n\n \n\n 70,327\n\n \n
\n
\n Income taxes\n \n
\n		\n \n\n \n\n (40,513\n\n )\n\n \n\n \n\n (33,471\n\n )\n\n \n\n \n\n (19,456\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net income\n \n
\n		\n \n\n $\n\n 104,175\n\n \n\n \n\n $\n\n 81,947\n\n \n\n \n\n $\n\n 50,871\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n

\n
\n II-6\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n The Company evaluates regional performance using sales and\n segment profit. Segment profit or loss does not include certain\n administrative costs, interest, restructuring charges,\n investment and other income and income taxes.\n
\n\n
 
\n\n
\n\n Americas\n
\n\n
 
\n\n
\n Sales in the Americas region increased 19.4% from fiscal 2005 to\n fiscal 2006, and 22.2% from fiscal 2004 to fiscal 2005. Organic\n growth accounted for 5.0% in 2006 and 4.4% in 2005. The organic\n growth in fiscal 2006 was due to strong growth in the United\n States in our safety, electrical, and industrial markets. Our\n operations in Canada, Mexico and Brazil also provided\n year-over-year\n organic sales growth in the Brady brand business. Within the\n direct marketing business, base sales increased over the prior\n year as well. The organic growth in fiscal 2005 was due\n partially to an improving economy in the United States and\n strong performance in the industrial OEM and electronics\n markets. Also contributing to the base growth increase were the\n following factors: Canada turned the corner in fiscal 2005 and\n posted double-digit organic growth year over year and Brazil and\n Mexico reported double-digit organic growth in fiscal 2005 as\n well. The acquisitions of Stopware, TruMed, J.A.M., Personnel\n Concepts and Identicard added 12.9% to fiscal 2006 sales. The\n acquisitions of Brandon International, Prinzing Enterprises\n Inc., EMED, and Electromark added 16.6% to fiscal 2005 sales.\n The positive effect of fluctuations in the exchange rates used\n to translate financial results into U.S. currency increased\n sales in the region by 1.5% and 1.2% in fiscal 2006 and 2005,\n respectively.\n
\n\n
 
\n\n
\n In the Americas region, segment profit as a percentage of sales\n increased to 24.6% in 2006 from 23.5% in 2005. While the region\n continues to experience increases on many of its materials and\n utility costs, the impact on segment profit of the increase in\n sales volume and sales prices has more than offset these cost\n increases. As expected, the recent acquisitions have reported an\n initial rate of profit that is below the average of the region.\n As the businesses continue to integrate and achieve synergies,\n profit levels are expected to increase, all other things being\n equal. Comparing fiscal 2005 to 2004, segment profit as a\n percentage of sales increased from 17.6% to 23.5%, due to the\n increase in sales volume, profit from acquisitions, continuing\n cost savings primarily in the direct marketing business and the\n benefits from lower manufacturing costs of higher volume stock\n products as we transferred production to the Company’s\n Mexico subsidiary.\n
\n\n
 
\n\n
\n\n Europe\n
\n\n
 
\n\n
\n Sales in the European region increased 16.3% in fiscal 2006 from\n fiscal 2005 and 10.7% in fiscal 2005 from fiscal 2004. Organic\n growth in fiscal 2006 accounted for 4.2% and 2.5% in fiscal\n 2005. The increase in the organic growth in fiscal 2006 was due\n to modest growth in the direct marketing business as a result of\n continuing to add new customers and expand product offerings and\n growth from expansion into newer geographies for the Brady brand\n business, primarily from the expansion into Slovakia, Turkey and\n the Nordic region. Foreign currency translation decreased the\n region’s sales by 4.3% from fiscal 2005 to 2006 compared to\n an increase in the region’s sales by 6.0% from fiscal 2004\n to 2005. The acquisitions of Texit and Tradex added 16.4% to the\n region’s sales in fiscal 2006 and the acquisitions of\n B.I.G. and Signs & Labels added 2.2% to the\n region’s sales in fiscal 2005.\n
\n\n
 
\n\n
\n Segment profit as a percentage of sales decreased to 26.3% in\n fiscal 2006 from 29.0% in fiscal 2005 and increased to 29.0% in\n fiscal 2005 from 26.7% in fiscal 2004. The decrease experienced\n in fiscal 2006 from 2005 was due to the impact of a stronger\n U.S. dollar, the profit dilution caused by the\n start-up of\n business in Slovakia and the integration and acquisition-related\n costs from the June 2005 acquisition of Signs and Labels and\n Tradex, as we had anticipated. As Tradex’s headquarters are\n in Sweden, all of the headquarter costs are reflected in the\n Europe segment. Excluding acquisitions in the year,\n Europe’s segment profit as a percent of sales increased in\n fiscal 2006 over fiscal 2005. The increase achieved in fiscal\n 2005 from 2004 was due to the restructuring activity completed\n during fiscal 2004 and continued operational improvements.\n
\n\n
 
\n\n
\n\n Asia-Pacific\n
\n\n
 
\n\n
\n Asia-Pacific sales increased 61.4% in fiscal 2006 from fiscal\n 2005 and 53.1% in fiscal 2005 from fiscal 2004. Organic growth\n accounted for 34.7% in fiscal 2006 and 21.4% in fiscal 2005. The\n increase in organic growth for fiscal 2006 was due to the high\n demand for consumer electronics and strong growth in the\n Australian direct marketing and safety businesses. Of the 21.4%\n increase in organic growth in fiscal 2005, a significant portion\n was driven by growth in China as the Asian economy continued to\n strengthen. Foreign currency translation increased the\n region’s sales by 1.6%\n
\n\n

\n
\n II-7\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n from fiscal 2005 to 2006 compared to an increase of 3.0% from\n fiscal 2004 to 2005. The acquisitions of Technology Print Supply\n and Technology Supply Media, QDPT, Accidental Health, Tradex,\n Carroll and Daewon added 25.1% to the region’s sales in\n fiscal 2006, whereas the acquisition of ID Technologies added\n 28.7% in fiscal 2005.\n
\n\n
 
\n\n
\n Segment profit as a percentage of sales decreased to 24.7% in\n fiscal 2006 from 27.6% in fiscal 2005 and to 27.6% in fiscal\n 2005 from 28.1% in fiscal 2004. The decrease experienced in\n fiscal 2006 was due to the continued shift of business mix\n towards the die cut business that experiences lower margins,\n combined with pricing pressures from our OEM customers and the\n lower initial rate of profit produced by the companies acquired\n in the region. The decrease in the profit percentage in fiscal\n 2005 was also due to lower margins in China as a result of a\n higher mix of OEM electronics, which have lower margins. As a\n result of these pricing pressures, we will continue to focus on\n generating efficiencies in our operations and the development of\n proprietary new solutions.\n
\n\n
 
\n\n
\n\n Liquidity\n and Capital Resources\n
\n\n
 
\n\n
\n Cash and cash equivalents were $113.0 million at\n July 31, 2006, compared to $73.0 million at\n July 31, 2005. Additionally, short-term investments,\n consisting of investments in auction rate securities, were\n $11.5 million at July 31, 2006, compared to\n $7.1 million at July 31, 2005. Working capital\n increased $98.9 million during fiscal 2006 to\n $240.5 million and increased $9.9 million during\n fiscal 2005 to $141.6 million. Accounts receivable balances\n increased $64.5 million from July 31, 2005 to\n July 31, 2006. The increase in accounts receivable was due\n primarily to increased sales volume, foreign currency\n translation and accounts receivable balances added from\n acquisitions completed during fiscal 2006. Inventories increased\n $39.2 million from July 31, 2005 to July 31, 2006\n due to foreign currency translation, inventory of acquired\n companies, and a planned increase in inventory levels in\n Asia-Pacific and North America to meet demand for sales\n initiatives and an extended supply chain due to the use of our\n Mexican and Asian sourcing of purchased products. Current\n liabilities increased $57.8 million due to increased\n operating liabilities associated with acquisitions completed\n during fiscal 2006.\n
\n\n
 
\n\n
\n The Company has maintained significant cash balances due in\n large part to its strong operating cash flow, which totaled\n $114.9 million for fiscal 2006, $119.1 million for\n fiscal 2005 and $87.6 million for fiscal 2004. In\n accordance with the adoption of SFAS No. 123(R),\n “Share Based Payment” on August 1, 2005, the\n Company has classified the income tax benefit from the exercise\n of stock options subsequent to adoption as a financing cash\n inflow. Prior to adoption, this tax benefit was recorded in cash\n flows from operations and totaled $5.4 million and\n $4.4 million for the fiscal years ended July 31, 2005\n and 2004, respectively. The $31.5 million increase in\n operating cash flows from fiscal 2004 to 2005 was primarily due\n to a $31.1 million increase in net income.\n
\n\n
 
\n\n
\n Capital expenditures were $39.4 million in fiscal 2006,\n $21.9 million in fiscal 2005 and $14.9 million in\n fiscal 2004. Capital expenditures in 2006 were driven by the\n completion of the central distribution warehouse in Milwaukee,\n Wisconsin, continued expansion in Asia, new facilities in\n Slovakia and in Canada and by upgrading existing plant and\n machinery. Capital expenditures in 2005 included plant\n expansions in China and the start of the addition of the central\n distribution warehouse in Milwaukee. Capital expenditures in\n 2004 included plant additions/expansions in China and facility\n improvement costs.\n
\n\n
 
\n\n
\n Financing activities provided $319.0 million of cash in\n fiscal 2006, used $9.7 million in fiscal 2005 and provided\n $146.1 million in fiscal 2004. In fiscal 2006, the Company\n completed a secondary public offering of 4.6 million shares\n of its Class A nonvoting common stock and received proceeds\n of approximately $157.7 million. Cash used for dividends to\n shareholders was $26.1 million in fiscal 2006,\n $21.3 million in fiscal 2005 and $19.8 million in\n fiscal 2004. Cash received from the exercise of stock options\n was $8.9 million in fiscal 2006, $15.7 million in\n fiscal 2005 and $19.4 million in fiscal 2004. The Company\n purchased treasury stock of $24.7 million in fiscal 2006,\n $1.6 million in fiscal 2005 and $0.6 million in fiscal\n 2004. In fiscal 2006, a stock repurchase plan was implemented by\n purchasing shares on the open market or in privately negotiated\n transactions, with repurchased shares available for use in\n connection with the Company’s stock option plan and for\n other corporate purposes. The Company completed the repurchase\n of 800,000 shares of its Class A Common Stock for\n $26.5 million in fiscal year 2006. The remainder of the\n treasury stock purchases resulted from purchases of Class A\n Common Stock by the Company’s deferred compensation plan.\n
\n\n
 
\n\n
\n On March 31, 2004, the Company entered into an unsecured\n $215.0 million multi-currency revolving loan agreement with\n a group of five banks. The $215.0 million was divided\n between a\n 5-year\n credit facility for\n
\n\n

\n
\n II-8\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n $125.0 million and a\n 364-day\n credit facility for $90.0 million. On July 6, 2004,\n the Company permanently reduced the borrowings on the\n 364-day\n facility to $0 and closed the facility. On January 19,\n 2006, the agreement was amended to increase the available amount\n under the\n 5-year\n credit facility to $200.0 million from $125.0 million\n (the “previous credit facility”).\n
\n\n
 
\n\n
\n On October 5, 2006, the Company entered into a\n $200.0 million multi-currency revolving loan agreement with\n a group of five banks that replaced the previous credit\n facility. At the Company’s option, and subject to certain\n standard conditions, the available amount under the new credit\n facility may be increased from $200.0 million up to\n $300.0 million.\n
\n\n
 
\n\n
\n Under the new\n 5-year\n agreement, which has a final maturity date of October 5,\n 2011, the Company has the option to select either a base\n interest rate (based upon the higher of the federal funds rate\n plus one-half of 1% or the prime rate of Bank of America) or a\n Eurocurrency interest rate (at the LIBOR rate plus a margin\n based on the Company’s consolidated leverage ratio). A\n commitment fee is payable on the unused amount of the facility.\n The agreement requires the Company to maintain two financial\n covenants. As of October 5, 2006, the Company was in\n compliance with the covenants of the new agreement, and as of\n July 31, 2006, the Company was in compliance with the\n covenants of the previous credit facility.\n
\n\n
 
\n\n
\n The new agreement restricts the amount of certain types of\n payments, including dividends, which can be made annually to\n $50.0 million plus an amount equal to 75% of consolidated\n net income for the prior fiscal year of the Company. The Company\n believes that based on historic dividend practice, this\n restriction would not impede the Company in following a similar\n dividend practice in the future. During fiscal 2006 and 2005,\n the Company borrowed and repaid $415.7 million and\n $83.0 million, respectively. As of July 31, 2006 and\n October 5, 2006, there were $0 and $10.0 million of\n outstanding borrowings under the previous credit facility or the\n new credit facility, respectively.\n
\n\n
 
\n\n
\n On February 14, 2006, the Company completed the private\n placement of $200.0 million in ten-year fixed notes at 5.3%\n interest to institutional investors. The notes will be amortized\n in equal installments over seven years, beginning in 2010 with\n interest payable on the notes semiannually on August 14 and\n February 14, beginning in August 2006. The notes have been\n fully and unconditionally guaranteed on an unsecured basis by\n the Company’s domestic subsidiaries. The Company used the\n net proceeds of the offering to finance acquisitions completed\n in fiscal 2006 and intends to use the remainder to fund future\n acquisitions and for general corporate purposes. This private\n placement was exempt from the registration requirements of the\n Securities Act of 1933. The notes were not registered for resale\n and may not be resold absent such registration or an applicable\n exemption from the registration requirements of the Securities\n Act of 1933 and applicable state securities laws. The notes have\n certain prepayment penalties for repaying them prior to the\n maturity date. The agreement also requires the Company to\n maintain a financial covenant. As of July 31, 2006, the\n Company was in compliance with this covenant.\n
\n\n
 
\n\n
\n On June 30, 2004, the Company finalized a debt offering of\n $150.0 million of 5.14% unsecured senior notes due in 2014\n in an offering exempt from the registration requirements of the\n Securities Act of 1933. The debt offering was in conjunction\n with the Company’s acquisition of EMED. The notes will be\n amortized over seven years beginning in 2008, with interest\n payable on the notes being due semiannually on June 28 and\n December 28, beginning in December 2004. The Company used\n the proceeds of the offering to reduce outstanding indebtedness\n under the Company’s revolving credit facilities used to\n initially fund the EMED acquisition. The debt has certain\n prepayment penalties for repaying the debt prior to its maturity\n date. The agreement also requires the Company to maintain a\n financial covenant. As of July 31, 2006, the Company was in\n compliance with this covenant.\n
\n\n
 
\n\n
\n Long-term obligations as a percentage of long-term obligations\n plus stockholders’ investment were 31.9% at July 31,\n 2006 and 23.2% at July 31, 2005. Long-term obligations\n increased by $200.0 million from July 31, 2005 to\n July 31, 2006 due to the private placement that was\n completed during the year and stockholders’ investment\n increased $248.3 million during this period due to net\n earnings for fiscal 2006 and the effect of the issuance of stock\n from the equity offering.\n
\n\n
 
\n\n
\n The Company intends to fund its short-term and long-term cash\n requirements, including its fiscal 2007 dividend payments,\n primarily through net cash provided by operating activities.\n
\n\n

\n
\n II-9\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n The Company believes that its continued strong cash flows from\n operations and existing borrowing capacity will enable it to\n execute its long-term strategic plan. This strategic plan\n includes investments, which expand its current market share,\n open new markets and geographies, develop new products and\n distribution channels and continue to improve our processes.\n This strategic plan also includes executing key acquisitions.\n
\n\n
 
\n\n
\n\n Subsequent\n Events Affecting Liquidity and Capital Resources\n
\n\n
 
\n\n
\n On August 15, 2006, the Company completed the acquisition\n of CIPI, headquartered in Burlington, Massachusetts. CIPI is a\n market leader in badging accessories used to identify and track\n employees and visitors in a variety of settings including\n businesses, healthcare facilities and government buildings.\n Founded in 1966, CIPI had sales of approximately\n $31 million in its fiscal 2005 and currently employs\n approximately 900 people at operations in the United States, the\n Netherlands, Hong Kong and China.\n
\n\n
 
\n\n
\n On September 12, 2006, the Board of Directors announced an\n increase in the quarterly dividend to shareholders of the\n Company’s Class A Common Stock, from $0.13 to\n $0.14 per share. The dividend will be paid on\n October 31, 2006, to shareholders of record at the close of\n business on October 10, 2006. This dividend represents an\n increase of 7.7% percent and is the 21st consecutive annual\n increase in dividends since the Company went public in 1984.\n
\n\n
 
\n\n
\n\n Off-Balance\n Sheet Arrangements\n
\n\n
 
\n\n
\n The Company does not have material off-balance sheet\n arrangements or related party transactions. The Company is not\n aware of factors that are reasonably likely to adversely affect\n liquidity trends, other than the risks discussed in this filing\n and presented in other Company filings. However, the following\n additional information is provided to assist financial statement\n users.\n
\n\n
 
\n\n
\n Operating Leases — These leases generally are\n entered into for investments in facilities such as manufacturing\n facilities, warehouses and office buildings, computer equipment\n and company vehicles, for which the economic profile is\n favorable.\n
\n\n
 
\n\n
\n Purchase Commitments — The Company has purchase\n commitments for materials, supplies, services, and property,\n plant and equipment entered into in the ordinary course of\n business. Such commitments are not in excess of current market\n prices.\n
\n\n
 
\n\n
\n Due to the proprietary nature of many of the Company’s\n materials and processes, certain supply contracts contain\n penalty provisions for early termination. The Company does not\n believe a material amount of penalties will be incurred under\n these contracts based upon historical experience and current\n expectations.\n
\n\n
 
\n\n
\n Other Contractual Obligations — The Company\n does not have material financial guarantees or other contractual\n commitments that are reasonably likely to adversely affect\n liquidity other than those discussed below under “Payments\n Due Under Contractual Obligations.”\n
\n\n
 
\n\n
\n Related Party Transactions — The Company does\n not have related party transactions that affect the results of\n operations, cash flow or financial condition.\n
\n\n

\n
\n II-10\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n Payments\n Due Under Contractual Obligations\n
\n\n
 
\n\n
\n The Company’s future commitments at July 31, 2006 for\n long-term debt, operating lease obligations, purchase\n obligations, interest obligations and other obligations are as\n follows (dollars in thousands):\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                     
\n \n\n \n\n Payments Due by Period\n\n \n
\n \n\n \n\n \n\n \n\n \n\n Less than
\n \n		\n \n\n \n\n 1-3
\n \n		\n \n\n \n\n 3-5
\n \n		\n \n\n \n\n More than
\n \n		\n \n
\n
\n Contractual Obligations\n
\n		\n \n\n Total\n\n \n\n \n\n 1 Year\n\n \n\n \n\n Years\n\n \n\n \n\n Years\n\n \n\n \n\n 5 Years\n\n \n
 \n
\n
\n Long-Term Debt Obligations\n \n
\n		\n \n\n $\n\n 350,038\n\n \n\n \n\n $\n\n 20\n\n \n\n \n\n $\n\n 42,875\n\n \n\n \n\n $\n\n 100,000\n\n \n\n \n\n $\n\n 207,143\n\n \n
\n
\n Operating Lease Obligations\n \n
\n		\n \n\n \n\n 51,946\n\n \n\n \n\n \n\n 15,744\n\n \n\n \n\n \n\n 20,931\n\n \n\n \n\n \n\n 8,199\n\n \n\n \n\n \n\n 7,072\n\n \n
\n
\n Purchase Obligations(1)\n \n
\n		\n \n\n \n\n 47,860\n\n \n\n \n\n \n\n 47,250\n\n \n\n \n\n \n\n 400\n\n \n\n \n\n \n\n 210\n\n \n\n \n\n \n\n 0\n\n \n
\n
\n Interest Obligations\n \n
\n		\n \n\n \n\n 112,750\n\n \n\n \n\n \n\n 18,310\n\n \n\n \n\n \n\n 35,519\n\n \n\n \n\n \n\n 29,598\n\n \n\n \n\n \n\n 29,323\n\n \n
\n
\n Other Obligations(2)\n \n
\n		\n \n\n \n\n 7,490\n\n \n\n \n\n \n\n 628\n\n \n\n \n\n \n\n 1,370\n\n \n\n \n\n \n\n 1,521\n\n \n\n \n\n \n\n 3,971\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n $\n\n 570,084\n\n \n\n \n\n $\n\n 81,952\n\n \n\n \n\n $\n\n 101,095\n\n \n\n \n\n $\n\n 139,528\n\n \n\n \n\n $\n\n 247,509\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n (1) \n Purchase obligations include all open purchase orders as of\n July 31, 2006.
 
\n (2) \n Other obligations represent expected payments under the\n Company’s postretirement medical, dental, and vision plan\n as disclosed in Note 3 to the consolidated financial\n statements, under Item 8 of this report.
\n\n
 
\n\n
\n\n Inflation\n and Changing Prices\n
\n\n
 
\n\n
\n Essentially all of the Company’s revenue is derived from\n the sale of its products in competitive markets. Because prices\n are influenced by market conditions, it is not always possible\n to fully recover cost increases through pricing. Changes in\n product mix from year to year, timing differences in instituting\n price changes and the large amount of part numbers make it\n virtually impossible to accurately define the impact of\n inflation on profit margins.\n
\n\n
 
\n\n
\n\n Critical\n Accounting Estimates\n
\n\n
 
\n\n
\n\n Income\n Taxes\n
\n\n
 
\n\n
\n The Company accounts for income taxes in accordance with\n Statement of Financial Accounting Standards (“SFAS”)\n No. 109, “Accounting for Income Taxes,” which\n requires an asset and liability approach to financial accounting\n and reporting for income taxes. Deferred income tax assets and\n liabilities are computed annually for differences between the\n financial statement and tax basis of assets and liabilities that\n will result in taxable or deductible amounts in the future based\n on enacted tax laws and rates applicable to the periods in which\n the differences are expected to affect taxable income. Valuation\n allowances are established when necessary to reduce deferred tax\n assets to the amount expected to be realized. Income tax expense\n is the tax payable or refundable for the period plus or minus\n the change during the period in deferred tax assets and\n liabilities. Changes in existing regulatory tax laws and rates\n may affect the Company’s ability to successfully manage\n regulatory matters around the world, and future business results\n may affect the amount of deferred tax liabilities or the\n valuation of deferred tax assets over time. The Company’s\n accounting for deferred tax consequences represents\n management’s best estimate of future events that can be\n appropriately reflected in the accounting estimates. Although\n the Company’s current estimates may be subject to change in\n the future, management does not believe such changes would\n result in a material\n period-to-period\n impact on the results of operations or the financial condition\n of the Company.\n
\n\n
 
\n\n
\n\n Goodwill\n and Intangible Assets\n
\n\n
 
\n\n
\n The allocation of purchase price for business combinations\n requires management estimates and judgment as to expectations\n for future cash flows of the acquired business and the\n allocation of those cash flows to identifiable intangible assets\n in determining the estimated fair value for purchase price\n allocation purposes. If the actual results differ from the\n estimates and judgments used in these estimates, the amounts\n recorded in the financial statements could result in a possible\n impairment of the intangible assets and goodwill or require\n acceleration of the amortization expense of finite-lived\n intangible assets. In addition, SFAS No. 142,\n “Goodwill and Other Intangible Assets,” requires that\n goodwill and other indefinite-lived intangible assets be tested\n annually for impairment. Changes in management’s estimates\n or judgments could result in an impairment charge, and such a\n charge could\n
\n\n

\n
\n II-11\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n have an adverse effect on the Company’s financial condition\n and results of operations. To aid in establishing the value of\n goodwill and other intangible assets at the time of acquisition,\n Company policy requires that all acquisitions with a purchase\n price above $5 million must be evaluated by a professional\n appraisal company.\n
\n\n
 
\n\n
\n\n Reserves\n and Allowances\n
\n\n
 
\n\n
\n The Company has recorded reserves or allowances for inventory\n obsolescence, uncollectible accounts receivable, returns, credit\n memos, incurred but not reported medical claims, and income tax\n contingencies. These reserves require the use of estimates and\n judgment. The Company bases its estimates on historical\n experience and on various other assumptions that are believed to\n be reasonable under the circumstances. The Company believes that\n such estimates are made with consistent and appropriate methods.\n Actual results may differ from these estimates under different\n assumptions or conditions.\n
\n\n
 
\n\n
\n\n New\n Accounting Standards\n
\n\n
 
\n\n
\n The information required by this Item is provided in Note 1\n of the Notes to Consolidated Financial Statements contained in\n Item 8 — Financial Statements and Supplementary\n Data.\n
\n\n
 
\n\n
\n\n Forward-Looking\n Statements\n
\n\n
 
\n\n
\n Brady believes that certain statements in this\n Form 10-K\n are “forward-looking statements” within the meaning of\n the Private Securities Litigation Reform Act of 1995. All\n statements related to future, not past, events included in this\n Form 10-K,\n including, without limitation, statements regarding Brady’s\n future financial position, business strategy, targets, projected\n sales, costs, earnings, capital expenditures, debt levels and\n cash flows, and plans and objectives of management for future\n operations are forward-looking statements. When used in this\n Form 10-K,\n words such as “may,” “will,”\n “expect,” “intend,” “estimate,”\n “anticipate,” “believe,” “should,”\n “project” or “plan” or similar terminology\n are generally intended to identify forward-looking statements.\n These forward-looking statements by their nature address matters\n that are, to different degrees, uncertain and are subject to\n risks, assumptions and other factors, some of which are beyond\n Brady’s control, that could cause actual results to differ\n materially from those expressed or implied by such\n forward-looking statements. For Brady, uncertainties arise from\n future financial performance of major markets Brady serves,\n which include, without limitation, telecommunications,\n manufacturing, electrical, construction, laboratory, education,\n governmental, public utility, computer, transportation;\n difficulties in making and integrating acquisitions; risks\n associated with newly acquired businesses; Brady’s ability\n to retain significant contracts and customers; future\n competition; Brady’s ability to develop and successfully\n market new products; changes in the supply of, or price for,\n parts and components; increased price pressure from suppliers\n and customers; interruptions to sources of supply;\n environmental, health and safety compliance costs and\n liabilities; Brady’s ability to realize cost savings from\n operating initiatives; Brady’s ability to attract and\n retain key talent; difficulties associated with exports; risks\n associated with international operations; fluctuations in\n currency rates versus the US dollar; technology changes;\n potential write-offs of Brady’s substantial intangible\n assets; risks associated with obtaining governmental approvals\n and maintaining regulatory compliance for new and existing\n products; business interruptions due to implementing business\n systems; and numerous other matters of national, regional and\n global scale, including those of a political, economic,\n business, competitive and regulatory nature contained from time\n to time in Brady’s U.S. Securities and Exchange\n Commission filings, including, but not limited to, those factors\n listed in the “Risk Factors” section located in\n Item 1A of Part I of this\n Form 10-K.\n These uncertainties may cause Brady’s actual future results\n to be materially different than those expressed in its\n forward-looking statements. Brady does not undertake to update\n its forward-looking statements.\n
\n\n
 
\n\n
\n\n Risk\n Factors\n
\n\n
 
\n\n
\n Please see the information contained in Item 1A —\n Risk Factors.\n
\n\n

\n
\n II-12\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 7A.  \n\n Quantitative\n and Qualitative Disclosures About Market Risk\n
\n\n
 
\n\n
\n The Company’s business operations give rise to market risk\n exposure due to changes in foreign exchange rates. To manage\n that risk effectively, the Company enters into hedging\n transactions, according to established guidelines and policies,\n that enable it to mitigate the adverse effects of this financial\n market risk.\n
\n\n
 
\n\n
\n The global nature of the Company’s business requires active\n participation in the foreign exchange markets. As a result of\n investments, production facilities and other operations on a\n global scale, the Company has assets, liabilities and cash flows\n in currencies other than the U.S. Dollar. The primary\n objective of the Company’s foreign-currency exchange risk\n management is to minimize the impact of currency movements on\n intercompany transactions and foreign raw-material imports. To\n achieve this objective, we hedge a portion of known exposures\n using forward contracts. Main exposures are related to\n transactions denominated in the British Pound, the Euro,\n Canadian Dollar, Australian Dollar, Swedish Krona and Chinese\n RMB currency. In the third quarter of fiscal 2006, we purchased\n a currency option to hedge against increases in the purchase\n price in U.S. dollar terms of Tradex, as the transaction\n was denominated in the Swedish Krona. A gain of approximately\n $1.5 million was recorded in fiscal 2006 due to this option.\n
\n\n
 
\n\n
\n The Company could be exposed to interest rate risk through its\n corporate borrowing activities. The objective of the\n Company’s interest rate risk management activities is to\n manage the levels of the Company’s fixed and floating\n interest rate exposure to be consistent with the Company’s\n preferred mix. The interest rate risk management program allows\n the Company to enter into approved interest rate derivatives if\n there is a desire to modify the Company’s exposure to\n interest rates. As of July 31, 2006, the Company had no\n interest rate derivatives.\n
\n\n

\n
\n II-13\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 8.  \n\n Financial\n Statements and Supplementary Data\n
\n\n
 
\n\n
\n\n BRADY\n CORPORATION & SUBSIDIARIES\n
\n\n
 
\n\n
\n\n INDEX TO\n FINANCIAL STATEMENTS\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
     
\n \n\n \n\n Page\n
 \n
\n\n\n \n\n\n II-15\n \n\n
\n
\n Financial Statements:\n \n
\n		\n \n\n\n \n\n
\n\n\n \n\n\n II-16\n \n\n
\n\n\n \n\n\n II-17\n \n\n
\n\n\n \n\n\n II-18\n \n\n
\n\n\n \n\n\n II-19\n \n\n
\n\n\n \n\n\n II-20\n \n\n
\n\n
\n\n
\n\n

\n
\n II-14\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n REPORT OF\n INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n
\n\n\n
 
\n\n
\n To the Board of Directors and Stockholders of\n
\n\n
\n Brady Corporation\n
\n\n
\n Milwaukee, WI\n
\n\n
 
\n\n
\n We have audited the accompanying consolidated balance sheets of\n Brady Corporation and subsidiaries (the “Company”) as\n of July 31, 2006 and 2005, and the related consolidated\n statements of income, stockholders’ investment, and cash\n flows for each of the three years in the period ended\n July 31, 2006. Our audits also included the financial\n statement schedule listed in the Index at Item 15. These\n financial statements and financial statement schedule are the\n responsibility of the Company’s management. Our\n responsibility is to express an opinion on the financial\n statements and financial statement schedules based on our audits.\n
\n\n
 
\n\n
\n We conducted our audits in accordance with the standards of the\n Public Company Accounting Oversight Board (United States). Those\n standards require that we plan and perform the audit to obtain\n reasonable assurance about whether the financial statements are\n free of material misstatement. An audit includes examining, on a\n test basis, evidence supporting the amounts and disclosures in\n the financial statements. An audit also includes assessing the\n accounting principles used and significant estimates made by\n management, as well as evaluating the overall financial\n statement presentation. We believe that our audits provide a\n reasonable basis for our opinion.\n
\n\n
 
\n\n
\n In our opinion, such consolidated financial statements present\n fairly, in all material respects, the financial position of\n Brady Corporation and subsidiaries at July 31, 2006 and\n 2005, and the results of their operations and their cash flows\n for each of the three years in the period ended July 31,\n 2006, in conformity with accounting principles generally\n accepted in the United States of America. Also, in our opinion,\n such financial statement schedule, when considered in relation\n to the basic consolidated financial statements taken as a whole,\n presents fairly, in all material respects, the information set\n forth therein.\n
\n\n
 
\n\n
\n We have also audited, in accordance with the standards of the\n Public Company Accounting Oversight Board (United States), the\n effectiveness of the Company’s internal control over\n financial reporting as of July 31, 2006, based on the\n criteria established in Internal Control —\n Integrated Framework issued by the Committee of Sponsoring\n Organizations of the Treadway Commission and our report dated\n September 28, 2006 expressed an unqualified opinion on\n management’s assessment of the effectiveness of the\n Company’s internal control over financial reporting and an\n unqualified opinion on the effectiveness of the Company’s\n internal control over financial reporting.\n
\n\n
 
\n\n
\n
/s/  Deloitte &\n Touche LLP
\n
\n\n
\n Milwaukee, WI\n
\n\n
\n September 28, 2006\n
\n\n

\n
\n II-15\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES\n
\n\n
 
\n\n
\n\n CONSOLIDATED\n BALANCE SHEETS
\n July 31, 2006 and 2005\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n
\n \n\n \n\n (In thousands)\n\n \n
 \n
\n
\n ASSETS\n
\n
\n
\n Current assets:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Cash and cash equivalents\n \n
\n		\n \n\n $\n\n 113,008\n\n \n\n \n\n $\n\n 72,970\n\n \n
\n
\n Short term investments\n \n
\n		\n \n\n \n\n 11,500\n\n \n\n \n\n \n\n 7,100\n\n \n
\n
\n Accounts receivable, less allowance\n for losses ($6,390 and $3,726, respectively)\n \n
\n		\n \n\n \n\n 187,907\n\n \n\n \n\n \n\n 123,453\n\n \n
\n
\n Inventories:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Finished products\n \n
\n		\n \n\n \n\n 59,365\n\n \n\n \n\n \n\n 38,827\n\n \n
\n
\n Work-in-process\n \n
\n		\n \n\n \n\n 12,850\n\n \n\n \n\n \n\n 9,681\n\n \n
\n
\n Raw materials and supplies\n \n
\n		\n \n\n \n\n 37,702\n\n \n\n \n\n \n\n 22,227\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total inventories\n \n
\n		\n \n\n \n\n 109,917\n\n \n\n \n\n \n\n 70,735\n\n \n
\n
\n Prepaid expenses and other current\n assets\n \n
\n		\n \n\n \n\n 36,825\n\n \n\n \n\n \n\n 28,114\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total current assets\n \n
\n		\n \n\n \n\n 459,157\n\n \n\n \n\n \n\n 302,372\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Other assets:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Goodwill\n \n
\n		\n \n\n \n\n 587,642\n\n \n\n \n\n \n\n 332,369\n\n \n
\n
\n Other intangibles assets\n \n
\n		\n \n\n \n\n 134,111\n\n \n\n \n\n \n\n 71,647\n\n \n
\n
\n Deferred income taxes\n \n
\n		\n \n\n \n\n 34,135\n\n \n\n \n\n \n\n 39,043\n\n \n
\n
\n Other\n \n
\n		\n \n\n \n\n 10,235\n\n \n\n \n\n \n\n 6,305\n\n \n
\n
\n Property, plant and equipment:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Cost:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Land\n \n
\n		\n \n\n \n\n 6,548\n\n \n\n \n\n \n\n 6,388\n\n \n
\n
\n Buildings and improvements\n \n
\n		\n \n\n \n\n 78,418\n\n \n\n \n\n \n\n 65,007\n\n \n
\n
\n Machinery and equipment\n \n
\n		\n \n\n \n\n 198,426\n\n \n\n \n\n \n\n 157,093\n\n \n
\n
\n Construction in progress\n \n
\n		\n \n\n \n\n 12,098\n\n \n\n \n\n \n\n 6,510\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n 295,490\n\n \n\n \n\n \n\n 234,998\n\n \n
\n
\n Less accumulated depreciation\n \n
\n		\n \n\n \n\n 155,584\n\n \n\n \n\n \n\n 136,587\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Property, plant and\n equipment — net\n \n
\n		\n \n\n \n\n 139,906\n\n \n\n \n\n \n\n 98,411\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n $\n\n 1,365,186\n\n \n\n \n\n $\n\n 850,147\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n
\n
\n LIABILITIES AND\n STOCKHOLDERS’ INVESTMENT\n
\n
\n
\n Current liabilities:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Accounts payable\n \n
\n		\n \n\n $\n\n 78,585\n\n \n\n \n\n $\n\n 52,696\n\n \n
\n
\n Wages and amounts withheld from\n employees\n \n
\n		\n \n\n \n\n 61,778\n\n \n\n \n\n \n\n 49,620\n\n \n
\n
\n Taxes, other than income taxes\n \n
\n		\n \n\n \n\n 6,231\n\n \n\n \n\n \n\n 4,815\n\n \n
\n
\n Accrued income taxes\n \n
\n		\n \n\n \n\n 25,243\n\n \n\n \n\n \n\n 24,028\n\n \n
\n
\n Other current liabilities\n \n
\n		\n \n\n \n\n 46,763\n\n \n\n \n\n \n\n 29,649\n\n \n
\n
\n Short-term borrowings and current\n maturities on long-term obligations\n \n
\n		\n \n\n \n\n 20\n\n \n\n \n\n \n\n 4\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total current liabilities\n \n
\n		\n \n\n \n\n 218,620\n\n \n\n \n\n \n\n 160,812\n\n \n
\n
\n Long-term obligations, less current\n maturities\n \n
\n		\n \n\n \n\n 350,018\n\n \n\n \n\n \n\n 150,026\n\n \n
\n
\n Other liabilities\n \n
\n		\n \n\n \n\n 50,502\n\n \n\n \n\n \n\n 42,035\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total liabilities\n \n
\n		\n \n\n \n\n 619,140\n\n \n\n \n\n \n\n 352,873\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Stockholders’ investment:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Common stock:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class A Nonvoting —\n Issued 50,481,743 and 45,877,543 shares, respectively\n (aggregate liquidation preference of $42,152 and $38,308 at\n July 31, 2006 and 2005, respectively)\n \n
\n		\n \n\n \n\n 505\n\n \n\n \n\n \n\n 458\n\n \n
\n
\n Class B Voting —\n Issued and outstanding 3,538,628 shares\n \n
\n		\n \n\n \n\n 35\n\n \n\n \n\n \n\n 35\n\n \n
\n
\n Additional paid-in capital\n \n
\n		\n \n\n \n\n 258,922\n\n \n\n \n\n \n\n 99,029\n\n \n
\n
\n Earnings retained in the business\n \n
\n		\n \n\n \n\n 460,991\n\n \n\n \n\n \n\n 382,880\n\n \n
\n
\n Treasury stock — 292,901\n and 85,344 shares, respectively of Class A nonvoting\n common stock, at cost\n \n
\n		\n \n\n \n\n (10,865\n\n )\n\n \n\n \n\n (1,575\n\n )\n
\n
\n Accumulated other comprehensive\n income\n \n
\n		\n \n\n \n\n 35,696\n\n \n\n \n\n \n\n 17,497\n\n \n
\n
\n Other\n \n
\n		\n \n\n \n\n 762\n\n \n\n \n\n \n\n (1,050\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total stockholders’ investment\n \n
\n		\n \n\n \n\n 746,046\n\n \n\n \n\n \n\n 497,274\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n $\n\n 1,365,186\n\n \n\n \n\n $\n\n 850,147\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n See notes to consolidated financial statements.\n
\n\n

\n
\n II-16\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES\n
\n\n
 
\n\n
\n\n CONSOLIDATED\n STATEMENTS OF INCOME
\n Years Ended July 31, 2006, 2005 and 2004\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
\n \n\n \n\n (In thousands, except per share amounts)\n\n \n
 \n
\n
\n Net sales\n \n
\n		\n \n\n $\n\n 1,018,436\n\n \n\n \n\n $\n\n 816,447\n\n \n\n \n\n $\n\n 671,219\n\n \n
\n
\n Cost of products sold\n \n
\n		\n \n\n \n\n 492,681\n\n \n\n \n\n \n\n 383,171\n\n \n\n \n\n \n\n 325,858\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Gross margin\n \n
\n		\n \n\n \n\n 525,755\n\n \n\n \n\n \n\n 433,276\n\n \n\n \n\n \n\n 345,361\n\n \n
\n
\n Operating expenses:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Research and development\n \n
\n		\n \n\n \n\n 30,443\n\n \n\n \n\n \n\n 25,078\n\n \n\n \n\n \n\n 23,028\n\n \n
\n
\n Selling, general and administrative\n \n
\n		\n \n\n \n\n 338,796\n\n \n\n \n\n \n\n 285,746\n\n \n\n \n\n \n\n 248,171\n\n \n
\n
\n Restructuring charge —\n net\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 3,181\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total operating expenses\n \n
\n		\n \n\n \n\n 369,239\n\n \n\n \n\n \n\n 310,824\n\n \n\n \n\n \n\n 274,380\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Operating income\n \n
\n		\n \n\n \n\n 156,516\n\n \n\n \n\n \n\n 122,452\n\n \n\n \n\n \n\n 70,981\n\n \n
\n
\n Other income (expense):\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Investment and other\n income — net\n \n
\n		\n \n\n \n\n 2,403\n\n \n\n \n\n \n\n 1,369\n\n \n\n \n\n \n\n 577\n\n \n
\n
\n Interest expense\n \n
\n		\n \n\n \n\n (14,231\n\n )\n\n \n\n \n\n (8,403\n\n )\n\n \n\n \n\n (1,231\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net other expense\n \n
\n		\n \n\n \n\n (11,828\n\n )\n\n \n\n \n\n (7,034\n\n )\n\n \n\n \n\n (654\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Income before income taxes\n \n
\n		\n \n\n \n\n 144,688\n\n \n\n \n\n \n\n 115,418\n\n \n\n \n\n \n\n 70,327\n\n \n
\n
\n Income taxes\n \n
\n		\n \n\n \n\n 40,513\n\n \n\n \n\n \n\n 33,471\n\n \n\n \n\n \n\n 19,456\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net income\n \n
\n		\n \n\n $\n\n 104,175\n\n \n\n \n\n $\n\n 81,947\n\n \n\n \n\n $\n\n 50,871\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net income per common share(1):\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class A Nonvoting:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic\n \n
\n		\n \n\n $\n\n 2.10\n\n \n\n \n\n $\n\n 1.67\n\n \n\n \n\n $\n\n 1.08\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Diluted\n \n
\n		\n \n\n $\n\n 2.07\n\n \n\n \n\n $\n\n 1.64\n\n \n\n \n\n $\n\n 1.07\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Dividends\n \n
\n		\n \n\n $\n\n 0.52\n\n \n\n \n\n $\n\n 0.44\n\n \n\n \n\n $\n\n 0.42\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class B Voting:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic\n \n
\n		\n \n\n $\n\n 2.09\n\n \n\n \n\n $\n\n 1.66\n\n \n\n \n\n $\n\n 1.06\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Diluted\n \n
\n		\n \n\n $\n\n 2.05\n\n \n\n \n\n $\n\n 1.63\n\n \n\n \n\n $\n\n 1.05\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Dividends\n \n
\n		\n \n\n $\n\n 0.50\n\n \n\n \n\n $\n\n 0.42\n\n \n\n \n\n $\n\n 0.40\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Weighted average Class A and\n Class B common shares outstanding(1)\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic\n \n
\n		\n \n\n \n\n 49,494\n\n \n\n \n\n \n\n 48,967\n\n \n\n \n\n \n\n 47,298\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Diluted\n \n
\n		\n \n\n \n\n 50,385\n\n \n\n \n\n \n\n 49,859\n\n \n\n \n\n \n\n 47,813\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
\n (1) \n Adjusted for\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004
\n\n
 
\n\n
\n See notes to consolidated financial statements.\n
\n\n

\n
\n II-17\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES\n
\n\n
 
\n\n
\n\n CONSOLIDATED\n STATEMENTS OF STOCKHOLDERS’ INVESTMENT
\n Years Ended JULY 31, 2006, 2005 AND 2004\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                             
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Earnings
\n \n		\n \n\n \n\n \n\n \n\n \n\n Accumulated
\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n Additional
\n \n		\n \n\n \n\n Retained
\n \n		\n \n\n \n\n \n\n \n\n \n\n Other
\n \n		\n \n\n \n\n \n\n \n\n \n\n Total
\n \n		\n \n
\n \n\n \n\n Common
\n \n		\n \n\n \n\n Paid-In
\n \n		\n \n\n \n\n in the
\n \n		\n \n\n \n\n Treasury
\n \n		\n \n\n \n\n Comprehensive
\n \n		\n \n\n \n\n \n\n \n\n \n\n Comprehensive
\n \n		\n \n
\n \n\n \n\n Stock\n\n \n\n \n\n Capital\n\n \n\n \n\n Business\n\n \n\n \n\n Stock\n\n \n\n \n\n Income\n\n \n\n \n\n Other\n\n \n\n \n\n Income\n\n \n
\n \n\n \n\n (In thousands, except per share amounts)\n\n \n
 \n
\n
\n Balances at July 31, 2003\n \n
\n		\n \n\n $\n\n 466\n\n \n\n \n\n $\n\n 47,232\n\n \n\n \n\n $\n\n 290,805\n\n \n\n \n\n $\n\n (509\n\n )\n\n \n\n $\n\n 1,595\n\n \n\n \n\n $\n\n (628\n\n )\n\n \n\n \n\n \n\n \n
\n
\n Net income\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 50,871\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n $\n\n 50,871\n\n \n
\n
\n Net currency translation adjustment\n and other\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 7,745\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 7,745\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total comprehensive income\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n $\n\n 58,616\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Issuance of 1,607,058 shares\n of Class A Common Stock under stock option plan\n \n
\n		\n \n\n \n\n 16\n\n \n\n \n\n \n\n 19,406\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Other (Note 6)\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 346\n\n \n\n \n\n \n\n \n\n \n
\n
\n Tax benefit from exercise of stock\n options\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 4,406\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Purchase of 32,790 shares of\n Class A Common Stock\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (565\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Stock-based compensation expense\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 1,581\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Cash dividends on Common Stock:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class A —\n $.42 per share\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (18,025\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Class B —\n $.40 per share\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (1,427\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances at July 31, 2004\n \n
\n		\n \n\n $\n\n 482\n\n \n\n \n\n $\n\n 72,625\n\n \n\n \n\n $\n\n 322,224\n\n \n\n \n\n $\n\n (1,074\n\n )\n\n \n\n $\n\n 9,340\n\n \n\n \n\n $\n\n (282\n\n )\n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net income\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 81,947\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n $\n\n 81,947\n\n \n
\n
\n Net currency translation adjustment\n and other\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 8,157\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 8,157\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total comprehensive income\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n $\n\n 90,104\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Issuance of 1,117,431 shares\n of Class A Common Stock under stock option plan\n \n
\n		\n \n\n \n\n 11\n\n \n\n \n\n \n\n 15,722\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Other (Note 6)\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (768\n\n )\n\n \n\n \n\n \n\n \n
\n
\n Tax benefit from exercise of stock\n options\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 5,385\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Purchase of 16,030 shares of\n Class A Common Stock\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (501\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Stock-based compensation expense\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 5,297\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Cash dividends on Common Stock:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class A —\n $.44 per share\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (19,793\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Class B —\n $.42 per share\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (1,498\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances at July 31, 2005\n \n
\n		\n \n\n $\n\n 493\n\n \n\n \n\n $\n\n 99,029\n\n \n\n \n\n $\n\n 382,880\n\n \n\n \n\n $\n\n (1,575\n\n )\n\n \n\n $\n\n 17,497\n\n \n\n \n\n $\n\n (1,050\n\n )\n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net income\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 104,175\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n $\n\n 104,175\n\n \n
\n
\n Net currency translation adjustment\n and other\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 18,199\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 18,199\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total comprehensive income\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n $\n\n 122,374\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Issuance of 4,600,000 shares\n of Class A Common Stock from equity offering\n \n
\n		\n \n\n \n\n 46\n\n \n\n \n\n \n\n 157,699\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Issuance of 4,200 shares of\n Class A Common Stock under stock option plan\n \n
\n		\n \n\n \n\n 1\n\n \n\n \n\n \n\n (8,286\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n 17,205\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Other (Note 6)\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 1,812\n\n \n\n \n\n \n\n \n\n \n
\n
\n Tax benefit from exercise of stock\n options\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 4,912\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Purchase of 800,000 shares of\n Class A Common Stock\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (26,495\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Stock-based compensation expense\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 5,568\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Cash dividends on Common Stock:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class A —\n $.52 per share\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (24,283\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n
\n Class B —\n $.50 per share\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (1,781\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances at July 31, 2006\n \n
\n		\n \n\n $\n\n 540\n\n \n\n \n\n $\n\n 258,922\n\n \n\n \n\n $\n\n 460,991\n\n \n\n \n\n $\n\n (10,865\n\n )\n\n \n\n $\n\n 35,696\n\n \n\n \n\n $\n\n 762\n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n See notes to consolidated financial statements.\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n
\n Adjusted for\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004.\n
\n\n

\n
\n II-18\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES\n
\n\n
 
\n\n
\n\n CONSOLIDATED\n STATEMENTS OF CASH FLOWS
\n Years Ended July 31, 2006, 2005 and 2004\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
\n \n\n \n\n (Dollars in thousands)\n\n \n
 \n
\n
\n Operating activities:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net income\n \n
\n		\n \n\n $\n\n 104,175\n\n \n\n \n\n $\n\n 81,947\n\n \n\n \n\n $\n\n 50,871\n\n \n
\n
\n Adjustments to reconcile net income\n to net cash provided by operating activities:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Depreciation and amortization\n \n
\n		\n \n\n \n\n 35,144\n\n \n\n \n\n \n\n 26,822\n\n \n\n \n\n \n\n 20,190\n\n \n
\n
\n Gain on foreign currency contract\n \n
\n		\n \n\n \n\n (1,516\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n
\n
\n Income tax benefit from the\n exercise of stock options\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 5,385\n\n \n\n \n\n \n\n 4,406\n\n \n
\n
\n Deferred income taxes\n \n
\n		\n \n\n \n\n (1,843\n\n )\n\n \n\n \n\n (2,653\n\n )\n\n \n\n \n\n 5,172\n\n \n
\n
\n Loss on sale of property, plant and\n equipment\n \n
\n		\n \n\n \n\n 124\n\n \n\n \n\n \n\n 743\n\n \n\n \n\n \n\n 321\n\n \n
\n
\n Provision for losses on accounts\n receivable\n \n
\n		\n \n\n \n\n 1,152\n\n \n\n \n\n \n\n 1,216\n\n \n\n \n\n \n\n 1,450\n\n \n
\n
\n Non-cash portion of stock-based\n compensation expense\n \n
\n		\n \n\n \n\n 5,568\n\n \n\n \n\n \n\n 5,579\n\n \n\n \n\n \n\n 1,927\n\n \n
\n
\n Net restructuring charge accrued\n liability\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 3,221\n\n \n
\n
\n Changes in operating assets and\n liabilities (net of effects of business acquisitions):\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Accounts receivable\n \n
\n		\n \n\n \n\n (13,620\n\n )\n\n \n\n \n\n (7,132\n\n )\n\n \n\n \n\n (11,979\n\n )\n
\n
\n Inventories\n \n
\n		\n \n\n \n\n (16,961\n\n )\n\n \n\n \n\n (11,847\n\n )\n\n \n\n \n\n (6,791\n\n )\n
\n
\n Prepaid expenses and other assets\n \n
\n		\n \n\n \n\n (2,163\n\n )\n\n \n\n \n\n (3,572\n\n )\n\n \n\n \n\n 2,168\n\n \n
\n
\n Accounts payable and accrued\n liabilities\n \n
\n		\n \n\n \n\n 10,421\n\n \n\n \n\n \n\n 8,827\n\n \n\n \n\n \n\n 15,210\n\n \n
\n
\n Income taxes\n \n
\n		\n \n\n \n\n 58\n\n \n\n \n\n \n\n 9,662\n\n \n\n \n\n \n\n (393\n\n )\n
\n
\n Other liabilities\n \n
\n		\n \n\n \n\n (5,643\n\n )\n\n \n\n \n\n 4,126\n\n \n\n \n\n \n\n 1,873\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net cash provided by operating\n activities\n \n
\n		\n \n\n \n\n 114,896\n\n \n\n \n\n \n\n 119,103\n\n \n\n \n\n \n\n 87,646\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Investing activities:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Acquisitions of businesses, net of\n cash acquired\n \n
\n		\n \n\n \n\n (351,331\n\n )\n\n \n\n \n\n (79,926\n\n )\n\n \n\n \n\n (228,928\n\n )\n
\n
\n Purchases of short-term investments\n \n
\n		\n \n\n \n\n (150,900\n\n )\n\n \n\n \n\n (50,025\n\n )\n\n \n\n \n\n (38,450\n\n )\n
\n
\n Sales of short-term investments\n \n
\n		\n \n\n \n\n 146,500\n\n \n\n \n\n \n\n 48,075\n\n \n\n \n\n \n\n 42,850\n\n \n
\n
\n Purchases of property, plant and\n equipment\n \n
\n		\n \n\n \n\n (39,410\n\n )\n\n \n\n \n\n (21,920\n\n )\n\n \n\n \n\n (14,892\n\n )\n
\n
\n Net settlement of foreign currency\n contract\n \n
\n		\n \n\n \n\n 1,516\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n
\n
\n Proceeds from sale of property,\n plant and equipment\n \n
\n		\n \n\n \n\n 546\n\n \n\n \n\n \n\n 390\n\n \n\n \n\n \n\n 448\n\n \n
\n
\n Other\n \n
\n		\n \n\n \n\n (2,203\n\n )\n\n \n\n \n\n (1,686\n\n )\n\n \n\n \n\n (1,533\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net cash used in investing\n activities\n \n
\n		\n \n\n \n\n (395,282\n\n )\n\n \n\n \n\n (105,092\n\n )\n\n \n\n \n\n (240,505\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Financing activities:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Payment of dividends\n \n
\n		\n \n\n \n\n (26,064\n\n )\n\n \n\n \n\n (21,291\n\n )\n\n \n\n \n\n (19,805\n\n )\n
\n
\n Proceeds from issuance of common\n stock\n \n
\n		\n \n\n \n\n 166,664\n\n \n\n \n\n \n\n 15,734\n\n \n\n \n\n \n\n 19,422\n\n \n
\n
\n Principal payments on debt\n \n
\n		\n \n\n \n\n (417,601\n\n )\n\n \n\n \n\n (85,604\n\n )\n\n \n\n \n\n (161,578\n\n )\n
\n
\n Proceeds from issuance of debt\n \n
\n		\n \n\n \n\n 615,730\n\n \n\n \n\n \n\n 83,000\n\n \n\n \n\n \n\n 310,000\n\n \n
\n
\n Purchase of treasury stock\n \n
\n		\n \n\n \n\n (24,683\n\n )\n\n \n\n \n\n (1,551\n\n )\n\n \n\n \n\n (564\n\n )\n
\n
\n Income tax benefit from the\n exercise of stock options\n \n
\n		\n \n\n \n\n 4,912\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n
\n
\n Debt issue costs\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (1,372\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net cash provided by (used in)\n provided by financing activities\n \n
\n		\n \n\n \n\n 318,958\n\n \n\n \n\n \n\n (9,712\n\n )\n\n \n\n \n\n 146,103\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Effect of exchange rate changes on\n cash\n \n
\n		\n \n\n \n\n 1,466\n\n \n\n \n\n \n\n (117\n\n )\n\n \n\n \n\n 6,939\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net increase in cash and cash\n equivalents\n \n
\n		\n \n\n \n\n 40,038\n\n \n\n \n\n \n\n 4,182\n\n \n\n \n\n \n\n 183\n\n \n
\n
\n Cash and cash equivalents,\n beginning of year\n \n
\n		\n \n\n \n\n 72,970\n\n \n\n \n\n \n\n 68,788\n\n \n\n \n\n \n\n 68,605\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Cash and cash equivalents, end of\n year\n \n
\n		\n \n\n $\n\n 113,008\n\n \n\n \n\n $\n\n 72,970\n\n \n\n \n\n $\n\n 68,788\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Supplemental disclosure of cash\n flow information:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Cash paid during the year for:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Interest, net of capitalized\n interest\n \n
\n		\n \n\n $\n\n 8,991\n\n \n\n \n\n $\n\n 7,836\n\n \n\n \n\n $\n\n 506\n\n \n
\n
\n Income taxes, net of refunds\n \n
\n		\n \n\n \n\n 37,661\n\n \n\n \n\n \n\n 19,358\n\n \n\n \n\n \n\n 10,977\n\n \n
\n
\n Acquisitions:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Fair value of assets acquired, net\n of cash\n \n
\n		\n \n\n $\n\n 167,900\n\n \n\n \n\n $\n\n 60,193\n\n \n\n \n\n $\n\n 96,656\n\n \n
\n
\n Liabilities assumed\n \n
\n		\n \n\n \n\n (63,667\n\n )\n\n \n\n \n\n (35,113\n\n )\n\n \n\n \n\n (8,674\n\n )\n
\n
\n Goodwill\n \n
\n		\n \n\n \n\n 247,098\n\n \n\n \n\n \n\n 54,846\n\n \n\n \n\n \n\n 140,946\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net cash paid for acquisitions\n \n
\n		\n \n\n $\n\n 351,331\n\n \n\n \n\n $\n\n 79,926\n\n \n\n \n\n $\n\n 228,928\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n See notes to consolidated financial statements.\n
\n\n

\n
\n II-19\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL STATEMENTS\n
\n\n\n\n
\n\n Years\n Ended July 31, 2006, 2005 and 2004
\n (In thousands except share and per share amounts)\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 1.  \n\n Summary\n of Significant Accounting Policies\n
\n\n
 
\n\n
\n Nature of Operations — Brady Corporation\n (“Brady” or the “Company”) is an\n international manufacturer and marketer of identification\n solutions and specialty products which identify and protect\n premises, products and people. Brady’s core capabilities in\n manufacturing, printing systems, precision engineering and\n materials expertise make it a leading supplier to the\n Maintenance, Repair and Operations (“MRO”) market and\n to the Original Equipment Manufacturing (“OEM”) market.\n
\n\n
 
\n\n
\n Principles of Consolidation — The accompanying\n consolidated financial statements include the accounts of Brady\n Corporation and its subsidiaries (the “Company”), all\n of which are wholly-owned, with the exception of one subsidiary\n where a third party retains an insignificant investment. All\n significant intercompany accounts and transactions have been\n eliminated in consolidation.\n
\n\n
 
\n\n
\n Use of Estimates — The preparation of financial\n statements in conformity with accounting principles generally\n accepted in the United States of America requires management to\n make estimates and assumptions that affect the reported amounts\n of assets and liabilities, and disclosure of contingent assets\n and liabilities at the date of the financial statements and the\n reported amounts of revenues and expenses during the reporting\n period. Actual results could differ from those estimates.\n
\n\n
 
\n\n
\n Stock Dividend — All previously presented\n earnings per share, share amounts, and stock price data have\n been adjusted for a\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004.\n
\n\n
 
\n\n
\n Fair Value of Financial Instruments — The\n Company believes the carrying amount of its financial\n instruments (cash and cash equivalents, accounts receivable and\n accounts payable) is a reasonable estimate of the fair value of\n these instruments due to their short-term nature.\n
\n\n
 
\n\n
\n Cash Equivalents — The Company considers all\n highly liquid investments with maturities of three months or\n less when acquired to be cash equivalents, which are recorded at\n cost.\n
\n\n
 
\n\n
\n Available-for-Sale\n Securities — The Company has invested in certain\n marketable securities that are categorized as\n available-for-sale.\n These investments consist of auction-rate securities and have\n been classified as short-term investments\n available-for-sale\n for all periods presented. The amount of\n available-for-sale\n securities included in the consolidated balance sheets as of\n July 31, 2006 and July 31, 2005 was $11,500 and\n $7,100, respectively, and consists solely of auction rate\n securities.\n
\n\n
 
\n\n
\n The auction rate securities held by the Company are municipal\n bonds with either perpetual or intermediate to long-term\n maturities. The holding period of each bond is either 7,\n 28, 35, or 49 days and is determined when the security is\n issued. A Dutch auction takes place at the end of each holding\n period at which time the security can be sold or held. The\n lowest rate that sells all of the securities is the set rate for\n the subsequent holding period. If there are not sufficient\n orders to place all of the available securities, the auction is\n said to have “failed” and liquidity will be denied for\n the subsequent holding period.\n
\n\n
 
\n\n
\n The carrying value of the\n available-for-sale\n securities approximates the aggregate fair value of the\n securities and there are no unrealized gains or losses on the\n available-for-sale\n securities. There were no gains or losses on\n available-for-sales\n securities during the periods presented.\n
\n\n
 
\n\n
\n Inventories — Inventories are stated at the\n lower of cost or market. Cost has been determined using the\n last-in,\n first-out (“LIFO”) method for certain domestic\n inventories (approximately 30% of total inventories at\n July 31, 2006 and approximately 37% of total inventories at\n July 31, 2005) and the\n first-in,\n first-out (“FIFO”) or average cost methods for other\n inventories. The carrying value of certain domestic inventories\n stated at FIFO cost exceeded the value of such inventories\n stated at LIFO cost by $8,863 and $8,499 at July 31, 2006\n and 2005, respectively.\n
\n\n

\n
\n II-20\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n Depreciation — The cost of buildings and\n improvements and machinery and equipment is being depreciated\n over their estimated useful lives using primarily the\n straight-line method for financial reporting purposes. The\n estimated useful lives range from 3 to 33 years as shown\n below.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
   
\n
\n Asset Category\n
\n		\n \n\n Range of Useful Lives\n
 \n
\n
\n Buildings and improvements\n \n
\n		\n \n\n 10 to 33 Years\n \n
\n
\n Machinery and equipment\n \n
\n		\n \n\n 3 to 10 Years\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Leasehold improvements are depreciated over the shorter of the\n lease term or the estimated useful life of the asset.\n
\n\n
 
\n\n
\n Goodwill and other Intangible Assets — The cost\n of intangible assets with determinable useful lives is amortized\n to reflect the pattern of economic benefits consumed,\n principally on a straight-line basis, over the estimated periods\n benefited. Intangible assets with indefinite useful lives and\n goodwill are not subjected to amortization. These assets are\n assessed for impairment annually and when deemed necessary.\n
\n\n
 
\n\n
\n Changes in the carrying amount of goodwill for the years ended\n July 31, 2006 and 2005, are as follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                 
\n \n\n \n\n Americas\n\n \n\n \n\n Europe\n\n \n\n \n\n Asia-Pacific\n\n \n\n \n\n Total\n\n \n
 \n
\n
\n Balance as of July 31, 2004\n \n
\n		\n \n\n $\n\n 217,316\n\n \n\n \n\n $\n\n 55,848\n\n \n\n \n\n $\n\n 2,733\n\n \n\n \n\n $\n\n 275,897\n\n \n
\n
\n Goodwill acquired during the period\n \n
\n		\n \n\n \n\n 8,771\n\n \n\n \n\n \n\n 18,326\n\n \n\n \n\n \n\n 28,176\n\n \n\n \n\n \n\n 55,273\n\n \n
\n
\n Translation adjustments and other\n \n
\n		\n \n\n \n\n 756\n\n \n\n \n\n \n\n (630\n\n )\n\n \n\n \n\n 1,073\n\n \n\n \n\n \n\n 1,199\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balance as of July 31, 2005\n \n
\n		\n \n\n $\n\n 226,843\n\n \n\n \n\n $\n\n 73,544\n\n \n\n \n\n $\n\n 31,982\n\n \n\n \n\n $\n\n 332,369\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Goodwill acquired during the period\n \n
\n		\n \n\n \n\n 95,185\n\n \n\n \n\n \n\n 33,892\n\n \n\n \n\n \n\n 118,021\n\n \n\n \n\n \n\n 247,098\n\n \n
\n
\n Translation adjustments and other\n \n
\n		\n \n\n \n\n 731\n\n \n\n \n\n \n\n 4,356\n\n \n\n \n\n \n\n 3,088\n\n \n\n \n\n \n\n 8,175\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balance as of July 31, 2006\n \n
\n		\n \n\n $\n\n 322,759\n\n \n\n \n\n $\n\n 111,792\n\n \n\n \n\n $\n\n 153,091\n\n \n\n \n\n $\n\n 587,642\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Goodwill increased by $255,273 during the year ended\n July 31, 2006, including an increase of $8,175 attributable\n to the effects of foreign currency translation and adjustments\n to the preliminary allocation of the purchase price of Signs and\n Labels Ltd. (“Signs & Labels”), in Europe\n which was acquired on June 24, 2005 and to Technology Print\n Supplies, Ltd. and its associate, Technology Supply Media Co.,\n Ltd. (“TPS”) in Thailand, which were acquired on\n July 29, 2005.\n
\n\n

\n
\n II-21\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n The following acquisitions completed in fiscal 2006 increased\n goodwill by the following amounts:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
       
\n \n\n \n\n
\n Segment\n
\n		\n \n\n Goodwill\n
 \n
\n
\n STOPware, Inc.\n (“Stopware”)\n \n
\n		\n \n\n Americas\n \n\n \n\n $\n\n 2,506\n\n \n
\n
\n TruMed Technologies, Inc.\n (“TruMed”)\n \n
\n		\n \n\n Americas\n \n\n \n\n \n\n 4,134\n\n \n
\n
\n J.A.M. Plastics Inc.\n (“J.A.M.”)\n \n
\n		\n \n\n Americas\n \n\n \n\n \n\n 9,116\n\n \n
\n
\n Personnel Concepts\n \n
\n		\n \n\n Americas\n \n\n \n\n \n\n 48,154\n\n \n
\n
\n IDenticard Systems, Inc.\n (“IDenticard”)\n \n
\n		\n \n\n Americas\n \n\n \n\n \n\n 25,192\n\n \n
\n
\n Identicam Systems\n (“Identicam”)\n \n
\n		\n \n\n Americas\n \n\n \n\n \n\n 6,001\n\n \n
\n
\n Texit Danmark AS and Texit Norge\n AS (collectively “Texit”)\n \n
\n		\n \n\n Europe\n \n\n \n\n \n\n 6,043\n\n \n
\n
\n QDP Thailand Co., Ltd.\n (“QDPT”)\n \n
\n		\n \n\n Asia-Pacific\n \n\n \n\n \n\n 2,298\n\n \n
\n
\n Daewon Industry Corporation\n (“Daewon”)\n \n
\n		\n \n\n Asia-Pacific\n \n\n \n\n \n\n 18,005\n\n \n
\n
\n Accidental Health &\n Safety Pty. Ltd. and Trafalgar First Aid Pty. Ltd. (collectively\n “Accidental Health”)\n \n
\n		\n \n\n Asia-Pacific\n \n\n \n\n \n\n 6,895\n\n \n
\n
\n Carroll Australasia Pty. Ltd.\n (“Carroll”)\n \n
\n		\n \n\n Asia-Pacific\n \n\n \n\n \n\n 12,343\n\n \n
\n
\n Tradex Converting AB\n (“Tradex”)\n \n
\n		\n \n\n Americas, Europe and Asia-Pacific\n \n\n \n\n \n\n 106,411\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Goodwill increased by $56,472 during the year ended\n July 31, 2005, including an increase of $1,199 attributable\n to the effects of foreign currency translation and other. The\n acquisitions of Emed Co, Inc. (“EMED”) and Electromark\n in the Americas, ID Technologies, Inc. and TPS in Asia-Pacific,\n and Signs & Labels in Europe resulted in $427, $8,344,\n $25,926, $2,250 and $18,326 of additional goodwill, respectively.\n
\n\n
 
\n\n
\n Other intangible assets include patents, trademarks, non-compete\n agreements and other intangible assets with finite lives being\n amortized in accordance with Statement of Financial Accounting\n Standards (“SFAS”) No. 142, “Goodwill and\n Other Intangible Assets.” The net book value of these\n assets was as follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                                 
\n \n\n \n\n July 31, 2006\n\n \n\n \n\n July 31, 2005\n\n \n
\n \n\n \n\n Weighted
\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Weighted
\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n Average
\n \n		\n \n\n \n\n Gross
\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Average
\n \n		\n \n\n \n\n Gross
\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n Amortization
\n \n		\n \n\n \n\n Carrying
\n \n		\n \n\n \n\n Accumulated
\n \n		\n \n\n \n\n Net Book
\n \n		\n \n\n \n\n Amortization
\n \n		\n \n\n \n\n Carrying
\n \n		\n \n\n \n\n Accumulated
\n \n		\n \n\n \n\n Net Book
\n \n		\n \n
\n \n\n \n\n Period (Years)\n\n \n\n \n\n Amount\n\n \n\n \n\n Amortization\n\n \n\n \n\n Value\n\n \n\n \n\n Period (Years)\n\n \n\n \n\n Amount\n\n \n\n \n\n Amortization\n\n \n\n \n\n Value\n\n \n
 \n
\n
\n Amortized other intangible assets:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Patents\n \n
\n		\n \n\n \n\n 15\n\n \n\n \n\n $\n\n 7,885\n\n \n\n \n\n $\n\n (5,134\n\n )\n\n \n\n $\n\n 2,751\n\n \n\n \n\n \n\n 16\n\n \n\n \n\n $\n\n 6,830\n\n \n\n \n\n $\n\n (4,525\n\n )\n\n \n\n $\n\n 2,305\n\n \n
\n
\n Trademarks and other\n \n
\n		\n \n\n \n\n 6\n\n \n\n \n\n \n\n 3,328\n\n \n\n \n\n \n\n (2,106\n\n )\n\n \n\n \n\n 1,222\n\n \n\n \n\n \n\n 10\n\n \n\n \n\n \n\n 1,370\n\n \n\n \n\n \n\n (1,134\n\n )\n\n \n\n \n\n 236\n\n \n
\n
\n Customer relationships\n \n
\n		\n \n\n \n\n 7\n\n \n\n \n\n \n\n 109,955\n\n \n\n \n\n \n\n (17,693\n\n )\n\n \n\n \n\n 92,262\n\n \n\n \n\n \n\n 8\n\n \n\n \n\n \n\n 51,211\n\n \n\n \n\n \n\n (7,244\n\n )\n\n \n\n \n\n 43,967\n\n \n
\n
\n Purchased software\n \n
\n		\n \n\n \n\n 5\n\n \n\n \n\n \n\n 3,288\n\n \n\n \n\n \n\n (1,887\n\n )\n\n \n\n \n\n 1,401\n\n \n\n \n\n \n\n 5\n\n \n\n \n\n \n\n 3,148\n\n \n\n \n\n \n\n (1,353\n\n )\n\n \n\n \n\n 1,795\n\n \n
\n
\n Non-compete agreements\n \n
\n		\n \n\n \n\n 4\n\n \n\n \n\n \n\n 9,757\n\n \n\n \n\n \n\n (4,448\n\n )\n\n \n\n \n\n 5,309\n\n \n\n \n\n \n\n 4\n\n \n\n \n\n \n\n 6,216\n\n \n\n \n\n \n\n (3,212\n\n )\n\n \n\n \n\n 3,004\n\n \n
\n
\n Unamortized other intangible assets:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Trademarks\n \n
\n		\n \n\n \n\n N/A\n\n \n\n \n\n \n\n 31,166\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 31,166\n\n \n\n \n\n \n\n N/A\n\n \n\n \n\n \n\n 20,340\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 20,340\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n $\n\n 165,379\n\n \n\n \n\n $\n\n (31,268\n\n )\n\n \n\n $\n\n 134,111\n\n \n\n \n\n \n\n \n\n \n\n \n\n $\n\n 89,115\n\n \n\n \n\n $\n\n (17,468\n\n )\n\n \n\n $\n\n 71,647\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n The acquisitions completed in fiscal 2006 (see Note 2 for\n more information) attributed to the increases in each of the\n categories of other intangible assets listed above. The largest\n components of the increase in customer relationships relates to\n the acquisitions of Tradex, Personnel Concepts, Daewon,\n IDenticard, and Carroll which added $25,076, $6,000, $5,300,\n $5,210, and $4,512, respectively. These assets will be amortized\n over a weight average amortization period of six years. The\n increase in non-compete agreements is primarily attributable to\n the\n
\n\n

\n
\n II-22\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

\n Carroll acquisition, which added $1,594. It will be amortized\n over a five year life. The increase in unamortized trademarks\n relates mainly to the acquisitions of Personnel Concepts and\n IDenticard, adding $7,900 and $1,680, respectively.\n
\n\n
 
\n\n
\n The value of goodwill and other intangible assets in the\n consolidated balance sheet at July 31, 2006 differs from\n the value assigned to them in the allocation of purchase price\n due to the effect of fluctuations in the exchange rates used to\n translate financial statements into the United States Dollar\n between the date of acquisition and July 31, 2006.\n
\n\n
 
\n\n
\n Amortization expense of intangible assets during fiscal 2006,\n 2005, and 2004 was $13,633, $7,935, and $2,965, respectively.\n The amortization over each of the next five fiscal years is\n projected to be $19,370, $18,662, $18,098, $17,046 and $13,638\n for the years ending July 31, 2007, 2008, 2009, 2010 and\n 2011, respectively.\n
\n\n
 
\n\n
\n Impairment of Long-Lived and Other Intangible\n Assets — The Company evaluates whether events and\n circumstances have occurred that indicate the remaining\n estimated useful life of long-lived and other finite- lived\n intangible assets may warrant revision or that the remaining\n balance of an asset may not be recoverable. The measurement of\n possible impairment is based on fair value of the assets\n generally estimated by the ability to recover the balance of\n assets from expected future operating cash flows on an\n undiscounted basis. If an impairment is determined to exist, any\n related impairment loss is calculated based on the fair value of\n the asset. Based on the assessments completed in fiscal 2006,\n there have been no indications of impairment in the\n Company’s long-lived and other intangible assets.\n
\n\n
 
\n\n
\n Impairment of Goodwill — The Company evaluates\n goodwill under SFAS No. 142, which addresses the\n financial accounting and reporting standards for the acquisition\n of intangible assets outside of a business combination and for\n goodwill and other intangible assets subsequent to their\n acquisition. This accounting standard requires that goodwill not\n be amortized, but instead be tested for impairment on at least\n an annual basis.\n
\n\n
 
\n\n
\n The Company performed its annual assessments in the fourth\n quarter of the fiscal year. The assessments included comparing\n the carrying amount of net assets, including goodwill, of each\n reporting unit to its respective fair value as of the date of\n the assessment. Fair value was estimated based upon discounted\n cash flow analyses. Because the estimated fair value of each of\n the Company’s reporting units exceeded its carrying amount,\n management believes that no impairment existed as of the date of\n the latest assessment. No indications of impairment have been\n identified between the date of the latest assessment and\n July 31, 2006.\n
\n\n
 
\n\n
\n Catalog Costs — Direct response catalog costs\n are primarily capitalized and amortized over the estimated\n useful lives of the publications (generally less than one year).\n Non-direct response catalog costs are recorded as prepaid\n supplies and recorded as advertising expense as they are\n consumed (less than one year). At July 31, 2006 and 2005,\n $14,331 and $13,887, respectively of prepaid catalog costs were\n included in prepaid expenses and other current assets.\n
\n\n
 
\n\n
\n Revenue Recognition — Revenue is recognized\n when it is both earned and realized or realizable. The\n Company’s policy is to recognize revenue when title to the\n product, ownership and risk of loss have transferred to the\n customer, persuasive evidence of an arrangement exits and\n collection of the sales proceeds is reasonably assured, all of\n which generally occur upon shipment of goods to customers. The\n vast majority of the Company’s revenue relates to the sale\n of inventory to customers, and revenue is recognized when title\n and the risks and rewards of ownership pass to the customer.\n Given the nature of the Company’s business and the\n applicable rules guiding revenue recognition, the Company’s\n revenue recognition practices do not contain estimates that\n materially affect the results of operations, with the exception\n of estimated returns. The Company provides for an allowance for\n estimated product returns, which is recognized as a deduction\n from sales at the time of the sale.\n
\n\n
 
\n\n
\n Sales Incentives — In accordance with the\n Financial Accounting Standard Board’s Emerging Issues Task\n Force Issue (“EITF”)\n No. 01-9,\n “Accounting for Consideration Given by a Vendor to a\n Customer or a Reseller of the\n
\n\n

\n
\n II-23\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

\n Vendor’s Product,” the Company accounts for cash\n consideration (such as sales incentives and cash discounts)\n given to its customers or resellers as a reduction of revenue\n rather than an operating expense.\n
\n\n
 
\n\n
\n Shipping and Handling Fees and Costs — The\n Company accounts for shipping and handling fees and costs in\n accordance with EITF Issue\n No. 00-10,\n “Accounting for Shipping and Handling Fees and Costs.”\n Under EITF\n No. 00-10\n amounts billed to a customer in a sale transaction related to\n shipping costs are reported as net sales and the related costs\n incurred for shipping are reported as cost of goods sold.\n
\n\n
 
\n\n
\n Advertising Costs — Advertising costs are\n expensed as incurred, except catalog costs as outlined above.\n Advertising expense for the years ended July 31, 2006, 2005\n and 2004 were $57,253, $50,405 and $46,143, respectively.\n
\n\n
 
\n\n
\n Stock Based Compensation — Effective\n August 1, 2005, the Company adopted\n SFAS No. 123(R), “Shared Based Payment.” In\n accordance with this standard, the Company recognizes the\n compensation cost of all share-based awards using the grant-date\n fair value of those awards (the\n “fair-value-based”\n method). The expense is recognized on a straight-line basis over\n the vesting period of the award. Total stock compensation\n expense recognized by the Company during the year ended\n July 31, 2006 was $5,568 ($3,396 net of taxes). As of\n July 31, 2006, total unrecognized compensation cost related\n to share-based compensation awards was approximately $9,507, net\n of estimated forfeitures, which the Company expects to recognize\n over a weighted-average period of approximately 2.0 years.\n
\n\n
 
\n\n
\n The Company adopted the fair value recognition provisions of\n SFAS No. 123(R) using the\n modified-prospective-transition method. Under that transition\n method, compensation cost recognized during fiscal 2006\n includes: (a) compensation costs for all share-based\n payments granted prior to, but not yet vested as of\n August 1, 2005, based on the grant date fair value\n estimated in accordance with the original provisions of\n SFAS No. 123, and (b) compensation cost for all\n share-based payments granted subsequent to August 1, 2005,\n based on the grant date fair value estimated in accordance with\n the provisions of SFAS No. 123(R). Prior periods are\n not restated under this method of adoption.\n
\n\n
 
\n\n
\n Prior to August 1, 2005, the Company accounted for employee\n stock-based compensation under the intrinsic value method\n prescribed by Accounting Principles Board Opinion\n (“APB”) No. 25, “Accounting for Stock Issued\n to Employees.” Under APB No. 25, no employee stock\n option based compensation expense was recorded in the income\n statement prior to August 1, 2005 for the service-based\n options. For performance-based options, the Company recorded\n compensation expense for changes in the market value of the\n underlying common stock under APB No. 25. The compensation\n costs for the fiscal years ended July 31, 2005 and 2004\n included expense for both performance stock options and\n restricted stock.\n
\n\n
 
\n\n
\n If the Company had elected to recognize compensation cost for\n the stock option plans based on the fair value at the grant\n dates for awards under those plans, consistent with the method\n prescribed by SFAS No. 123(R), net income and net\n income per common share would have been changed to the pro forma\n amounts indicated below:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Net income:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 81,947\n\n \n\n \n\n $\n\n 50,871\n\n \n
\n
\n Stock-based compensation expense\n recorded, net of tax effect\n \n
\n		\n \n\n \n\n 3,350\n\n \n\n \n\n \n\n 1,133\n\n \n
\n
\n Pro-forma expense, net of tax\n effect\n \n
\n		\n \n\n \n\n (3,344\n\n )\n\n \n\n \n\n (2,377\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Pro-forma net income, net of tax\n effect\n \n
\n		\n \n\n $\n\n 81,953\n\n \n\n \n\n $\n\n 49,627\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n

\n
\n II-24\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Net income per Class A Common\n Share:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 1.67\n\n \n\n \n\n $\n\n 1.08\n\n \n
\n
\n Pro-forma adjustments\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (0.03\n\n )\n
\n
\n Pro-forma net income per share\n \n
\n		\n \n\n \n\n 1.67\n\n \n\n \n\n \n\n 1.05\n\n \n
\n
\n Diluted:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 1.64\n\n \n\n \n\n $\n\n 1.07\n\n \n
\n
\n Pro-forma adjustments\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (0.03\n\n )\n
\n
\n Pro-forma net income per share\n \n
\n		\n \n\n \n\n 1.64\n\n \n\n \n\n \n\n 1.04\n\n \n
\n
\n Net income per Class B Common\n Share:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 1.66\n\n \n\n \n\n $\n\n 1.06\n\n \n
\n
\n Pro-forma adjustments\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (0.03\n\n )\n
\n
\n Pro-forma net income per share\n \n
\n		\n \n\n \n\n 1.66\n\n \n\n \n\n \n\n 1.03\n\n \n
\n
\n Diluted:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 1.63\n\n \n\n \n\n $\n\n 1.05\n\n \n
\n
\n Pro-forma adjustments\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (0.03\n\n )\n
\n
\n Pro-forma net income per share\n \n
\n		\n \n\n \n\n 1.63\n\n \n\n \n\n \n\n 1.02\n\n \n
\n\n

\n\n
\n\n
 
\n\n
\n The fair value of stock options used to compute pro-forma net\n income and net income per common share disclosure is the\n estimated present value at grant date using the Black-Scholes\n option-pricing model with weighted average assumptions and the\n resulting estimated fair value for fiscal years 2005 and 2004 as\n follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Risk-free interest rate\n \n
\n		\n \n\n \n\n 3.1\n\n %\n\n \n\n \n\n 2.6\n\n %\n
\n
\n Expected volatility\n \n
\n		\n \n\n \n\n 31.1\n\n %\n\n \n\n \n\n 36.5\n\n %\n
\n
\n Dividend yield\n \n
\n		\n \n\n \n\n 1.9\n\n %\n\n \n\n \n\n 2.5\n\n %\n
\n
\n Expected option life\n \n
\n		\n \n\n \n\n 4.5 years\n\n \n\n \n\n \n\n 4.0 years\n\n \n
\n
\n Weighted average estimated fair\n value at grant date\n \n
\n		\n \n\n $\n\n 7.04\n\n \n\n \n\n $\n\n 8.81\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n The Company has estimated the fair value of its\n performance-based option awards granted after August 1,\n 2005 using the Black-Scholes option-pricing model. The\n weighted-average assumptions used in the Black-Scholes valuation\n model for fiscal year 2006 are reflected in the following table:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n Performance-Based
\n \n		\n \n\n \n\n Service-Based
\n \n		\n \n
\n
\n Black-Scholes Option Valuation Assumptions\n
\n		\n \n\n Options\n\n \n\n \n\n Options\n\n \n
 \n
\n
\n Expected term (in years)\n \n
\n		\n \n\n \n\n 3.39\n\n \n\n \n\n \n\n 5.72\n\n \n
\n
\n Expected volatility\n \n
\n		\n \n\n \n\n 31.10\n\n %\n\n \n\n \n\n 34.54\n\n %\n
\n
\n Expected dividend yield\n \n
\n		\n \n\n \n\n 1.50\n\n %\n\n \n\n \n\n 1.52\n\n %\n
\n
\n Risk-free interest rate\n \n
\n		\n \n\n \n\n 4.09\n\n %\n\n \n\n \n\n 4.53\n\n %\n
\n
\n Weighted-average market value of\n underlying stock at grant date\n \n
\n		\n \n\n $\n\n 33.89\n\n \n\n \n\n $\n\n 37.62\n\n \n
\n
\n Weighted-average exercise price\n \n
\n		\n \n\n $\n\n 33.89\n\n \n\n \n\n $\n\n 37.62\n\n \n
\n
\n Weighted-average fair value of\n options granted\n \n
\n		\n \n\n $\n\n 8.34\n\n \n\n \n\n $\n\n 13.11\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n The Company uses historical data regarding stock option exercise\n behaviors to estimate the expected term of options granted based\n on the period of time that options granted are expected to be\n outstanding. Expected\n
\n\n

\n II-25\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

\n volatilities are based on the historical volatility of the\n Company’s stock. The expected dividend yield is based on\n the Company’s historical dividend payments. The risk-free\n interest rate is based on the U.S. Treasury yield curve in\n effect on the grant date for the length of time corresponding to\n the expected term of the option. The market value is obtained by\n taking the average of the high and the low stock price on the\n date of grant.\n
\n\n
 
\n\n
\n Research and Development — Amounts expended for\n research and development are expensed as incurred.\n
\n\n
 
\n\n
\n Other comprehensive income — Other\n comprehensive income consists of foreign currency translation\n adjustments, net unrealized gains and losses from cash flow\n hedges and other investments, and their related tax effects. The\n components of accumulated other comprehensive income were as\n follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n July 31, 2006\n\n \n\n \n\n July 31, 2005\n\n \n
 \n
\n
\n Unrealized (loss) gain on cash\n flow hedges and securities in deferred compensation plans\n \n
\n		\n \n\n $\n\n (90\n\n )\n\n \n\n $\n\n 779\n\n \n
\n
\n Deferred tax on cash flow hedges\n and securities in deferred compensation plans\n \n
\n		\n \n\n \n\n 35\n\n \n\n \n\n \n\n (304\n\n )\n
\n
\n Cumulative translation adjustments\n \n
\n		\n \n\n \n\n 35,751\n\n \n\n \n\n \n\n 17,022\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Accumulated other comprehensive\n income\n \n
\n		\n \n\n $\n\n 35,696\n\n \n\n \n\n $\n\n 17,497\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Foreign Currency Translation — Foreign currency\n assets and liabilities are translated into United States dollars\n at end of period rates of exchange, and income and expense\n accounts are translated at the weighted average rates of\n exchange for the period. Resulting translation adjustments are\n included in other comprehensive income.\n
\n\n
 
\n\n
\n Income Taxes — The Company accounts for income\n taxes in accordance with SFAS No. 109,\n “Accounting for Income Taxes,” which requires an asset\n and liability approach to financial accounting and reporting for\n income taxes. Deferred income tax assets and liabilities are\n computed annually for differences between the financial\n statement and tax basis of assets and liabilities that will\n result in taxable or deductible amounts in the future based on\n enacted tax laws and rates applicable to the periods in which\n the differences are expected to affect taxable income. Valuation\n allowances are established when necessary to reduce deferred tax\n assets to the amount expected to be realized. Income tax expense\n is the tax payable or refundable for the period plus or minus\n the change during the period in deferred tax assets and\n liabilities.\n
\n\n
 
\n\n
\n Risk Management Activities — The Company is\n exposed to market risk, such as changes in interest rates and\n currency exchange rates. The Company does not hold or issue\n derivative financial instruments for trading purposes.\n
\n\n
 
\n\n
\n Currency Rate Hedging — The primary objectives\n of the foreign exchange risk management activities are to\n understand and mitigate the impact of potential foreign exchange\n fluctuations on the Company’s financial results and its\n economic well-being. While the Company’s risk management\n objectives and strategies will be driven from an economic\n perspective, the Company will attempt, where possible and\n practical, to ensure that the hedging strategies it engages in\n can be treated as “hedges” from an accounting\n perspective or otherwise result in accounting treatment where\n the earnings effect of the hedging instrument provides\n substantial offset (in the same period) to the earnings effect\n of the hedged item. Generally, these risk management\n transactions will involve the use of foreign currency\n derivatives to protect against exposure resulting from\n intercompany sales and identified inventory or other asset\n purchases.\n
\n\n
 
\n\n
\n The Company primarily utilizes forward exchange contracts with\n maturities of less than 12 months, which qualify as cash\n flow hedges. These are intended to offset the effect of exchange\n rate fluctuations on forecasted sales, inventory purchases and\n intercompany charges. The fair value of these instruments at\n July 31, 2006 and 2005 was $(355) and $618, respectively.\n
\n\n
 
\n\n
\n Hedge effectiveness is determined by how closely the changes in\n the fair value of the hedging instrument offset the changes in\n the fair value or cash flows of the hedged item. Hedge\n accounting is permitted only if the hedging relationship is\n expected to be highly effective at the inception of the hedge\n and on an on-going basis. Any ineffective portions are to be\n recognized in earnings immediately as a component of investment\n and other income.\n
\n\n

\n
\n II-26\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n New Accounting Standards — In June 2006, the\n Financial Accounting Standards Board (“FASB”) issued\n FIN 48, “Accounting for Uncertainty in Income\n Taxes.” This interpretation clarifies the accounting for\n uncertainty in income taxes recognized in an enterprise’s\n financial statements in accordance with FASB Statement\n No. 109, “Accounting for Income Taxes.” This\n interpretation establishes a threshold condition that a tax\n position must meet for any part of the benefit of that position\n to be recognized in the financial statements. This\n Interpretation also provides guidance on de-recognition,\n classification, interest and penalties, accounting in interim\n periods, disclosure and transition. This interpretation is\n effective for fiscal years beginning after December 15,\n 2006. The Company has not yet completed the process of\n evaluating the impact that will result from adopting FIN 48\n and therefore is unable to disclose the impact that adopting\n FIN 48 will have on its financial position and results of\n operations when such statement is adopted.\n
\n\n
 
\n\n
\n Reclassifications — Certain prior year amounts\n have been reclassified to conform to the current year\n presentation. The reclassifications did not impact the\n Company’s net income or net income per share.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 2.  \n\n Acquisitions\n of Businesses\n
\n\n
 
\n\n
\n The Company completed eleven business acquisitions during the\n fiscal year ended July 31, 2006 and four acquisitions\n during each of the fiscal years ended July 31, 2005 and\n 2004. All of these transactions were accounted for using the\n purchase method of accounting; therefore, the results of\n operations are included in the accompanying consolidated\n financial statements only since their acquisition dates. The\n Company is continuing to evaluate the initial purchase price\n allocations for the acquisitions completed during the fiscal\n year ended July 31, 2006, and will adjust the allocations\n as additional information relative to the fair values of assets\n and liabilities of the acquired businesses become known.\n
\n\n
 
\n\n
\n\n Fiscal\n 2006\n
\n\n
 
\n\n
\n The Company acquired the following companies in fiscal 2006 for\n a total combined purchase price, net of cash acquired, of\n $351,331. A brief description of each company acquired during\n the year is included below:\n
\n\n
 
\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
  • \n\n Stopware is located in San Jose, California and is a\n manufacturer of visitor-badging and lobby-security software used\n to identify and track visitors. Stopware was acquired in August\n 2005.\n
 
  • \n\n Texit is a manufacturer and distributor of wire markers and\n cable-management products headquartered in Odense, Denmark, with\n operations in Alesund, Norway. Texit was acquired in September\n 2005.\n
 
  • \n\n TruMed is a converter of disposable products and components for\n manufacturers in the medical device, diagnostic, personal care\n and industrial markets and is located in Burnsville, Minnesota.\n TruMed was acquired in October 2005.\n
 
  • \n\n QDPT is located in Wangnoi, Ayutthaya, Thailand and designs and\n manufactures high-precision components for the electronic,\n medical and automotive industries, specializing in precision\n laminating, stamping and contract assembly. QDPT was acquired in\n October 2005.\n
 
  • \n\n J.A.M. is located in Anaheim, California and specializes in the\n sale and manufacture of security-related accessory products\n including patented badge holders, lanyards and retractable badge\n reels. J.A.M. was acquired in December 2005.\n
 
  • \n\n Personnel Concepts is located in Pomona, California and is a\n direct marketer of labor-law compliance posters and related\n products. Personnel Concepts also offers consultative expertise\n on required communication of federal and state minimum wages,\n HIPAA privacy regulations, and EEO compliance, among other\n regulatory areas. Personnel Concepts was acquired in January\n 2006.\n
\n\n

\n
\n II-27\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
  • \n\n IDenticard is located in Lancaster, Pennsylvania and its\n affiliate Identicam is located in Markham, Ontario. The\n companies are market leaders in personal identification, access\n control and consumable identification badges. IDenticard and\n Identicam were acquired in February 2006.\n
 
  • \n\n Accidental Health is located in Glendenning, New South Wales,\n Australia and is a supplier and distributor of customized\n first-aid kits, related safety products and signage for\n commercial enterprises. Accidental Health was acquired in March\n 2006.\n
 
  • \n\n Tradex is headquarterd in Kungalv, Sweden with operations in\n Sweden, China, Korea, Mexico, the United States, Brazil, and\n Taiwan. Tradex is a leading manufacturer and supplier of\n pressure sensitive, die-cut adhesive components for the mobile\n handset and electronics industries. Tradex was acquired in May\n 2006.\n
 
  • \n\n Carroll is located in Sydney, New South Wales, Australia and is\n a supplier and distributor of identification products for the\n electrical industry, with a complete line of wiring accessory\n products including prepared wire and cable markers, termination\n and connection supplies, wire-bundling materials and electrical\n circuit protection products. Carroll also markets to the\n automotive and marine markets. Carroll was acquired in June 2006.\n
 
  • \n\n Daewon is based in Seoul, South Korea with additional operations\n in Suzhou, China. Daewon is a manufacturer and supplier of\n pressure sensitive, die-cut adhesive components for the mobile\n handset and electronics industry and was acquired in July 2006.\n
\n\n
 
\n\n
\n The following table summarizes the combined estimated fair\n values of the assets acquired and liabilities assumed at the\n date of the acquisitions.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
     
\n
\n Current assets\n \n
\n		\n \n\n $\n\n 72,882\n\n \n
\n
\n Property, plant &\n equipment\n \n
\n		\n \n\n \n\n 22,159\n\n \n
\n
\n Goodwill\n \n
\n		\n \n\n \n\n 247,098\n\n \n
\n
\n Customer relationships\n \n
\n		\n \n\n \n\n 56,538\n\n \n
\n
\n Trademarks\n \n
\n		\n \n\n \n\n 10,619\n\n \n
\n
\n Non-compete agreements\n \n
\n		\n \n\n \n\n 3,206\n\n \n
\n
\n Purchased software\n \n
\n		\n \n\n \n\n 378\n\n \n
\n
\n Patents\n \n
\n		\n \n\n \n\n 610\n\n \n
\n
\n Other intangible assets\n \n
\n		\n \n\n \n\n 1,508\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n
\n Total assets acquired\n \n
\n		\n \n\n \n\n 414,998\n\n \n
\n
\n Liabilities assumed\n \n
\n		\n \n\n \n\n 63,667\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n
\n Net assets acquired\n \n
\n		\n \n\n $\n\n 351,331\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Of the $247,098 allocated to goodwill, $28,113 associated with\n TruMed, J.A.M. and IDenticard is expected to be deductible for\n tax purposes based on preliminary analysis.\n
\n\n
 
\n\n
\n The purchase agreements for Texit, QDPT, and Stopware each\n include provisions for contingent payments based upon meeting\n certain performance conditions over a period of time subsequent\n to the acquisition. As of July 31, 2006, $1,000 has been\n recorded as a liability on the accompanying consolidated\n financial statements as a portion of the performance conditions\n for Stopware has been met. The liability was paid in September\n 2006. The remaining total contingent payments of between $2,200\n and $4,050 have not been accrued as liabilities in the\n accompanying consolidated financial statements based on the\n accounting guidance in SFAS No. 141 “Business\n Combinations.” The purchase agreements for QDPT, Stopware\n and Daewon include holdback provisions of $310, $200 and $4,350,\n respectively, that have been recorded as liabilities in the\n accompanying consolidated financial statements.\n
\n\n

\n
\n II-28\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n The following unaudited pro forma results of operations of the\n Company for the fiscal years ended July 31, 2006 and 2005,\n respectively, give effect to all acquisitions completed since\n August 1, 2005 as listed above as though the transactions\n had occurred on August 1, 2004.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n Fiscal Year Ended July 31,\n\n \n
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n
 \n
\n
\n Net sales\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 1,018,436\n\n \n\n \n\n $\n\n 816,447\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 1,189,545\n\n \n\n \n\n \n\n 1,040,327\n\n \n
\n
\n Net income\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 104,175\n\n \n\n \n\n $\n\n 81,947\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 105,883\n\n \n\n \n\n \n\n 84,171\n\n \n
\n
\n Per Class A Nonvoting Common\n Share:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic earnings per share\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 2.10\n\n \n\n \n\n $\n\n 1.67\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 2.14\n\n \n\n \n\n \n\n 1.72\n\n \n
\n
\n Diluted earnings per share\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 2.07\n\n \n\n \n\n $\n\n 1.64\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 2.10\n\n \n\n \n\n \n\n 1.69\n\n \n
\n
\n Per Class B Voting Common\n Share:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic earnings per share\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 2.09\n\n \n\n \n\n $\n\n 1.66\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 2.12\n\n \n\n \n\n \n\n 1.70\n\n \n
\n
\n Diluted earnings per share\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 2.05\n\n \n\n \n\n $\n\n 1.63\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 2.09\n\n \n\n \n\n \n\n 1.67\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n These unaudited pro forma results have been prepared for\n comparative purposes only and primarily include adjustments for\n amortization arising from the valuation of intangible assets,\n interest expense on debt issued in connection with the\n acquisitions, and the related income tax adjustments. The pro\n forma information is not necessarily indicative of the results\n that would have occurred had the acquisitions occurred at the\n beginning of the periods presented, nor is it necessarily\n indicative of future results.\n
\n\n
 
\n\n
\n\n Fiscal\n 2005\n
\n\n
 
\n\n
\n In August 2004, the Company acquired ID Technologies, a\n Singapore based manufacturer and supplier of pressure sensitive\n die-cut components and labeling products. The purchase price was\n approximately $42,800 in cash and included a holdback amount of\n $6,500, which was paid in August 2006. The holdback is recorded\n in other liabilities in the accompanying consolidated balance\n sheets at July 31, 2006 and 2005. Interest is imputed on\n the holdback at a rate of 4.9% per year. The agreement also\n provided for a contingent payment of no more than $2,500 if ID\n Technologies met certain financial targets for the fiscal year\n ended July 31, 2005. As of July 31, 2005, the\n financial targets had been met and the corresponding liability\n was reflected in the consolidated financial statements at the\n maximum payment amount and was paid to the sellers in fiscal\n 2006. Of the purchase price, $25,926 was assigned to goodwill\n and $16,017 was assigned to other intangible assets in the\n purchase price allocation. The allocation of these intangible\n assets included approximately $13,500 for customer\n relationships, $2,300 for non-compete agreements, and $217 of\n other intangible assets. There is no remaining goodwill expected\n to be deductible for tax purposes.\n
\n\n

\n
\n II-29\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n In February 2005, the Company acquired Electromark, a\n manufacturer and supplier of safety and facility identification\n products to the utility industry, headquartered in Wolcott, New\n York. The purchase price was approximately $15,100 in cash. Of\n the purchase price, a total of $3,509 was assigned to intangible\n assets other than goodwill and $8,344 was assigned to goodwill\n in the purchase price allocation. The intangible assets consist\n of approximately $1,300 of customer relationships, $1,600 of\n trademarks, and $609 of other intangible assets at the time of\n acquisition. Remaining tax goodwill of $50 is expected to be\n deductible for tax purposes.\n
\n\n
 
\n\n
\n In June 2005, the Company acquired Signs & Labels, a\n provider of stock and custom signage, custom safety signs,\n architectural signs and modular signage systems for business\n offices, schools and hospitals in the United Kingdom. The\n purchase price was approximately $24,000 in cash. Of the\n purchase price, a total of $10,955 was assigned to intangible\n assets other than goodwill and $18,039 was assigned to goodwill\n in the allocation of the purchase price. The intangible assets\n identified in the allocation of the purchase price consist of\n approximately $6,109 of customer relationships, $4,554 of\n trademarks, and $292 of non-compete and other. Immediately\n following the acquisition, all outstanding debt of\n Signs & Labels, approximately $2,500, was repaid with\n cash. There is no remaining goodwill expected to be deductible\n for tax purposes.\n
\n\n
 
\n\n
\n In July 2005, the Company acquired TPS, a manufacturer and\n supplier of pressure sensitive labels, nameplates and tags in\n Thailand. The purchase price was approximately $5,250 in cash.\n Of the purchase price, a total of $2,755 was assigned to\n intangible assets other than goodwill and $2,090 was assigned to\n goodwill in the allocation of the purchase price. Of the cash\n purchase price, a portion is being withheld until legal\n ownership of the facility owned by TPS is transferred to Brady\n Corporation. The intangible assets identified in the allocation\n of the purchase price include approximately $1,975 of customer\n relationships and $780 of non-compete agreements and other.\n Remaining tax goodwill of $1,956 is expected to be deductible\n for tax purposes based on the allocation of the purchase price.\n
\n\n
 
\n\n
\n\n Fiscal\n 2004\n
\n\n
 
\n\n
\n In September 2003, the Company acquired Brandon International,\n Inc. (“Brandon”) headquartered in Baldwin Park,\n California, with international operations in Mexico and\n Singapore. Brandon is a manufacturer of die-cut products. In\n October 2003, the Company acquired Prinzing Enterprises, Inc.\n (“Prinzing”) located in Warrenville, Illinois.\n Prinzing is a manufacturer of lockout/tagout products, signs and\n other safety devices. In November 2003, the Company acquired\n B.I.G, headquartered in the United Kingdom, a provider of\n badging and business card solutions. The combined purchase price\n for these acquisitions was approximately $31,700 in cash\n (including $1,000 paid in February 2005). The Prinzing\n acquisition agreement included provisions for contingent\n payments up to a maximum $1,500 based on certain performance\n criteria during fiscal year 2004. As of May 2004, these criteria\n were met and the entire amount was paid to the sellers. The\n allocation of the purchase price resulted in the allocation to\n intangible assets as follows: $27,000 to goodwill, $500 to\n trademarks, $300 to patents, $200 to non-compete agreements and\n $2,900 to customer lists. Remaining combined tax goodwill of\n $20,400 is expected to be deductible for tax purposes based on\n the allocation of the purchase price.\n
\n\n
 
\n\n
\n In May 2004, the Company acquired EMED for cash with a purchase\n price of $191,800, net of cash acquired. EMED is a direct\n marketer and manufacturer of identification, safety and facility\n management products headquartered in Buffalo, New York. The\n funds used to finance the purchase price came from borrowings on\n the Company’s revolving credit facility and from working\n capital.\n
\n\n

\n
\n II-30\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n The following table summarizes the estimated fair values of the\n assets acquired and liabilities assumed at the date of the EMED\n acquisition. The difference between the purchase price of\n $191,800 and the net assets acquired value of $193,800 relates\n to transaction costs.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
     
\n
\n Current assets\n \n
\n		\n \n\n $\n\n 40,036\n\n \n
\n
\n Property, plant &\n equipment\n \n
\n		\n \n\n \n\n 6,800\n\n \n
\n
\n Other intangible assets\n \n
\n		\n \n\n \n\n 35,300\n\n \n
\n
\n Goodwill\n \n
\n		\n \n\n \n\n 114,331\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n
\n Total assets acquired\n \n
\n		\n \n\n \n\n 196,467\n\n \n
\n
\n Liabilities assumed\n \n
\n		\n \n\n \n\n 2,667\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n
\n Net assets acquired\n \n
\n		\n \n\n $\n\n 193,800\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n The following unaudited pro-forma combined information, assuming\n the EMED acquisition was completed on August 1, 2003, is\n provided for comparative purposes only and is not necessarily\n indicative of the results that would have occurred had the\n acquisition occurred at the beginning of the periods presented,\n nor is it necessarily indicative of future results.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
     
\n \n\n \n\n Fiscal Year Ended
\n \n		\n \n
\n \n\n \n\n July 31, 2004\n\n \n
 \n
\n
\n Net sales\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 671,219\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 714,848\n\n \n
\n
\n Net income\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n $\n\n 50,871\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 57,091\n\n \n
\n
\n Per Class A Nonvoting Common\n Share:\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n Basic earnings per share\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n \n\n 1.08\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 1.21\n\n \n
\n
\n Diluted earnings per share\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n \n\n 1.07\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 1.20\n\n \n
\n
\n Per Class B Voting Common\n Share:\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n Basic earnings per share\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n \n\n 1.06\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 1.19\n\n \n
\n
\n Diluted earnings per share\n \n
\n		\n \n\n \n\n \n\n \n
\n
\n As reported\n \n
\n		\n \n\n \n\n 1.05\n\n \n
\n
\n Pro forma\n \n
\n		\n \n\n \n\n 1.18\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Of the $35,300 of acquired intangible assets, $13,900 was\n assigned to trademarks that are not subject to amortization,\n $21,100 was assigned to customer relationships and is being\n amortized over 7 years and $300 was assigned to non-compete\n agreements, which are amortized over 2 years. Remaining tax\n goodwill of $83,523 is expected to be deductible for tax\n purposes over the next eight years.\n
\n\n

\n
\n II-31\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n\n Subsequent\n Event\n
\n\n
 
\n\n
\n On August 15, 2006, the Company completed the acquisition\n of Comprehensive Identification Products, Inc.\n (“CIPI”), headquartered in Burlington, Massachusetts.\n CIPI is a market leader in badging accessories used to identify\n and track employees and visitors in a variety of settings\n including businesses, healthcare facilities and government\n buildings. Founded in 1966, CIPI had sales of approximately\n $31.0 million in fiscal 2005 and currently employs\n approximately 900 people at operations in the United States, the\n Netherlands, Hong Kong and China.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 3.  \n\n Employee\n Benefit Plans\n
\n\n
 
\n\n
\n The Company provides postretirement medical, dental and vision\n benefits (the “Plan”) for all regular full and\n part-time domestic employees (including spouses) who retire on\n or after attainment of age 55 with 15 years of\n credited service. Credited service begins accruing at the later\n of age 40 or date of hire. All active employees first\n eligible to retire after July 31, 1992, are covered by an\n unfunded, contributory postretirement healthcare plan where\n employer contributions will not exceed a defined dollar benefit\n amount, regardless of the cost of the program. Employer\n contributions to the plan are based on the employee’s age\n and service at retirement.\n
\n\n
 
\n\n
\n The Company accounts for postretirement benefits other than\n pensions in accordance with SFAS No. 106,\n “Employers’ Accounting for Postretirement Benefits\n Other than Pensions.” The Company funds benefit costs on a\n pay-as-you-go basis.\n
\n\n
 
\n\n
\n The following table provides a reconciliation of the changes in\n the Plan’s accumulated benefit obligations during the years\n ended July 31:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n
 \n
\n
\n Obligation at beginning of year\n \n
\n		\n \n\n $\n\n 10,909\n\n \n\n \n\n $\n\n 12,606\n\n \n
\n
\n Service cost\n \n
\n		\n \n\n \n\n 1,049\n\n \n\n \n\n \n\n 895\n\n \n
\n
\n Interest cost\n \n
\n		\n \n\n \n\n 675\n\n \n\n \n\n \n\n 689\n\n \n
\n
\n Actuarial (gain) loss\n \n
\n		\n \n\n \n\n 723\n\n \n\n \n\n \n\n (373\n\n )\n
\n
\n Other events (Medicare Part D)\n \n
\n		\n \n\n \n\n 0\n\n \n\n \n\n \n\n (2,227\n\n )\n
\n
\n Benefit payments\n \n
\n		\n \n\n \n\n (706\n\n )\n\n \n\n \n\n (681\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Obligation at end of fiscal year\n \n
\n		\n \n\n $\n\n 12,650\n\n \n\n \n\n $\n\n 10,909\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n The following table outlines the unfunded status of the Plan\n recorded as a long-term liability in the accompanying\n consolidated balance sheets as of July 31, 2006 and 2005:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n
 \n
\n
\n Unfunded status at July 31\n \n
\n		\n \n\n $\n\n 12,650\n\n \n\n \n\n $\n\n 10,909\n\n \n
\n
\n Unrecognized net actuarial gain\n \n
\n		\n \n\n \n\n 2,720\n\n \n\n \n\n \n\n 3,470\n\n \n
\n
\n Unrecognized prior service gain\n \n
\n		\n \n\n \n\n 310\n\n \n\n \n\n \n\n 343\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Accumulated postretirement benefit\n obligation (“APBO”) liability\n \n
\n		\n \n\n $\n\n 15,680\n\n \n\n \n\n $\n\n 14,722\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n

\n
\n II-32\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n Net periodic benefit cost for the Plan for fiscal years 2006,\n 2005 and 2004 includes the following components:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Years Ended July 31,\n\n \n
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Net periodic postretirement\n benefit cost included the following components:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Service cost — benefits\n attributed to service during the period\n \n
\n		\n \n\n $\n\n 1,049\n\n \n\n \n\n $\n\n 895\n\n \n\n \n\n $\n\n 866\n\n \n
\n
\n Prior service cost\n \n
\n		\n \n\n \n\n (33\n\n )\n\n \n\n \n\n (33\n\n )\n\n \n\n \n\n 22\n\n \n
\n
\n Interest cost on accumulated\n postretirement benefit obligation\n \n
\n		\n \n\n \n\n 675\n\n \n\n \n\n \n\n 689\n\n \n\n \n\n \n\n 719\n\n \n
\n
\n Amortization of unrecognized gain\n \n
\n		\n \n\n \n\n (27\n\n )\n\n \n\n \n\n (127\n\n )\n\n \n\n \n\n (54\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Periodic postretirement benefit\n cost\n \n
\n		\n \n\n $\n\n 1,664\n\n \n\n \n\n $\n\n 1,424\n\n \n\n \n\n $\n\n 1,553\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n The following assumptions were used in accounting for the plan:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Weighted average discount rate\n used in determining accumulated postretirement benefit\n obligation liability\n \n
\n		\n \n\n \n\n 6.0\n\n %\n\n \n\n \n\n 5.0\n\n %\n\n \n\n \n\n 6.0\n\n %\n
\n
\n Weighted average discount rate\n used in determining net periodic benefit cost\n \n
\n		\n \n\n \n\n 5.0\n\n %\n\n \n\n \n\n 6.0\n\n %\n\n \n\n \n\n 6.0\n\n %\n
\n
\n Assumed health care trend rate\n used to measure APBO at July 31\n \n
\n		\n \n\n \n\n 10.0\n\n %\n\n \n\n \n\n 11.0\n\n %\n\n \n\n \n\n 12.0\n\n %\n
\n
\n Rate to which cost trend rate is\n assumed to decline (the ultimate trend rate)\n \n
\n		\n \n\n \n\n 5.5\n\n %\n\n \n\n \n\n 5.5\n\n %\n\n \n\n \n\n 5.5\n\n %\n
\n
\n Fiscal year the ultimate trend\n rate is reached\n \n
\n		\n \n\n \n\n 2011\n\n \n\n \n\n \n\n 2011\n\n \n\n \n\n \n\n 2011\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n The assumed health care cost trend rate has a significant effect\n on the amounts reported for the Plan. A one-percentage point\n change in assumed health care cost trend rates would have the\n following effects:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n One-Percentage
\n \n		\n \n\n \n\n One-Percentage
\n \n		\n \n
\n \n\n \n\n Point Increase\n\n \n\n \n\n Point Decrease\n\n \n
 \n
\n
\n Effect on future service and\n interest cost\n \n
\n		\n \n\n $\n\n 141\n\n \n\n \n\n $\n\n (124\n\n )\n
\n
\n Effect on accumulated\n postretirement benefit obligation at July 31, 2006\n \n
\n		\n \n\n \n\n 826\n\n \n\n \n\n \n\n (732\n\n )\n
\n\n
\n\n
\n\n
 
\n\n
\n The following benefit payments, which reflect expected future\n service, as appropriate, are expected to be paid during the\n years ending July 31:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Prior to
\n \n		\n \n\n \n\n After
\n \n		\n \n\n \n\n Impact of
\n \n		\n \n
\n \n\n \n\n Medicare Part D\n\n \n\n \n\n Medicare Part D\n\n \n\n \n\n Medicare Part D\n\n \n
 \n
\n
\n 2007\n \n
\n		\n \n\n $\n\n 750\n\n \n\n \n\n $\n\n 628\n\n \n\n \n\n $\n\n (122\n\n )\n
\n
\n 2008\n \n
\n		\n \n\n \n\n 798\n\n \n\n \n\n \n\n 663\n\n \n\n \n\n \n\n (135\n\n )\n
\n
\n 2009\n \n
\n		\n \n\n \n\n 854\n\n \n\n \n\n \n\n 707\n\n \n\n \n\n \n\n (147\n\n )\n
\n
\n 2010\n \n
\n		\n \n\n \n\n 905\n\n \n\n \n\n \n\n 743\n\n \n\n \n\n \n\n (162\n\n )\n
\n
\n 2011\n \n
\n		\n \n\n \n\n 951\n\n \n\n \n\n \n\n 778\n\n \n\n \n\n \n\n (173\n\n )\n
\n
\n 2012 through 2016\n \n
\n		\n \n\n \n\n 4,908\n\n \n\n \n\n \n\n 3,971\n\n \n\n \n\n \n\n (937\n\n )\n
\n\n
\n\n
\n\n
 
\n\n
\n In December 2003, the United States enacted into law the\n Medicare Prescription Drug, Improvement and Modernization Act of\n 2003 (the “Act”). The Act establishes a prescription\n drug benefit under Medicare (Medicare Part D) as well\n as a federal subsidy to sponsors of retiree health care benefit\n plans that provide a benefit that is at least actuarially\n equivalent to Medicare Part D.\n
\n\n
 
\n\n
\n In May 2004, the Financial Accounting Standards Board issued FSP\n 106-2, “Accounting and Disclosure Requirements Related to\n the Medicare Prescription Drug, Improvement and Modernization\n Act of 2003”. FSP 106-\n
\n\n

\n
\n II-33\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

\n 2 requires companies to account for the effect of the subsidy on\n benefits attributable to past service as an actuarial experience\n gain and as a reduction of the service cost component of net\n postretirement health care costs for amounts attributable to\n current service, if the benefit provided is at least actuarially\n equivalent to Medicare Part D.\n
\n\n
 
\n\n
\n The Company adopted FSP 106-2 effective with the fiscal year\n beginning August 1, 2004. The Company determined that\n benefits provided to certain participants are expected to be at\n least actuarially equivalent to Medicare Part D, and,\n accordingly, the Company will be entitled to a subsidy. The\n expected subsidy reduced the accumulated postretirement benefit\n obligation at August 1, 2004 by approximately $2,200 and\n net periodic cost for the year ended July 31, 2006 and 2005\n by $409 and $463, respectively, as compared with the amount\n calculated without considering the effects of the subsidy.\n
\n\n
 
\n\n
\n Assumptions used to develop these reductions include those used\n in the determination of the annual expense under\n SFAS No. 106, “Employers’ Accounting for\n Postretirement Benefits other than Pensions,” and also\n include expectations of how the federal program would ultimately\n operate.\n
\n\n
 
\n\n
\n The Company has retirement and profit-sharing plans covering\n substantially all full-time domestic employees and certain of\n its foreign subsidiaries. Contributions to the plans are\n determined annually or quarterly, according to the respective\n plans, based on earnings of the respective companies and\n employee contributions. At July 31, 2006 and 2005, $5,928\n and $5,048, respectively, of accrued profit-sharing\n contributions were included in other current liabilities in the\n accompanying consolidated balance sheets.\n
\n\n
 
\n\n
\n The Company also has deferred compensation plans for directors,\n officers and key executives which are discussed below. At\n July 31, 2006 and 2005, $7,853 and $7,999, respectively, of\n deferred compensation was included in current and other\n long-term liabilities on the accompanying consolidated balance\n sheets.\n
\n\n
 
\n\n
\n During fiscal 1998, the Company adopted a new deferred\n compensation plan that invests solely in shares of the\n Company’s Class A Nonvoting Common Stock. Participants\n in a predecessor phantom stock plan were allowed to convert\n their balances in the old plan to this new plan. The new plan\n was funded initially by the issuance of shares of Class A\n Nonvoting Common Stock to a Rabbi Trust. All deferrals into the\n new plan result in purchases of Class A Nonvoting Common\n Stock by the Rabbi Trust. No deferrals are allowed into a\n predecessor plan. Shares held by the Rabbi Trust are distributed\n to participants upon separation from the Company as defined in\n the plan agreement.\n
\n\n
 
\n\n
\n During fiscal 2002, the Company adopted a new deferred\n compensation plan that allows future contributions to be\n invested in shares of the Company’s Class A Nonvoting\n Common Stock or in certain other investment vehicles. Prior\n deferred compensation deferrals must remain in the\n Company’s Class A Nonvoting Common Stock. All\n participant deferrals into the new plan result in purchases of\n Class A Nonvoting Common Stock or certain other investment\n vehicles by the Rabbi Trust. Balances held by the Rabbi Trust\n are distributed to participants upon separation from the Company\n as defined in the plan agreement. On May 1, 2006, the plan\n was amended to require that deferrals into Brady stock must\n remain in Brady stock and be distributed in shares of Brady\n stock.\n
\n\n
 
\n\n
\n The amounts charged to expense for the retirement, profit\n sharing and deferred compensation plans described above were\n $9,862, $10,980, and $9,373 during the years ended July 31,\n 2006, 2005 and 2004, respectively.\n
\n\n

\n
\n II-34\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 4.  \n\n Income\n Taxes\n
\n\n
 
\n\n
\n\n Income\n taxes consist of the following:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Years Ended July 31,\n\n \n
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Currently payable:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Federal\n \n
\n		\n \n\n $\n\n 14,201\n\n \n\n \n\n $\n\n 10,002\n\n \n\n \n\n $\n\n 2,645\n\n \n
\n
\n Foreign\n \n
\n		\n \n\n \n\n 26,143\n\n \n\n \n\n \n\n 24,286\n\n \n\n \n\n \n\n 10,903\n\n \n
\n
\n State\n \n
\n		\n \n\n \n\n 2,012\n\n \n\n \n\n \n\n 1,836\n\n \n\n \n\n \n\n 736\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n 42,356\n\n \n\n \n\n \n\n 36,124\n\n \n\n \n\n \n\n 14,284\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Deferred provision (credit):\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Federal\n \n
\n		\n \n\n \n\n (75\n\n )\n\n \n\n \n\n (1,215\n\n )\n\n \n\n \n\n 1,075\n\n \n
\n
\n Foreign\n \n
\n		\n \n\n \n\n (472\n\n )\n\n \n\n \n\n (855\n\n )\n\n \n\n \n\n 3,558\n\n \n
\n
\n State\n \n
\n		\n \n\n \n\n (1,296\n\n )\n\n \n\n \n\n (583\n\n )\n\n \n\n \n\n 539\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n (1,843\n\n )\n\n \n\n \n\n (2,653\n\n )\n\n \n\n \n\n 5,172\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n $\n\n 40,513\n\n \n\n \n\n $\n\n 33,471\n\n \n\n \n\n $\n\n 19,456\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Deferred income taxes result from temporary differences in the\n recognition of revenues and expenses for financial statement and\n income tax purposes.\n
\n\n
 
\n\n
\n\n Income\n before income taxes consists of the following:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Years Ended July 31,\n\n \n
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Domestic\n \n
\n		\n \n\n $\n\n 46,790\n\n \n\n \n\n $\n\n 36,985\n\n \n\n \n\n $\n\n 15,911\n\n \n
\n
\n Foreign\n \n
\n		\n \n\n \n\n 97,898\n\n \n\n \n\n \n\n 78,433\n\n \n\n \n\n \n\n 54,416\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n $\n\n 144,688\n\n \n\n \n\n $\n\n 115,418\n\n \n\n \n\n $\n\n 70,327\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n

\n
\n II-35\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n The approximate tax effects of temporary differences are as\n follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n July 31, 2006\n\n \n
\n \n\n \n\n Assets\n\n \n\n \n\n Liabilities\n\n \n\n \n\n Total\n\n \n
 \n
\n
\n Inventories\n \n
\n		\n \n\n $\n\n 5,058\n\n \n\n \n\n \n\n —\n\n \n\n \n\n $\n\n 5,058\n\n \n
\n
\n Prepaid catalog costs\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n $\n\n (2,196\n\n )\n\n \n\n \n\n (2,196\n\n )\n
\n
\n Employee benefits\n \n
\n		\n \n\n \n\n 3,258\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 3,258\n\n \n
\n
\n Allowance for doubtful accounts\n \n
\n		\n \n\n \n\n 774\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 774\n\n \n
\n
\n Other, net\n \n
\n		\n \n\n \n\n 2,698\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 2,698\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Current\n \n
\n		\n \n\n \n\n 11,788\n\n \n\n \n\n \n\n (2,196\n\n )\n\n \n\n \n\n 9,592\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Depreciation\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (4,300\n\n )\n\n \n\n \n\n (4,300\n\n )\n
\n
\n Amortization\n \n
\n		\n \n\n \n\n 12,917\n\n \n\n \n\n \n\n (20,232\n\n )\n\n \n\n \n\n (7,315\n\n )\n
\n
\n Capitalized R&D expenditures\n \n
\n		\n \n\n \n\n 2,800\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 2,800\n\n \n
\n
\n Deferred compensation\n \n
\n		\n \n\n \n\n 13,446\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 13,446\n\n \n
\n
\n Postretirement benefits\n \n
\n		\n \n\n \n\n 7,490\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 7,490\n\n \n
\n
\n Currency translation adjustment\n \n
\n		\n \n\n \n\n 35\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 35\n\n \n
\n
\n Tax loss carryforwards\n \n
\n		\n \n\n \n\n 17,300\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 17,300\n\n \n
\n
\n Less valuation allowance\n \n
\n		\n \n\n \n\n (15,668\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n (15,668\n\n )\n
\n
\n Other, net\n \n
\n		\n \n\n \n\n 589\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 589\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Noncurrent\n \n
\n		\n \n\n \n\n 38,909\n\n \n\n \n\n \n\n (24,532\n\n )\n\n \n\n \n\n 14,377\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n $\n\n 50,697\n\n \n\n \n\n $\n\n (26,728\n\n )\n\n \n\n $\n\n 23,969\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n July 31, 2005\n\n \n
\n \n\n \n\n Assets\n\n \n\n \n\n Liabilities\n\n \n\n \n\n Total\n\n \n
 \n
\n
\n Inventories\n \n
\n		\n \n\n $\n\n 3,203\n\n \n\n \n\n \n\n —\n\n \n\n \n\n $\n\n 3,203\n\n \n
\n
\n Prepaid catalog costs\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n $\n\n (2,130\n\n )\n\n \n\n \n\n (2,130\n\n )\n
\n
\n Employee benefits\n \n
\n		\n \n\n \n\n 1,675\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 1,675\n\n \n
\n
\n Allowance for doubtful accounts\n \n
\n		\n \n\n \n\n 391\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 391\n\n \n
\n
\n Other, net\n \n
\n		\n \n\n \n\n 3,016\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 3,016\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Current\n \n
\n		\n \n\n \n\n 8,285\n\n \n\n \n\n \n\n (2,130\n\n )\n\n \n\n \n\n 6,155\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Depreciation\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n (4,691\n\n )\n\n \n\n \n\n (4,691\n\n )\n
\n
\n Amortization\n \n
\n		\n \n\n \n\n 20,352\n\n \n\n \n\n \n\n (8,966\n\n )\n\n \n\n \n\n 11,386\n\n \n
\n
\n Capital R&D expenditures\n \n
\n		\n \n\n \n\n 3,266\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 3,266\n\n \n
\n
\n Deferred compensation\n \n
\n		\n \n\n \n\n 11,205\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 11,205\n\n \n
\n
\n Postretirement benefits\n \n
\n		\n \n\n \n\n 7,232\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 7,232\n\n \n
\n
\n Currency translation adjustment\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (304\n\n )\n\n \n\n \n\n (304\n\n )\n
\n
\n Tax loss carryforwards\n \n
\n		\n \n\n \n\n 5,038\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 5,038\n\n \n
\n
\n Less valuation allowance\n \n
\n		\n \n\n \n\n (4,877\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n (4,877\n\n )\n
\n
\n Other, net\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (545\n\n )\n\n \n\n \n\n (545\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Noncurrent\n \n
\n		\n \n\n \n\n 42,216\n\n \n\n \n\n \n\n (14,506\n\n )\n\n \n\n \n\n 27,710\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n $\n\n 50,501\n\n \n\n \n\n $\n\n (16,636\n\n )\n\n \n\n $\n\n 33,865\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n

\n
\n II-36\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n The valuation allowance increased $10,791 during the fiscal year\n ended July 31, 2006 and decreased $657 and $740 during the\n fiscal years ended July 31, 2005 and 2004, respectively.\n
\n\n
 
\n\n
\n Tax loss carry forwards at July 31, 2006 are comprised of\n foreign net operating losses of approximately $51,904, of which\n $47,213 have no expiration date. The remaining balance relates\n to state net operating losses of $46,937 and state credits of\n $1,404. The Company expects to utilize all credits; however,\n state net operating losses will begin to expire in the fiscal\n year ending July 31, 2007. Of the $51,904 of valuation\n allowances at July 31, 2006, $36,677 relates to net\n operating losses acquired with the acquisition of Tradex. In the\n future, if the Company determines that the realization of these\n deferred tax assets is more likely than not, the reversal of the\n related valuation allowance will reduce goodwill instead of the\n provision for taxes.\n
\n\n
 
\n\n
\n\n Rate\n Reconciliation\n
\n\n
 
\n\n
\n A reconciliation of the tax computed by applying the statutory\n U.S. Federal income tax rate to income before income taxes\n to the total income tax provision is as follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Years Ended July 31,\n\n \n
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Tax at statutory rate\n \n
\n		\n \n\n \n\n 35.0\n\n %\n\n \n\n \n\n 35.0\n\n %\n\n \n\n \n\n 35.0\n\n %\n
\n
\n State income taxes, net of Federal\n tax benefit\n \n
\n		\n \n\n \n\n 0.2\n\n %\n\n \n\n \n\n 0.7\n\n %\n\n \n\n \n\n 1.2\n\n %\n
\n
\n International losses with no\n related tax benefits\n \n
\n		\n \n\n \n\n 0.0\n\n %\n\n \n\n \n\n 0.0\n\n %\n\n \n\n \n\n 0.4\n\n %\n
\n
\n International rate differential\n \n
\n		\n \n\n \n\n (6.8\n\n )%\n\n \n\n \n\n (4.1\n\n )%\n\n \n\n \n\n (7.2\n\n )%\n
\n
\n Rate variances arising from\n foreign subsidiary distributions\n \n
\n		\n \n\n \n\n 0.2\n\n %\n\n \n\n \n\n (1.1\n\n )%\n\n \n\n \n\n 1.4\n\n %\n
\n
\n Resolution of prior period tax\n matters\n \n
\n		\n \n\n \n\n 0.0\n\n %\n\n \n\n \n\n (0.6\n\n )%\n\n \n\n \n\n (4.2\n\n )%\n
\n
\n Other, net\n \n
\n		\n \n\n \n\n (0.6\n\n )%\n\n \n\n \n\n (0.9\n\n )%\n\n \n\n \n\n 1.1\n\n %\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Effective tax rate\n \n
\n		\n \n\n \n\n 28.0\n\n %\n\n \n\n \n\n 29.0\n\n %\n\n \n\n \n\n 27.7\n\n %\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n Unremitted\n Earnings\n
\n\n
 
\n\n
\n The Company’s policy is to remit earnings from foreign\n subsidiaries only to the extent any resultant foreign income\n taxes are creditable in the United States. Accordingly, the\n Company does not currently provide for the additional United\n States and foreign income taxes which would become payable upon\n remission of undistributed earnings of foreign subsidiaries.\n
\n\n
 
\n\n
\n The cumulative undistributed earnings of such subsidiaries at\n July 31, 2006 amounted to approximately $233,169.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 5.  \n\n Long-Term\n Obligations\n
\n\n
 
\n\n
\n On October 5, 2006, the Company entered into a\n $200.0 million multi-currency revolving loan agreement with\n a group of five banks that replaced the Company’s previous\n credit facility that had been entered into on March 31,\n 2004 and amended on January 19, 2006. At the Company’s\n option, and subject to certain standard conditions, the\n available amount under the new credit facility may be increased\n from $200.0 million up to $300.0 million. Under the\n new 5-year\n agreement, which has a final maturity date of October 5,\n 2011, the Company has the option to select either a base\n interest rate (based upon the higher of the federal funds rate\n plus one-half of 1% or the prime rate of Bank of America) or a\n Eurocurrency interest rate (at the LIBOR rate plus a margin\n based on the Company’s consolidated leverage ratio). A\n commitment fee is payable on the unused amount of the facility.\n The agreement requires the Company to maintain two financial\n covenants. As of October 5, 2006, the Company was in\n compliance with the covenants of the new agreement, and as of\n July 31, 2006, the Company was in compliance with the\n covenants of the previous credit facility. The new agreement\n restricts the amount of certain types of payments, including\n dividends, which can be made annually to $50.0 million plus\n an amount equal to 75% of consolidated net\n
\n\n

\n
\n II-37\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

\n income for the prior fiscal year of the Company. The Company\n believes that based on historic dividend practice, this\n restriction would not impede the Company in following a similar\n dividend practice in the future. As of July 31, 2006 and\n October 5, 2006, there were $0 and $10.0 million of\n outstanding borrowings under the previous credit facility or the\n new credit facility, respectively.\n
\n\n
 
\n\n
\n On February 14, 2006, the Company completed the private\n placement of $200.0 million in ten-year fixed notes at 5.3%\n interest to institutional investors. The notes will be amortized\n in equal installments over seven years, beginning in 2010 with\n interest payable on the notes semiannually on August 14 and\n February 14, beginning in August 2006. The notes have been\n fully and unconditionally guaranteed on an unsecured basis by\n the Company’s domestic subsidiaries. The Company used the\n net proceeds of the offering to finance acquisitions completed\n in fiscal 2006 (see Note 2 for more information) and\n intends to use the remainder to fund future acquisitions and for\n general corporate purposes. This private placement was exempt\n from the registration requirements of the Securities Act of\n 1933. The notes were not registered for resale and may not be\n resold absent such registration or an applicable exemption from\n the registration requirements of the Securities Act of 1933 and\n applicable state securities laws. The notes have certain\n prepayment penalties for repaying them prior to the maturity\n date. The agreement also requires the Company to maintain a\n financial covenant. As of July 31, 2006, the Company was in\n compliance with this covenant.\n
\n\n
 
\n\n
\n On June 30, 2004, the Company finalized a debt offering of\n $150.0 million of 5.14% fixed rate unsecured senior notes\n due in 2014 in an offering exempt from the registration\n requirements of the Securities Act of 1933. The debt offering\n was in conjunction with the Company’s acquisition of EMED.\n The notes will be repaid over 7 years beginning in 2008\n with interest payable on the notes semiannually on June 28 and\n December 28 beginning in December 2004. The Company used the\n proceeds of the offering to reduce outstanding indebtedness\n under the Company’s revolving credit facilities. The debt\n has certain prepayment penalties for repaying the debt prior to\n its maturity date. The agreement also requires the Company to\n maintain a financial covenant. As of July 31, 2006, the\n Company was in compliance with this covenant.\n
\n\n
 
\n\n
\n Long-term obligations consist of the following as of\n July 31:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n
 \n
\n
\n Various Bank loans\n \n
\n		\n \n\n $\n\n 38\n\n \n\n \n\n $\n\n 30\n\n \n
\n
\n Fixed Debt\n \n
\n		\n \n\n \n\n 350,000\n\n \n\n \n\n \n\n 150,000\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n 350,038\n\n \n\n \n\n \n\n 150,030\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Less Current maturities\n \n
\n		\n \n\n $\n\n (20\n\n )\n\n \n\n $\n\n (4\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n $\n\n 350,018\n\n \n\n \n\n $\n\n 150,026\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n The fair value of the Company’s long-term obligations\n approximates $340,483. The fair value of the Company’s\n long-term obligations is estimated based on quoted market prices\n for the same or similar issue and on the current rates offered\n for debt of the same maturities.\n
\n\n
 
\n\n
\n Maturities on long-term debt are as follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
     
\n
\n Years Ending July 31,\n
\n		\n \n\n \n\n \n
 \n
\n
\n 2007\n \n
\n		\n \n\n $\n\n 20\n\n \n
\n
\n 2008\n \n
\n		\n \n\n \n\n 21,443\n\n \n
\n
\n 2009\n \n
\n		\n \n\n \n\n 21,432\n\n \n
\n
\n 2010\n \n
\n		\n \n\n \n\n 50,000\n\n \n
\n
\n 2011\n \n
\n		\n \n\n \n\n 50,000\n\n \n
\n
\n Thereafter\n \n
\n		\n \n\n \n\n 207,143\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n $\n\n 350,038\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n

\n
\n II-38\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n The Company had outstanding letters of credit of $2,887 and\n $2,114 at July 31, 2006 and 2005, respectively.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 6.  \n\n Stockholders’\n Investment\n
\n\n
 
\n\n
\n Information as to the Company’s capital stock at\n July 31, 2006 and 2005 is as follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                         
\n \n\n \n\n July 31, 2006\n\n \n\n \n\n July 31, 2005\n\n \n
\n \n\n \n\n Shares
\n \n		\n \n\n \n\n Shares
\n \n		\n \n\n \n\n \n\n \n\n \n\n Shares
\n \n		\n \n\n \n\n Shares
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n Authorized\n\n \n\n \n\n Issued\n\n \n\n \n\n Amount\n\n \n\n \n\n Authorized\n\n \n\n \n\n Issued\n\n \n\n \n\n Amount\n\n \n
 \n
\n
\n Preferred Stock, $.01 par\n value\n \n
\n		\n \n\n \n\n 5,000,000\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n 5,000,000\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Cumulative Preferred Stock:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n 6% Cumulative\n \n
\n		\n \n\n \n\n 5,000\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n 5,000\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n 1972 Series\n \n
\n		\n \n\n \n\n 10,000\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n 10,000\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n 1979 Series\n \n
\n		\n \n\n \n\n 30,000\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n 30,000\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Common Stock, $.01 par value:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class A Nonvoting\n \n
\n		\n \n\n \n\n 100,000,000\n\n \n\n \n\n \n\n 50,481,743\n\n \n\n \n\n $\n\n 505\n\n \n\n \n\n \n\n 100,000,000\n\n \n\n \n\n \n\n 45,877,543\n\n \n\n \n\n $\n\n 458\n\n \n
\n
\n Class B Voting\n \n
\n		\n \n\n \n\n 10,000,000\n\n \n\n \n\n \n\n 3,538,628\n\n \n\n \n\n \n\n 35\n\n \n\n \n\n \n\n 10,000,000\n\n \n\n \n\n \n\n 3,538,628\n\n \n\n \n\n \n\n 35\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n $\n\n 540\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n $\n\n 493\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Before any dividend may be paid on the Class B Common\n Stock, holders of the Class A Common Stock are entitled to\n receive an annual, noncumulative cash dividend of\n $.01665 per share. Thereafter, any further dividend in that\n fiscal year must be paid on each share of Class A Common\n Stock and Class B Common Stock on an equal basis.\n
\n\n
 
\n\n
\n Holders of the Class A Common Stock are not entitled to any\n vote on corporate matters, unless, in each of the three\n preceding fiscal years, the $.01665 preferential dividend\n described above has not been paid in full. Holders of the\n Class A Common Stock are entitled to one vote per share for\n the entire fiscal year immediately following the third\n consecutive fiscal year in which the preferential dividend is\n not paid in full. Holders of Class B Common Stock are\n entitled to one vote per share for the election of directors and\n for all other purposes.\n
\n\n
 
\n\n
\n Upon liquidation, dissolution or winding up of the Company, and\n after distribution of any amounts due to holders of Cumulative\n Preferred Stock, holders of the Class A Common Stock are\n entitled to receive the sum of $0.835 per share before any\n payment or distribution to holders of the Class B Common\n Stock. Thereafter, holders of the Class B Common Stock are\n entitled to receive a payment or distribution of $0.835 per\n share. Thereafter, holders of the Class A Common Stock and\n Class B Common Stock share equally in all payments or\n distributions upon liquidation, dissolution or winding up of the\n Company.\n
\n\n
 
\n\n
\n The preferences in dividends and liquidation rights of the\n Class A Common Stock over the Class B Common Stock\n will terminate at any time that the voting rights of\n Class A Common Stock and Class B Common Stock become\n equal.\n
\n\n
 
\n\n
\n In September 2005, the Company announced that the Board of\n Directors of the Company approved a share repurchase program for\n up to 800,000 shares of the Company’s Class A\n Common Stock during fiscal 2006. The share repurchase plan was\n implemented by purchasing shares on the open market or in\n privately negotiated transactions, with repurchased shares\n available for use in connection with the Company’s stock\n option plan and for other corporate purposes. The Company\n completed the repurchase of all 800,000 shares of its\n Class A Common Stock for $26,495 under the repurchase plan\n approved by the Board of Directors during the fiscal year ended\n July 31, 2006.\n
\n\n
 
\n\n
\n In June 2006, the Company sold, pursuant to an underwritten\n public offering, 4,600,000 shares of its Class A\n nonvoting common stock at a price of $36 per share. Cash\n proceeds from the offering, net of underwriting discounts, were\n approximately $158,148. In addition to underwriting discounts,\n the Company incurred approximately $403 of additional\n accounting, legal and other expenses related to the offering\n that were charged to additional paid-in capital. The proceeds\n were used to fund acquisitions completed in fiscal 2006 and\n early fiscal 2007.\n
\n\n

\n
\n II-39\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n The following is a summary of other activity in\n stockholders’ investment for the years ended July 31,\n 2004, 2005 and 2006:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                 
\n \n\n \n\n Unearned
\n \n		\n \n\n \n\n \n\n \n\n \n\n Shares Held
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n Restricted
\n \n		\n \n\n \n\n Deferred
\n \n		\n \n\n \n\n in Rabbi
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n Stock\n\n \n\n \n\n Compensation\n\n \n\n \n\n Trust, at cost\n\n \n\n \n\n Total\n\n \n
 \n
\n
\n Balances July 31, 2003\n \n
\n		\n \n\n $\n\n (628\n\n )\n\n \n\n $\n\n 14,725\n\n \n\n \n\n $\n\n (14,725\n\n )\n\n \n\n $\n\n (628\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Shares at July 31, 2003(1)\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n 969,058\n\n \n\n \n\n \n\n 969,058\n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Sale of shares at cost\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (411\n\n )\n\n \n\n \n\n 411\n\n \n\n \n\n \n\n —\n\n \n
\n
\n Purchase of shares at cost\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 880\n\n \n\n \n\n \n\n (880\n\n )\n\n \n\n \n\n —\n\n \n
\n
\n Amortization of restricted stock\n \n
\n		\n \n\n \n\n 346\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 346\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances July 31, 2004\n \n
\n		\n \n\n $\n\n (282\n\n )\n\n \n\n $\n\n 15,194\n\n \n\n \n\n $\n\n (15,194\n\n )\n\n \n\n $\n\n (282\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Shares at July 31, 2004(1)\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n 988,534\n\n \n\n \n\n \n\n 988,534\n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Sale of shares at cost\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (498\n\n )\n\n \n\n \n\n 579\n\n \n\n \n\n \n\n 81\n\n \n
\n
\n Purchase of shares at cost\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 516\n\n \n\n \n\n \n\n (1,210\n\n )\n\n \n\n \n\n (694\n\n )\n
\n
\n Amortization of restricted stock\n \n
\n		\n \n\n \n\n 282\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 282\n\n \n
\n
\n Other\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (437\n\n )\n\n \n\n \n\n —\n\n \n\n \n\n \n\n (437\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances at July 31, 2005\n \n
\n		\n \n\n $\n\n 0\n\n \n\n \n\n $\n\n 14,775\n\n \n\n \n\n $\n\n (15,825\n\n )\n\n \n\n $\n\n (1,050\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Shares at July 31, 2005\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n 950,222\n\n \n\n \n\n \n\n 997,034\n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Sale of shares at cost\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n (450\n\n )\n\n \n\n \n\n 451\n\n \n\n \n\n \n\n 1\n\n \n
\n
\n Purchase of shares at cost\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 573\n\n \n\n \n\n \n\n (1,466\n\n )\n\n \n\n \n\n (893\n\n )\n
\n
\n Effect of plan amendment\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n 2,704\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n 2,704\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances at July 31, 2006\n \n
\n		\n \n\n $\n\n 0\n\n \n\n \n\n $\n\n 17,602\n\n \n\n \n\n $\n\n (16,840\n\n )\n\n \n\n $\n\n 762\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Shares at July 31, 2006\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n 1,012,914\n\n \n\n \n\n \n\n 1,012,914\n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
\n (1) \n Adjusted for\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004.
\n\n
 
\n\n
\n Prior to 2002, all Brady Corporation deferred compensation was\n invested in Brady stock. In 2002, the Company adopted a new\n deferred compensation plan which allowed investing in other\n investment funds in addition to Brady stock. Under this plan,\n participants were allowed to transfer funds between Brady stock\n and the other investment funds. On May 1, 2006 the plan was\n amended with the provision that deferrals into Brady stock must\n remain in Brady stock and be distributed in shares of Brady\n stock. At July 31, 2006, the deferred compensation balance\n in stockholders’ investment represents the investment at\n the original cost of shares held in Brady stock for the deferred\n compensation plan prior to 2002 and the investment at the cost\n of shares held in Brady stock for the plan subsequent to 2002,\n adjusted for the plan amendment on May 1, 2006. The balance\n of shares held in the Rabbi Trust represents the investment in\n Brady stock at the original cost of all Brady stock held in\n deferred compensation plans.\n
\n\n
 
\n\n
\n The Company’s Employee Monthly Stock Investment Plan\n (“the Plan”) provides that eligible employees may\n authorize a fixed dollar amount between $20 and $500 per\n month to be deducted from their pay. The funds deducted are\n forwarded to the Plan administrator and are used to purchase\n Brady stock at the market price. As part of the Plan, Brady pays\n all brokerage fees for stock purchases and dividend\n reinvestments.\n
\n\n
 
\n\n
\n The Company’s Nonqualified Stock Option Plans allow the\n granting of stock options to various officers, directors and\n other employees of the Company at prices equal to fair market\n value at the date of grant. At July 31, 2006, the Company\n had reserved 3,815,052 shares of Class A Nonvoting Common\n Stock for outstanding stock\n
\n\n

\n
\n II-40\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

\n options and 878,968 shares of Class A Nonvoting Common\n Stock for future issuance of stock options under the various\n plans, adjusted for a\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004. A total of 11,550,000 shares have\n been authorized under existing or prior plans. The Company uses\n treasury stock or will issue new Class A Common Stock to\n deliver shares under these plans.\n
\n\n
 
\n\n
\n The options vest ratably over a three-year period, with\n one-third becoming exercisable one year after the grant date and\n one-third additional in each of the succeeding two years.\n Options issued under these plans, referred to herein as\n “service-based” awards, generally expire 10 years\n from the date of grant. During the fiscal years ended\n July 31, 2006 and 2005, certain executives and key\n management employees were issued stock options that vest upon\n meeting certain financial performance conditions in addition to\n the vesting schedule described above. The financial performance\n conditions consist of net income targets that the Company must\n meet. These options, referred to herein as “performance\n based” awards, expire 5 years from the date of grant.\n
\n\n
 
\n\n
\n Changes in the options are as follows(1):\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Weighted
\n \n		\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Average
\n \n		\n \n
\n \n\n \n\n \n\n \n\n \n\n Options
\n \n		\n \n\n \n\n Exercise
\n \n		\n \n
\n \n\n \n\n Option Price\n\n \n\n \n\n Outstanding\n\n \n\n \n\n Price\n\n \n
 \n
\n
\n Balance, July 31, 2003\n \n
\n		\n \n\n $\n\n 6.08 - $17.00\n\n \n\n \n\n \n\n 4,694,882\n\n \n\n \n\n $\n\n 13.62\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Options granted\n \n
\n		\n \n\n \n\n 17.02 - 20.15\n\n \n\n \n\n \n\n 942,000\n\n \n\n \n\n \n\n 17.29\n\n \n
\n
\n Options exercised\n \n
\n		\n \n\n \n\n 6.08 - 16.44\n\n \n\n \n\n \n\n (1,607,058\n\n )\n\n \n\n \n\n 12.09\n\n \n
\n
\n Options cancelled\n \n
\n		\n \n\n \n\n 14.16 - 17.33\n\n \n\n \n\n \n\n (157,340\n\n )\n\n \n\n \n\n 15.97\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balance, July 31, 2004\n \n
\n		\n \n\n $\n\n 6.08 - $20.15\n\n \n\n \n\n \n\n 3,872,484\n\n \n\n \n\n $\n\n 15.05\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Options granted\n \n
\n		\n \n\n \n\n 22.63 - 31.54\n\n \n\n \n\n \n\n 888,000\n\n \n\n \n\n \n\n 27.27\n\n \n
\n
\n Options exercised\n \n
\n		\n \n\n \n\n 9.59 - 17.33\n\n \n\n \n\n \n\n (1,117,431\n\n )\n\n \n\n \n\n 14.08\n\n \n
\n
\n Options cancelled\n \n
\n		\n \n\n \n\n 9.59 - 17.33\n\n \n\n \n\n \n\n (113,722\n\n )\n\n \n\n \n\n 15.82\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balance, July 31, 2005\n \n
\n		\n \n\n $\n\n 9.59 - $31.54\n\n \n\n \n\n \n\n 3,529,331\n\n \n\n \n\n $\n\n 18.41\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Options granted\n \n
\n		\n \n\n \n\n 33.75 - 40.37\n\n \n\n \n\n \n\n 955,500\n\n \n\n \n\n \n\n 36.33\n\n \n
\n
\n Options exercised\n \n
\n		\n \n\n \n\n 9.59 - 28.84\n\n \n\n \n\n \n\n (596,643\n\n )\n\n \n\n \n\n 14.95\n\n \n
\n
\n Options cancelled\n \n
\n		\n \n\n \n\n 16.00 - 40.37\n\n \n\n \n\n \n\n (73,136\n\n )\n\n \n\n \n\n 27.20\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balance, July 31, 2006\n \n
\n		\n \n\n $\n\n 9.59 - $40.37\n\n \n\n \n\n \n\n 3,815,052\n\n \n\n \n\n $\n\n 23.27\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Available for grant after\n July 31, 2006\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n 1,064,770\n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
\n (1) \n Adjusted for a\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004.
\n\n
 
\n\n
\n The total fair value of options vested during the fiscal years\n ended July 31, 2006, 2005 and 2004 was $4,744, $3,223 and\n $5,147, respectively. The total intrinsic value of options\n exercised during the fiscal years ended July 31, 2006, 2005\n and 2004 was $13,974, $14,754 and $12,926, respectively.\n
\n\n
 
\n\n
\n There were 2,062,153, 1,772,930 and 2,142,578 options\n exercisable with a weighted average exercise price of $17.02,\n $14.84 and $13.94 at July 31, 2006, 2005 and 2004,\n respectively.\n
\n\n

\n
\n II-41\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n The following table summarizes information about stock options\n outstanding at July 31, 2006:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                     
\n \n\n \n\n \n\n \n\n \n\n Options Outstanding and
\n \n		\n \n
\n \n\n \n\n Options Outstanding\n\n \n\n \n\n Exercisable\n\n \n
\n \n\n \n\n \n\n \n\n \n\n Weighted Average
\n \n		\n \n\n \n\n Weighted
\n \n		\n \n\n \n\n Shares
\n \n		\n \n\n \n\n Weighted
\n \n		\n \n
\n \n\n \n\n Number of Shares
\n \n		\n \n\n \n\n Remaining
\n \n		\n \n\n \n\n Average
\n \n		\n \n\n \n\n Exercisable
\n \n		\n \n\n \n\n Average
\n \n		\n \n
\n Range of
\n \n		\n \n\n Outstanding at
\n \n		\n \n\n \n\n Contractual Life
\n \n		\n \n\n \n\n Exercise
\n \n		\n \n\n \n\n at July 31,
\n \n		\n \n\n \n\n Exercise
\n \n		\n \n
\n
\n Exercise Prices\n
\n		\n \n\n July 31, 2006\n\n \n\n \n\n (in years)\n\n \n\n \n\n Price\n\n \n\n \n\n 2006\n\n \n\n \n\n Price\n\n \n
 \n
\n
\n Up to $14.99\n \n
\n		\n \n\n \n\n 512,434\n\n \n\n \n\n \n\n 4.4\n\n \n\n \n\n $\n\n 12.59\n\n \n\n \n\n \n\n 512,434\n\n \n\n \n\n $\n\n 12.59\n\n \n
\n
\n $15.00 to $29.99\n \n
\n		\n \n\n \n\n 2,332,618\n\n \n\n \n\n \n\n 6.1\n\n \n\n \n\n \n\n 20.29\n\n \n\n \n\n \n\n 1,537,052\n\n \n\n \n\n \n\n 18.38\n\n \n
\n
\n $30.00 and up\n \n
\n		\n \n\n \n\n 970,000\n\n \n\n \n\n \n\n 7.5\n\n \n\n \n\n \n\n 36.07\n\n \n\n \n\n \n\n 12,667\n\n \n\n \n\n \n\n 31.42\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n \n\n 3,815,052\n\n \n\n \n\n \n\n 6.2\n\n \n\n \n\n \n\n 23.27\n\n \n\n \n\n \n\n 2,062,153\n\n \n\n \n\n \n\n 17.02\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n As of July 31, 2006, the aggregate intrinsic value of the\n number of options outstanding and the number of options\n outstanding and exercisable was $40,021 and $34,518,\n respectively.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 7.  \n\n Segment\n Information\n
\n\n
 
\n\n
\n The Company evaluates short-term regional performance based on\n segment profit or loss and customer sales. Corporate long-term\n performance is evaluated based on shareholder value enhancement\n (“SVE”), which incorporates the cost of capital as a\n hurdle rate for capital expenditures, new product development,\n acquisitions, and long-term lines of business. Segment profit or\n loss does not include certain administrative costs, interest,\n foreign exchange gain or loss, restructuring charges, other\n expenses not allocated to a segment, and income taxes. The\n accounting policies of the reportable segments are the same as\n those described in the summary of significant accounting\n policies.\n
\n\n
 
\n\n
\n The Company’s reportable segments are geographical regions\n that are each managed separately. The Company has three\n reportable segments: Americas, Europe and Asia-Pacific. Each\n reportable segment derives its revenue from the same types of\n products and services.\n
\n\n
 
\n\n
\n Intersegment sales and transfers are recorded at cost plus a\n standard percentage markup. Intercompany profit is eliminated in\n consolidation. It is not practicable to disclose enterprise-wide\n revenue from external customers on the basis of product or\n service.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                         
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Corporate
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n and
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n Americas\n\n \n\n \n\n Europe\n\n \n\n \n\n Asia-Pacific\n\n \n\n \n\n Subtotals\n\n \n\n \n\n Eliminations\n\n \n\n \n\n Totals\n\n \n
 \n
\n
\n Year ended July 31, 2006:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Revenues from external customers\n \n
\n		\n \n\n $\n\n 498,916\n\n \n\n \n\n $\n\n 319,432\n\n \n\n \n\n $\n\n 200,088\n\n \n\n \n\n $\n\n 1,018,436\n\n \n\n \n\n \n\n \n\n \n\n \n\n $\n\n 1,018,436\n\n \n
\n
\n Intersegment revenues\n \n
\n		\n \n\n \n\n 54,716\n\n \n\n \n\n \n\n 4,017\n\n \n\n \n\n \n\n 6,376\n\n \n\n \n\n \n\n 65,109\n\n \n\n \n\n $\n\n (65,109\n\n )\n\n \n\n \n\n \n\n \n
\n
\n Depreciation and amortization\n expense\n \n
\n		\n \n\n \n\n 20,407\n\n \n\n \n\n \n\n 6,282\n\n \n\n \n\n \n\n 7,435\n\n \n\n \n\n \n\n 34,124\n\n \n\n \n\n \n\n 1,020\n\n \n\n \n\n \n\n 35,144\n\n \n
\n
\n Segment profit (loss)\n \n
\n		\n \n\n \n\n 122,525\n\n \n\n \n\n \n\n 83,970\n\n \n\n \n\n \n\n 49,316\n\n \n\n \n\n \n\n 255,811\n\n \n\n \n\n \n\n (10,633\n\n )\n\n \n\n \n\n 245,178\n\n \n
\n
\n Assets\n \n
\n		\n \n\n \n\n 643,206\n\n \n\n \n\n \n\n 255,635\n\n \n\n \n\n \n\n 338,424\n\n \n\n \n\n \n\n 1,237,265\n\n \n\n \n\n \n\n 127,921\n\n \n\n \n\n \n\n 1,365,186\n\n \n
\n
\n Expenditures for property, plant\n and equipment\n \n
\n		\n \n\n \n\n 22,838\n\n \n\n \n\n \n\n 6,397\n\n \n\n \n\n \n\n 7,303\n\n \n\n \n\n \n\n 36,538\n\n \n\n \n\n \n\n 2,872\n\n \n\n \n\n \n\n 39,410\n\n \n
\n\n

\n
\n II-42\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                         
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Corporate
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n and
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n Americas\n\n \n\n \n\n Europe\n\n \n\n \n\n Asia-Pacific\n\n \n\n \n\n Subtotals\n\n \n\n \n\n Eliminations\n\n \n\n \n\n Totals\n\n \n
 \n
\n
\n Year ended July 31, 2005:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Revenues from external customers\n \n
\n		\n \n\n $\n\n 417,780\n\n \n\n \n\n $\n\n 274,691\n\n \n\n \n\n $\n\n 123,976\n\n \n\n \n\n $\n\n 816,447\n\n \n\n \n\n \n\n \n\n \n\n \n\n $\n\n 816,447\n\n \n
\n
\n Intersegment revenues\n \n
\n		\n \n\n \n\n 45,284\n\n \n\n \n\n \n\n 2,774\n\n \n\n \n\n \n\n 4,402\n\n \n\n \n\n \n\n 52,460\n\n \n\n \n\n $\n\n (52,460\n\n )\n\n \n\n \n\n \n\n \n
\n
\n Depreciation and amortization\n expense\n \n
\n		\n \n\n \n\n 17,428\n\n \n\n \n\n \n\n 4,140\n\n \n\n \n\n \n\n 4,323\n\n \n\n \n\n \n\n 25,891\n\n \n\n \n\n \n\n 931\n\n \n\n \n\n \n\n 26,822\n\n \n
\n
\n Segment profit (loss)\n \n
\n		\n \n\n \n\n 98,193\n\n \n\n \n\n \n\n 79,792\n\n \n\n \n\n \n\n 34,228\n\n \n\n \n\n \n\n 212,213\n\n \n\n \n\n \n\n (4,845\n\n )\n\n \n\n \n\n 207,368\n\n \n
\n
\n Assets\n \n
\n		\n \n\n \n\n 446,829\n\n \n\n \n\n \n\n 171,536\n\n \n\n \n\n \n\n 111,048\n\n \n\n \n\n \n\n 729,413\n\n \n\n \n\n \n\n 120,734\n\n \n\n \n\n \n\n 850,147\n\n \n
\n
\n Expenditures for property, plant\n and equipment\n \n
\n		\n \n\n \n\n 11,858\n\n \n\n \n\n \n\n 1,484\n\n \n\n \n\n \n\n 6,050\n\n \n\n \n\n \n\n 19,392\n\n \n\n \n\n \n\n 2,528\n\n \n\n \n\n \n\n 21,920\n\n \n
\n
\n Year ended July 31, 2004:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Revenues from external customers\n \n
\n		\n \n\n $\n\n 341,975\n\n \n\n \n\n $\n\n 248,255\n\n \n\n \n\n $\n\n 80,989\n\n \n\n \n\n $\n\n 671,219\n\n \n\n \n\n \n\n \n\n \n\n \n\n $\n\n 671,219\n\n \n
\n
\n Intersegment revenues\n \n
\n		\n \n\n \n\n 40,764\n\n \n\n \n\n \n\n 2,199\n\n \n\n \n\n \n\n 4,165\n\n \n\n \n\n \n\n 47,128\n\n \n\n \n\n $\n\n (47,128\n\n )\n\n \n\n \n\n \n\n \n
\n
\n Depreciation and amortization\n expense\n \n
\n		\n \n\n \n\n 14,112\n\n \n\n \n\n \n\n 3,686\n\n \n\n \n\n \n\n 1,136\n\n \n\n \n\n \n\n 18,934\n\n \n\n \n\n \n\n 1,256\n\n \n\n \n\n \n\n 20,190\n\n \n
\n
\n Segment profit (loss)\n \n
\n		\n \n\n \n\n 60,132\n\n \n\n \n\n \n\n 66,404\n\n \n\n \n\n \n\n 22,768\n\n \n\n \n\n \n\n 149,304\n\n \n\n \n\n \n\n (4,696\n\n )\n\n \n\n \n\n 144,608\n\n \n
\n
\n Assets\n \n
\n		\n \n\n \n\n 408,558\n\n \n\n \n\n \n\n 138,678\n\n \n\n \n\n \n\n 37,348\n\n \n\n \n\n \n\n 584,584\n\n \n\n \n\n \n\n 113,316\n\n \n\n \n\n \n\n 697,900\n\n \n
\n
\n Expenditures for property, plant\n and equipment\n \n
\n		\n \n\n \n\n 6,679\n\n \n\n \n\n \n\n 3,004\n\n \n\n \n\n \n\n 3,298\n\n \n\n \n\n \n\n 12,981\n\n \n\n \n\n \n\n 1,911\n\n \n\n \n\n \n\n 14,892\n\n \n
\n\n

\n\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Years Ended July 31,\n\n \n
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Segment profit reconciliation:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total profit for reportable\n segments\n \n
\n		\n \n\n $\n\n 255,811\n\n \n\n \n\n $\n\n 212,213\n\n \n\n \n\n $\n\n 149,304\n\n \n
\n
\n Corporate and eliminations\n \n
\n		\n \n\n \n\n (10,633\n\n )\n\n \n\n \n\n (4,845\n\n )\n\n \n\n \n\n (4,696\n\n )\n
\n
\n Unallocated amounts:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Administrative costs\n \n
\n		\n \n\n \n\n (88,662\n\n )\n\n \n\n \n\n (84,916\n\n )\n\n \n\n \n\n (70,446\n\n )\n
\n
\n Interest (expense)\n income — net\n \n
\n		\n \n\n \n\n (14,231\n\n )\n\n \n\n \n\n (8,403\n\n )\n\n \n\n \n\n (1,231\n\n )\n
\n
\n Restructuring charge, net\n \n
\n		\n \n\n \n\n —\n\n \n\n \n\n \n\n —\n\n \n\n \n\n \n\n (3,181\n\n )\n
\n
\n Investment and other income\n \n
\n		\n \n\n \n\n 2,403\n\n \n\n \n\n \n\n 1,369\n\n \n\n \n\n \n\n 577\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Income before income taxes\n \n
\n		\n \n\n \n\n 144,688\n\n \n\n \n\n \n\n 115,418\n\n \n\n \n\n \n\n 70,327\n\n \n
\n
\n Income taxes\n \n
\n		\n \n\n \n\n (40,513\n\n )\n\n \n\n \n\n (33,471\n\n )\n\n \n\n \n\n (19,456\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net income\n \n
\n		\n \n\n $\n\n 104,175\n\n \n\n \n\n $\n\n 81,947\n\n \n\n \n\n $\n\n 50,871\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n

\n II-43\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                         
\n \n\n \n\n Revenues*
\n \n		\n \n\n \n\n Long-Lived Assets**
\n \n		\n \n
\n \n\n \n\n Years Ended July 31,\n\n \n\n \n\n As of Years Ended July 31,\n\n \n
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Geographic information:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n United States\n \n
\n		\n \n\n $\n\n 484,387\n\n \n\n \n\n $\n\n 411,614\n\n \n\n \n\n $\n\n 343,879\n\n \n\n \n\n $\n\n 439,467\n\n \n\n \n\n $\n\n 321,482\n\n \n\n \n\n $\n\n 310,838\n\n \n
\n
\n Other\n \n
\n		\n \n\n \n\n 605,518\n\n \n\n \n\n \n\n 464,542\n\n \n\n \n\n \n\n 379,188\n\n \n\n \n\n \n\n 422,192\n\n \n\n \n\n \n\n 180,945\n\n \n\n \n\n \n\n 97,043\n\n \n
\n
\n Eliminations\n \n
\n		\n \n\n \n\n (71,469\n\n )\n\n \n\n \n\n (59,709\n\n )\n\n \n\n \n\n (51,848\n\n )\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Consolidated total\n \n
\n		\n \n\n $\n\n 1,018,436\n\n \n\n \n\n $\n\n 816,447\n\n \n\n \n\n $\n\n 671,219\n\n \n\n \n\n $\n\n 861,659\n\n \n\n \n\n $\n\n 502,427\n\n \n\n \n\n $\n\n 407,881\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n

\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n  * \n Revenues are attributed based on country of origin.
 
\n ** \n Long-lived assets consist of property, plant, and equipment,\n other intangible assets and goodwill.
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 8.  \n\n Net\n Income Per Common Share\n
\n\n
 
\n\n
\n Net income per Common Share is computed by dividing net income\n (after deducting the applicable Preferred Stock dividends and\n preferential Class A Common Stock dividends) by the\n weighted average Common Shares outstanding of 49,493,976 for\n 2006, 48,967,160 for 2005, and 47,298,454 for 2004. The\n preferential dividend on the Class A Common Stock of\n $.01665 per share has been added to the net income per\n Class A Common Share for all years presented.\n
\n\n
 
\n\n
\n Reconciliations of the numerator and denominator of the basic\n and diluted per share computations for the Company’s\n Class A and Class B common stock are summarized as\n follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Years ended July 31,\n\n \n
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
 \n
\n
\n Numerator\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net income (numerator for basic\n and diluted Class A net income per share)\n \n
\n		\n \n\n $\n\n 104,175\n\n \n\n \n\n $\n\n 81,947\n\n \n\n \n\n $\n\n 50,871\n\n \n
\n
\n Less:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Preferential dividends\n \n
\n		\n \n\n \n\n (758\n\n )\n\n \n\n \n\n (751\n\n )\n\n \n\n \n\n (721\n\n )\n
\n
\n Preferential dividends on dilutive\n stock options\n \n
\n		\n \n\n \n\n (15\n\n )\n\n \n\n \n\n (23\n\n )\n\n \n\n \n\n (9\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Numerator for basic and diluted\n Class B net income per share\n \n
\n		\n \n\n $\n\n 103,402\n\n \n\n \n\n $\n\n 81,173\n\n \n\n \n\n $\n\n 50,141\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Denominator:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Denominator for basic net income\n per share for both Class A and B\n \n
\n		\n \n\n \n\n 49,494\n\n \n\n \n\n \n\n 48,967\n\n \n\n \n\n \n\n 47,298\n\n \n
\n
\n Plus: effect of dilutive stock\n options\n \n
\n		\n \n\n \n\n 850\n\n \n\n \n\n \n\n 847\n\n \n\n \n\n \n\n 515\n\n \n
\n
\n Treasury shares —\n deferred compensation plan\n \n
\n		\n \n\n \n\n 41\n\n \n\n \n\n \n\n 45\n\n \n\n \n\n \n\n 0\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Denominator for diluted net income\n per share for both Class A and B\n \n
\n		\n \n\n \n\n 50,385\n\n \n\n \n\n \n\n 49,859\n\n \n\n \n\n \n\n 47,813\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Class A common stock net\n income per share calculation:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic\n \n
\n		\n \n\n $\n\n 2.10\n\n \n\n \n\n $\n\n 1.67\n\n \n\n \n\n $\n\n 1.08\n\n \n
\n
\n Diluted\n \n
\n		\n \n\n $\n\n 2.07\n\n \n\n \n\n $\n\n 1.64\n\n \n\n \n\n $\n\n 1.07\n\n \n
\n
\n Class B common stock net\n income per share calculation:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic\n \n
\n		\n \n\n $\n\n 2.09\n\n \n\n \n\n $\n\n 1.66\n\n \n\n \n\n $\n\n 1.06\n\n \n
\n
\n Diluted\n \n
\n		\n \n\n $\n\n 2.05\n\n \n\n \n\n $\n\n 1.63\n\n \n\n \n\n $\n\n 1.05\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n

\n II-44\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n
\n Options to purchase 650,500, 38,000 and 36,000 shares of\n Class A common stock were excluded from the computations of\n diluted net income per share for years ended July 31, 2006,\n 2005 and 2004, respectively, because the option exercise prices\n were greater than the average market price of the common shares\n and, therefore, the effect would be antidilutive.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 9.  \n\n Commitments\n and Contingencies\n
\n\n
 
\n\n
\n The Company has entered into various noncancellable operating\n lease agreements. Rental expense charged to operations on a\n straight-line basis was $15,181, $14,020, and $12,583 for the\n years ended July 31, 2006, 2005 and 2004, respectively.\n Future minimum lease payments required under such leases in\n effect at July 31, 2006 are as follows, for the years\n ending July 31:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
     
\n
\n 2007\n \n
\n		\n \n\n $\n\n 15,744\n\n \n
\n
\n 2008\n \n
\n		\n \n\n \n\n 11,987\n\n \n
\n
\n 2009\n \n
\n		\n \n\n \n\n 8,944\n\n \n
\n
\n 2010\n \n
\n		\n \n\n \n\n 4,629\n\n \n
\n
\n 2011\n \n
\n		\n \n\n \n\n 3,570\n\n \n
\n
\n Thereafter\n \n
\n		\n \n\n \n\n 7,072\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n $\n\n 51,946\n\n \n
\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n In the normal course of business, the Company is named as a\n defendant in various lawsuits in which claims are asserted\n against the Company. In the opinion of management, the\n liabilities, if any, which may ultimately result from lawsuits\n are not expected to have a material adverse effect on the\n consolidated financial statements of the Company.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 10.  \n\n Restructuring\n Charges\n
\n\n
 
\n\n
\n During fiscal 2004, the Company recorded a restructuring charge\n of $3,181, $2,166 after tax or $0.05 per diluted\n Class A Common Share, as part of the restructuring program\n announced in the fourth quarter of fiscal 2003 related primarily\n to combining sales and marketing resources and consolidating\n facilities throughout North America and Europe resulting in\n a workforce reduction of approximately 300 employees. The fiscal\n 2004 restructuring charge by reportable segment was $1,262 in\n Americas, $1,521 in Europe, and $398 in Asia-Pacific.\n
\n\n
 
\n\n
\n The restructuring charge included a provision for severance of\n approximately $2,900 and a write-off of assets and other of\n $281. Total cash expenditures in connection with this action was\n approximately $2,858, which was paid out in fiscal 2004 and\n 2005. As of July 31, 2005, there was no balance remaining\n in the restructuring reserve account on the consolidated balance\n sheet.\n
\n\n

\n
\n II-45\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n NOTES TO\n CONSOLIDATED FINANCIAL\n STATEMENTS — (Continued)\n
\n

\n\n

 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n 11.  \n\n Unaudited\n Quarterly Financial Information\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                     
\n \n\n \n\n Quarters\n\n \n
\n \n\n \n\n First\n\n \n\n \n\n Second\n\n \n\n \n\n Third\n\n \n\n \n\n Fourth(1)\n\n \n\n \n\n Total\n\n \n
 \n
\n
\n 2006\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net Sales\n \n
\n		\n \n\n $\n\n 232,635\n\n \n\n \n\n $\n\n 230,974\n\n \n\n \n\n $\n\n 266,494\n\n \n\n \n\n $\n\n 288,333\n\n \n\n \n\n $\n\n 1,018,436\n\n \n
\n
\n Gross Margin\n \n
\n		\n \n\n \n\n 123,991\n\n \n\n \n\n \n\n 117,105\n\n \n\n \n\n \n\n 140,755\n\n \n\n \n\n \n\n 143,904\n\n \n\n \n\n \n\n 525,755\n\n \n
\n
\n Operating Income\n \n
\n		\n \n\n \n\n 44,129\n\n \n\n \n\n \n\n 31,276\n\n \n\n \n\n \n\n 44,226\n\n \n\n \n\n \n\n 36,885\n\n \n\n \n\n \n\n 156,516\n\n \n
\n
\n Net Income\n \n
\n		\n \n\n \n\n 30,198\n\n \n\n \n\n \n\n 21,254\n\n \n\n \n\n \n\n 30,246\n\n \n\n \n\n \n\n 22,477\n\n \n\n \n\n \n\n 104,175\n\n \n
\n
\n Net Income Per Class A Common\n Share:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic\n \n
\n		\n \n\n \n\n 0.61\n\n \n\n \n\n \n\n 0.43\n\n \n\n \n\n \n\n 0.62\n\n \n\n \n\n \n\n 0.44\n\n \n\n \n\n \n\n 2.10\n\n \n
\n
\n Diluted\n \n
\n		\n \n\n \n\n 0.60\n\n \n\n \n\n \n\n 0.43\n\n \n\n \n\n \n\n 0.61\n\n \n\n \n\n \n\n 0.43\n\n \n\n \n\n \n\n 2.07\n\n \n
\n
\n 2005\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Net Sales\n \n
\n		\n \n\n $\n\n 200,419\n\n \n\n \n\n $\n\n 196,216\n\n \n\n \n\n $\n\n 209,766\n\n \n\n \n\n $\n\n 210,046\n\n \n\n \n\n $\n\n 816,447\n\n \n
\n
\n Gross Margin\n \n
\n		\n \n\n \n\n 105,525\n\n \n\n \n\n \n\n 104,956\n\n \n\n \n\n \n\n 113,868\n\n \n\n \n\n \n\n 108,927\n\n \n\n \n\n \n\n 433,276\n\n \n
\n
\n Operating Income\n \n
\n		\n \n\n \n\n 31,793\n\n \n\n \n\n \n\n 30,934\n\n \n\n \n\n \n\n 35,543\n\n \n\n \n\n \n\n 24,182\n\n \n\n \n\n \n\n 122,452\n\n \n
\n
\n Net Income\n \n
\n		\n \n\n \n\n 20,357\n\n \n\n \n\n \n\n 20,579\n\n \n\n \n\n \n\n 24,956\n\n \n\n \n\n \n\n 16,055\n\n \n\n \n\n \n\n 81,947\n\n \n
\n
\n Net Income Per Class A Common\n Share:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Basic\n \n
\n		\n \n\n \n\n 0.42\n\n *\n\n \n\n \n\n 0.42\n\n \n\n \n\n \n\n 0.51\n\n \n\n \n\n \n\n 0.33\n\n \n\n \n\n \n\n 1.67\n\n \n
\n
\n Diluted\n \n
\n		\n \n\n \n\n 0.42\n\n *\n\n \n\n \n\n 0.41\n\n \n\n \n\n \n\n 0.50\n\n \n\n \n\n \n\n 0.32\n\n \n\n \n\n \n\n 1.64\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n * \n Earnings per share for the first quarter of fiscal 2005 has been\n adjusted to reflect the effect of a\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004.
 
\n (1) \n The following significant events affect the comparability of the\n fourth quarter results for fiscal 2006 and 2005:
 
\n\n
\n • Throughout fiscal 2006, the Company completed eleven\n acquisitions. Refer to Note 2. Acquisitions of Businesses\n for further information on the companies acquired.
\n
 
\n\n
\n • Gross margins in the fourth quarter of fiscal 2006\n were impacted by the shift in business mix to more OEM business,\n which generates lower gross margins, offset by lower selling,\n general and administrative costs.
\n
 
\n\n
\n • The Company sold 4,600,000 shares of its\n Class A nonvoting common stock pursuant to an underwritten\n public offering during the fourth quarter of fiscal 2006.
\n
\n\n

\n
\n II-46\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 9.  \n\n Changes\n in and Disagreements with Accountants on Accounting and\n Financial Disclosure\n
\n\n
 
\n\n
\n None.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 9A.  \n\n Controls\n and Procedures\n
\n\n
 
\n\n
\n\n Disclosure\n Controls and Procedures:\n
\n\n
 
\n\n
\n The Company carried out an evaluation, under the supervision and\n with the participation of its management, including the Chief\n Executive Officer and Chief Financial Officer, of the\n effectiveness of the design and operation of the Company’s\n “disclosure controls and procedures” (as defined in\n the Exchange Act Rule 13a — 15(e)) as of the end\n of the period covered by this report. Based on that evaluation,\n the Company’s Chief Executive Officer and Chief Financial\n Officer concluded that the Company’s disclosure controls\n and procedures are effective as of July 31, 2006.\n
\n\n
 
\n\n
\n\n Management’s\n Report on Internal Control Over Financial Reporting:\n
\n\n
 
\n\n
\n The management of Brady Corporation and subsidiaries is\n responsible for establishing and maintaining adequate internal\n control over financial reporting for the Company, as such term\n is defined in\n Rule 13a-15(f)\n under the Securities Exchange Act of 1934. The Company’s\n internal control over financial reporting is designed to provide\n reasonable assurance regarding the reliability of financial\n reporting and the preparation of financial statements for\n external purposes in accordance with generally accepted\n accounting principals.\n
\n\n
 
\n\n
\n With the participation of the Chief Executive Officer and the\n Chief Financial Officer, our management conducted an evaluation\n of the effectiveness of our internal control over financial\n reporting as of July 31, 2006, based on the framework and\n criteria established in Internal Control —\n Integrated Framework, issued by the Committee of Sponsoring\n Organizations of the Treadway Commission in Internal\n Control — Integrated Framework. Based on the\n assessment, management concluded that, as of July 31, 2006,\n the Company’s internal control over financial reporting is\n effective based on those criteria. Management’s assessment\n of the effectiveness of the Company’s internal control over\n financial reporting, as of July 31, 2006, has been audited\n by Deloitte & Touche LLP, an independent\n registered public accounting firm, as stated in their report,\n which is included herein.\n
\n\n
 
\n\n
\n Because of the inherent limitations of internal control over\n financial reporting, misstatements may not be prevented or\n detected on a timely basis. Also, projections of any evaluation\n of the effectiveness of internal control over financial\n reporting to future periods are subject to the risk that the\n controls may become inadequate because of changes in conditions,\n or that the degree of compliance with the policies or procedures\n may deteriorate.\n
\n\n
 
\n\n
\n\n Changes\n in Internal Control Over Financial Reporting:\n
\n\n
 
\n\n
\n There was no change in the Company’s internal control over\n financial reporting that occurred during the Company’s most\n recently completed fiscal quarter that has materially affected,\n or is reasonably likely to materially affect, the Company’s\n internal control over financial reporting.\n
\n\n

\n
\n II-47\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n REPORT OF\n INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n
\n\n
 
\n\n
\n To the Board of Directors and Stockholders of
\n
\n\n
\n Brady Corporation
\n
\n\n
\n Milwaukee, WI\n
\n\n
 
\n\n
\n We have audited management’s assessment, included in the\n accompanying Management’s Report on Internal Control over\n Financial Reporting that Brady Corporation and subsidiaries (the\n “Company”) maintained effective internal control over\n financial reporting as of July 31, 2006, based on criteria\n established in Internal Control — Integrated\n Framework issued by the Committee of Sponsoring\n Organizations of the Treadway Commission. The Company’s\n management is responsible for maintaining effective internal\n control over financial reporting and for its assessment of the\n effectiveness of internal control over financial reporting. Our\n responsibility is to express an opinion on management’s\n assessment and an opinion on the effectiveness of the\n Company’s internal control over financial reporting based\n on our audit.\n
\n\n
 
\n\n
\n We conducted our audit in accordance with the standards of the\n Public Company Accounting Oversight Board (United States). Those\n standards require that we plan and perform the audit to obtain\n reasonable assurance about whether effective internal control\n over financial reporting was maintained in all material\n respects. Our audit included obtaining an understanding of\n internal control over financial reporting, evaluating\n management’s assessment, testing and evaluating the design\n and operating effectiveness of internal control, and performing\n such other procedures as we considered necessary in the\n circumstances. We believe that our audit provides a reasonable\n basis for our opinions.\n
\n\n
 
\n\n
\n A company’s internal control over financial reporting is a\n process designed by, or under the supervision of, the\n company’s principal executive and principal financial\n officers, or persons performing similar functions, and effected\n by the company’s board of directors, management, and other\n personnel to provide reasonable assurance regarding the\n reliability of financial reporting and the preparation of\n financial statements for external purposes in accordance with\n generally accepted accounting principles. A company’s\n internal control over financial reporting includes those\n policies and procedures that (1) pertain to the maintenance\n of records that, in reasonable detail, accurately and fairly\n reflect the transactions and dispositions of the assets of the\n company; (2) provide reasonable assurance that transactions\n are recorded as necessary to permit preparation of financial\n statements in accordance with generally accepted accounting\n principles, and that receipts and expenditures of the company\n are being made only in accordance with authorizations of\n management and directors of the company; and (3) provide\n reasonable assurance regarding prevention or timely detection of\n unauthorized acquisition, use, or disposition of the\n company’s assets that could have a material effect on the\n financial statements.\n
\n\n
 
\n\n
\n Because of the inherent limitations of internal control over\n financial reporting, including the possibility of collusion or\n improper management override of controls, material misstatements\n due to error or fraud may not be prevented or detected on a\n timely basis. Also, projections of any evaluation of the\n effectiveness of the internal control over financial reporting\n to future periods are subject to the risk that the controls may\n become inadequate because of changes in conditions, or that the\n degree of compliance with the policies or procedures may\n deteriorate.\n
\n\n
 
\n\n
\n In our opinion, management’s assessment that the Company\n maintained effective internal control over financial reporting\n as of July 31, 2006, is fairly stated, in all material\n respects, based on the criteria established in Internal\n Control — Integrated Framework issued by the\n Committee of Sponsoring Organizations of the Treadway\n Commission. Also in our opinion, the Company maintained, in all\n material respects, effective internal control over financial\n reporting as of July 31, 2006, based on the criteria\n established in Internal Control — Integrated\n Framework issued by the Committee of Sponsoring\n Organizations of the Treadway Commission.\n
\n\n
 
\n\n
\n We have also audited, in accordance with the standards of the\n Public Company Accounting Oversight Board (United States), the\n consolidated financial statements as of and for the year ended\n July 31, 2006 of the Company and our report dated\n September 28, 2006 expressed an unqualified opinion on\n those financial statements.\n
\n\n
 
\n\n
\n
/s/  Deloitte &\n Touche LLP
\n
\n\n
 
\n\n
\n Milwaukee, WI
\n
\n\n
\n September 28, 2006\n
\n\n

\n
\n II-48\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 9B.  \n\n Other\n Information\n
\n\n
 
\n\n
\n On October 5, 2006, the Company entered into a\n $200 million multi-currency revolving loan agreement with a\n group of five banks that replaced and terminated the\n Company’s previous credit facility that had been entered\n into on March 31, 2004 and amended on January 19,\n 2006. No fees were paid by the Company for terminating the\n previous credit facility prior to its expiration date. At the\n Company’s option, and subject to certain standard\n conditions, the available amount under the new credit facility\n may be increased from $200 million up to $300 million.\n Under the new\n 5-year\n agreement, which has a final maturity date of October 5,\n 2011, the Company has the option to select either a base\n interest rate (based upon the higher of the federal funds rate\n plus one-half of 1% or the prime rate of Bank of America) or a\n Eurocurrency interest rate (at the LIBOR rate plus a margin\n based on the Company’s consolidated leverage ratio). A\n commitment fee is payable on the unused amount of the facility.\n The foregoing description of the new credit agreement does not\n purport to be complete and is qualified in its entirety by\n reference to the full text of the agreement, a copy of which is\n filed herewith as Exhibit 10.14 and is incorporated herein\n by reference.\n
\n\n

\n
\n II-49\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n PART III\n
\n\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 10.  \n\n Directors\n and Executive Officers of the Registrant\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
       
\n
\n Name\n
\n		\n \n\n
\n Age\n
\n		\n \n\n
\n Title\n
\n
 \n
\n
\n Frank M. Jaehnert\n \n
\n		\n \n\n\n 49\n \n\n\n \n\n President, CEO and Director\n \n
\n
\n David Mathieson\n \n
\n		\n \n\n\n 52\n \n\n\n \n\n Sr. V.P., CFO\n \n
\n
\n David R. Hawke\n \n
\n		\n \n\n\n 52\n \n\n\n \n\n Executive Vice President\n \n
\n
\n Michael O. Oliver\n \n
\n		\n \n\n\n 53\n \n\n\n \n\n Sr. V.P., Human Resources\n \n
\n
\n Barbara Bolens\n \n
\n		\n \n\n\n 45\n \n\n\n \n\n V.P., Treasurer, Director of\n Investor Relations\n \n
\n
\n Allan J. Klotsche\n \n
\n		\n \n\n\n 41\n \n\n\n \n\n President — Brady\n Asia-Pacific and V.P., Brady Corporation\n \n
\n
\n Peter C. Sephton\n \n
\n		\n \n\n\n 47\n \n\n\n \n\n President — Brady Europe\n and V.P., Brady Corporation\n \n
\n
\n Matt O. Williamson\n \n
\n		\n \n\n\n 50\n \n\n\n \n\n President — Brady\n Americas and V.P., Brady Corporation\n \n
\n
\n Thomas J. Felmer\n \n
\n		\n \n\n\n 44\n \n\n\n \n\n President — Direct\n Marketing Americas and V.P., Brady Corporation\n \n
\n
\n Robert L. Tatterson\n \n
\n		\n \n\n\n 41\n \n\n\n \n\n Vice President and Chief\n Technology Officer\n \n
\n
\n Conrad G. Goodkind\n \n
\n		\n \n\n\n 62\n \n\n\n \n\n Secretary\n \n
\n
\n Dr. Elizabeth Pungello\n \n
\n		\n \n\n\n 39\n \n\n\n \n\n Director\n \n
\n
\n Peter J. Lettenberger\n \n
\n		\n \n\n\n 69\n \n\n\n \n\n Director\n \n
\n
\n Robert C. Buchanan\n \n
\n		\n \n\n\n 66\n \n\n\n \n\n Director\n \n
\n
\n Roger D. Peirce\n \n
\n		\n \n\n\n 69\n \n\n\n \n\n Director\n \n
\n
\n Richard A. Bemis\n \n
\n		\n \n\n\n 65\n \n\n\n \n\n Director\n \n
\n
\n Dr. Frank W. Harris\n \n
\n		\n \n\n\n 64\n \n\n\n \n\n Director\n \n
\n
\n Gary E. Nei\n \n
\n		\n \n\n\n 62\n \n\n\n \n\n Director\n \n
\n
\n Mary K. Bush\n \n
\n		\n \n\n\n 58\n \n\n\n \n\n Director\n \n
\n
\n Frank R. Jarc\n \n
\n		\n \n\n\n 64\n \n\n\n \n\n Director\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Frank M. Jaehnert — Mr. Jaehnert joined\n the Company in 1995 as Finance Director of the Identification\n Solutions & Specialty Tapes Group. He served as Chief\n Financial Officer from November 1996 to January 2002. He served\n as Senior Vice President of the Company and President,\n Identification Solutions and Specialty Tapes Group from January\n 2002 to March 2003. In February 2003, he was appointed to his\n current position, effective April 1, 2003. He has served as\n a Director of the Company since April 2003. Before joining the\n Company, he held various financial and management positions for\n Robert Bosch GmbH from 1983 to 1995.\n
\n\n
 
\n\n
\n David Mathieson — Mr. Mathieson joined\n Brady in 2001 as European Finance Director, based in the U.K. In\n August 2003, he was appointed Vice President of Finance for\n North America, and named Vice President and Chief Financial\n Officer in December 2003. Prior to joining Brady, he was Vice\n President and Chief Financial Officer of Honeywell Europe,\n concluding a\n 20-year\n career with Honeywell International, Inc., which included\n positions in Belgium, Denmark, England and the United States. A\n native of Scotland, he is a Fellow of the Chartered Management\n Accountants Institute in the United Kingdom and studied for this\n qualification at Glasgow College of Commerce and Glasgow\n Caledonian University.\n
\n\n
 
\n\n
\n David R. Hawke — Mr. Hawke joined the\n Company in 1979. He served as General Manager of the Industrial\n Products Division from 1985 to 1991. From 1991 to February 1995,\n he served as Managing Director — European Operations.\n From February 1995 to August 2001, he served as Vice President,\n Graphics Group. He served as Vice President, Graphics and\n Workplace Solutions from August 2001 to January 2002. He served\n as Senior Vice President of the Company and President, Graphics\n and Workplace Solutions Group from January 2002 to April 2003.\n In April 2003, he was appointed to his present position.\n
\n\n
 
\n\n
\n Michael O. Oliver — Mr. Oliver joined the\n Company in February 1997 as Vice President — Human\n Resources. He was appointed to his present position in January\n 2002. Before joining the Company, he held various human resource\n positions for Unilever from 1990 to 1997.\n
\n\n

\n
\n III-1\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n Barbara Bolens — Ms. Bolens joined the\n Company in 1986 and has held a wide variety of positions\n beginning in customer service and customer service management\n and progressing through product management and new product\n development. For 10 years, she had been the Assistant\n Treasurer and has held several other positions in the Corporate\n Finance Team throughout that time. She was appointed to her\n present position in November 2004. Ms. Bolens also holds\n the position of Director of Investor Relations.\n
\n\n
 
\n\n
\n Allan J. Klotsche — Mr. Klotsche joined\n the Company in 1988. He served in a variety of sales, marketing,\n technical, and management roles until 1998, when he was\n appointed V.P. and General Manager of the Precision Tapes Group.\n He was appointed to his current position in April 2003.\n
\n\n
 
\n\n
\n Peter C. Sephton — Mr. Sephton joined the\n Company in 1997 as Managing Director — Seton-U.K. From\n 2001 to 2003 he served as managing director for Brady’s\n Identification Solutions Business in Europe. In April 2003, he\n was appointed to his current position. Before joining Brady, he\n served in a variety of international managerial roles with Tate\n and Lyle Plc, Sutcliffe Speakman Plc and Morgan Crucible Plc. He\n is a graduate in accountancy and law from The University of\n Wales (UCC).\n
\n\n
 
\n\n
\n Matthew O. Williamson — Mr. Williamson\n joined the Company in 1979. From 1979 to 1994, he served in a\n variety of sales and marketing leadership roles. In 1995,\n Mr. Williamson served as the V.P. and General Manager of\n the Specialty Tape business. From 1996 to 1998,\n Mr. Williamson served as the V.P. and General Manager of\n the Identification Solutions and Specialty Tapes Division. From\n 1998 to 2001, he served as V.P. and General Manager of the\n Identification Solutions Division. From 2001 to 2003, he served\n as V.P. and General Manager of the Global High Performance\n Identification Business. In April 2003, he was appointed to his\n current position.\n
\n\n
 
\n\n
\n Thomas J. Felmer — Mr. Felmer joined the\n Company in 1989 and has held several sales and marketing\n positions until being named Vice President and General Manager\n of Brady’s U.S. Signmark Division in 1994. In 1999,\n Mr. Felmer moved to Europe where he led the European\n Signmark business for two years, then gained additional\n responsibility for the combined European Seton and Signmark\n businesses, which he also led for two years. In 2003,\n Mr. Felmer returned to Milwaukee where he was responsible\n for Brady’s global sales and marketing processes, Brady\n Software businesses, and due diligence/integration of the EMED\n acquisition. In June 2004, he was appointed to his current\n position.\n
\n\n
 
\n\n
\n Robert L. Tatterson — Mr. Tatterson joined\n the Company in 2006 as Vice President and Chief Technology\n Officer. Before joining Brady, he held a variety of positions\n with increasing responsibility at GE since 1992. Most recently,\n Mr. Tatterson served as Technology General Manager for GE\n Plastics’ Display and Optical Film business in Mt. Vernon,\n Indiana. He is a 6 Sigma Master Blackbelt and holds a Ph.D. in\n chemical engineering from the University of Michigan in Ann\n Arbor.\n
\n\n
 
\n\n
\n Conrad G. Goodkind — Mr. Goodkind has\n served as Secretary of the Company since November 1999. He is a\n partner of Quarles & Brady LLP, general counsel to the\n Company. He joined Quarles & Brady in 1979 and was a\n member of its Executive Committee from 1983 to 2005.\n
\n\n
 
\n\n
\n Elizabeth Pungello — Dr. Pungello has\n served as a Director of the Company since November 2003. She is\n the great-granddaughter of Brady founder William H.\n Brady, Sr., and a developmental psychologist at the Frank\n Porter Graham Child Development Institute at the University of\n North Carolina at Chapel Hill. She is a member of the\n Company’s Finance, Corporate Governance and Technology\n Committees. She has served as president of the Brady Education\n Foundation (formerly the W.H. Brady Foundation) since January\n 2001.\n
\n\n
 
\n\n
\n Peter J. Lettenberger — Mr. Lettenberger\n has served as a Director of the Company since January 1977.\n Mr. Lettenberger is chair of the Company’s Finance\n Committee, and serves as a member of the Audit and Corporate\n Governance Committees. He retired as a partner of\n Quarles & Brady LLP, general counsel to the Company,\n which he joined in 1964.\n
\n\n
 
\n\n
\n Robert C. Buchanan — Mr. Buchanan has been\n a Director of the Company since November 1987. Mr. Buchanan\n is a member of the Company’s Compensation Committee and\n chairs its Corporate Governance Committee. Mr. Buchanan is\n the non-executive Chairman of the Board and CEO of Fox Valley\n Corporation in Appleton, Wisconsin. He is also a trustee of The\n Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin.\n
\n\n

\n
\n III-2\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n Roger D. Peirce — Mr. Peirce has served as\n a Director of the Company since September 1988. Mr. Peirce\n is a member of the Compensation, Corporate Governance and Audit\n Committees of the Company, and chair of the Retirement\n Committee. Mr. Peirce is a private investor and consultant\n and is a director of Journal Communications, Inc. and Allete,\n Inc. He was the secretary/treasurer of The Jor-Mac Company,\n Inc., a metal fabricator in Grafton, Wisconsin, from 1997\n through 2002. He was President and CEO of Valuation Research\n Corporation from April 1995 to May 1996. From September 1988 to\n December 1993, he was President of Super Steel Products Corp. in\n Milwaukee, Wisconsin. Prior to that he was a managing partner\n for Arthur Andersen LLP, independent certified public\n accountants.\n
\n\n
 
\n\n
\n Richard A. Bemis — Mr. Bemis has been a\n Director of the Company since January 1990 and is a member of\n its Compensation and Governance Committees. Mr. Bemis is\n Co-chairman of the Board of Directors of Bemis Manufacturing\n Company, a manufacturer of molded plastic products in Sheboygan\n Falls, Wisconsin. He is also a director of the Wisconsin Public\n Service Corporation, Green Bay, Wisconsin.\n
\n\n
 
\n\n
\n Frank W. Harris — Dr. Harris has been a\n Director of the Company since November 1991. Dr. Harris is\n a member of its Finance Committee, and chair of the Technology\n Committee. He is a Distinguished Professor and Director of the\n Maurice Morton Institute of Polymer Science and Biomedical\n Engineering at the University of Akron, and has been on its\n faculty since 1983. He is also President and CEO of Akron\n Polymer Systems.\n
\n\n
 
\n\n
\n Gary E. Nei — Mr. Nei has been a Director\n of the Company since November 1992. Mr. Nei is a member of\n the Company’s Finance Committee and Chair of its\n Compensation Committee. Mr. Nei is Chairman of Nei-Turner\n Media, a publishing company in Walworth, Wisconsin. He also\n serves as Chairman of the Beverage Testing Institute, a\n publishing company in Chicago, Illinois and Chairman of Tastings\n Imports, an importer of fine wines headquartered in Chicago,\n Illinois.\n
\n\n
 
\n\n
\n Mary K. Bush — Ms. Bush has been a\n Director of the Company since May 2000. Ms. Bush is a\n member of the Company’s Finance and Compensation\n Committees. Ms. Bush has been President of Bush\n International, LLC, a Washington D.C. firm that advises foreign\n governments and U.S. companies on international financial\n markets. Prior to establishing Bush International, Ms. Bush\n held several positions in financial institutions and has served\n three Presidents of the United States as Alternate Director of\n the International Monetary Fund, Managing Director of the\n Federal Housing Finance Board, a member of the Board of Sallie\n Mae, and chairman of the HELP Commission. Ms. Bush also is\n a member of the boards of directors of Mortgage Guaranty\n Insurance Corporation, Briggs & Stratton Corporation,\n and United Airlines Corporation. She is also a trustee of the\n Pioneer Funds and a member of the Advisory Boards of Washington\n Mutual Investors Fund and Stern Stewart.\n
\n\n
 
\n\n
\n Frank R. Jarc — Mr. Jarc was elected to\n the Board of Directors in May 2000. Mr. Jarc is a\n consultant specializing in corporate development and\n international acquisitions. From April 1999 to March 2000 he was\n Senior Vice President of Corporate Development at Office Depot,\n an operator of office supply superstores. Between June 1996 and\n March 1999, he was Executive Vice President and Chief Financial\n Officer of Viking Office Products, a direct mail marketer of\n office products. Prior to that, he was Executive Vice President\n and Chief Financial Officer of R.R. Donnelley and Sons, a global\n printing company. He is chair of Brady’s Audit Committee\n and serves on the Technology Committee.\n
\n\n
 
\n\n
\n All directors serve until their respective successors are\n elected at the next annual meeting of shareholders. Officers\n serve at the discretion of the Board of Directors. None of the\n Company’s directors or executive officers has any family\n relationship with any other director or executive officer.\n
\n\n
 
\n\n
\n Audit Committee Financial Expert — The\n Company’s board of directors has determined that at least\n one audit committee financial expert is serving on its audit\n committee. Mr. Jarc, chair of the audit committee is a\n financial expert and is independent as that term is used in\n Item 7(d)(3)(iv) of Schedule 14A under the Exchange\n Act.\n
\n\n
 
\n\n
\n Director Independence — A majority of the\n directors must meet the criteria for independence established by\n the Board in accordance with the rules of the New York Stock\n Exchange. In determining the independence of a director, the\n Board must find that a director has no relationship that may\n interfere with the exercise of his or her independence from\n management and the Company. Based on these guidelines all\n directors, with the exception of Frank Jaehnert, President and\n CEO, and Elizabeth Pungello, 50% beneficial owner of the\n Class B Voting Common Stock, are deemed independent.\n
\n\n

\n
\n III-3\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n Meetings of Non-management Directors — The\n non-management directors of the Board regularly meet alone\n without any members of management present. Mr. Buchanan,\n Chairman of the Corporate Governance Committee, is the presiding\n director at these sessions. In fiscal 2006 there were five\n executive sessions. Interested parties can raise concerns to be\n addressed at these meetings by calling the confidential Brady\n hotline at\n 1-800-368-3613.\n
\n\n
 
\n\n
\n Audit Committee Members — The Audit Committee,\n which is a separately-designated standing committee of the Board\n of Directors, is composed of Mr. Jarc (Chairman),\n Mr. Lettenberger and Mr. Peirce. Each member of the\n Audit Committee has been determined by the Board to be\n independent under the rules of the SEC and NYSE. The charter for\n the Audit Committee is available on the Company’s corporate\n website at www.bradycorp.com.\n
\n\n
 
\n\n
\n Code of Ethics — For a number of years, the\n Company has had a code of ethics for its employees. This code of\n ethics applies to all of the Company’s employees, officers\n and Directors. The code of ethics can be viewed at the\n Company’s corporate website, www.bradycorp.com, or may be\n obtained in print by any shareholder by contacting Brady\n Corporation, Investor Relations, P.O. Box 571, Milwaukee,\n WI 53201. The Company intends to satisfy the disclosure\n requirements under Item 5.05 of\n Form 8-K\n regarding an amendment to, or a waiver from, a provision of its\n code of ethics by placing such information on its Internet\n website.\n
\n\n
 
\n\n
\n Corporate Governance Guidelines — Brady’s\n Corporate Governance Principles as well as the charters for the\n Audit Committee, Corporate Governance Committee, and\n Compensation Committee, are available on the Company’s\n Corporate website, www.bradycorp.com. Shareholders may request\n printed copies of these documents from Brady Corporation,\n Investor Relations, P.O. Box 571, Milwaukee, WI 53201.\n
\n\n
 
\n\n
\n Certifications — We have attached the required\n certifications under Section 302 of the Sarbanes-Oxley Act\n of 2002 regarding the quality of our public disclosures as\n Exhibits 31.1 and 31.2 to this report. Additionally, on\n December 1, 2005, the Company filed with the New York Stock\n Exchange (“NYSE”) an annual certification regarding\n our compliance with the NYSE’s corporate governance listing\n standards as required by NYSE Rule 303A.12(a).\n
\n\n
 
\n\n
\n\n SECTION 16(a)\n BENEFICIAL OWNERSHIP REPORTING COMPLIANCE\n
\n\n
 
\n\n
\n Section 16(a) of the Exchange Act requires the\n Company’s directors and executive officers, and persons who\n own more than ten percent of a registered class of the\n Company’s equity securities, to file with the SEC initial\n reports of ownership and reports of changes in ownership of\n Common Stock and other equity securities of the Company.\n Executive officers, directors and greater than ten percent\n stockholders are required by SEC regulation to furnish the\n Company with copies of all Section 16(a) forms they file.\n
\n\n
 
\n\n
\n To the Company’s knowledge, based solely on a review of the\n copies of such reports furnished to the Company and written\n representations that no other reports were required, during the\n fiscal year ended July 31, 2006, all Section 16(a)\n filing requirements applicable to its officers, directors and\n greater than 10 percent beneficial owners were complied\n with.\n
\n\n

\n
\n III-4\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 11.  \n\n Executive\n Compensation\n
\n\n
 
\n\n
\n The following table summarizes the compensation paid or accrued\n by the Company during the three years ended July 31, 2006,\n to those persons who, as of the end of fiscal 2006, were the\n Named Executive Officers.\n
\n\n
 
\n\n
\n\n SUMMARY\n COMPENSATION TABLE\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                     
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Long-Term Compensation\n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n Annual Compensation\n\n \n\n \n\n Awards\n\n \n\n \n\n All Other
\n \n		\n \n
\n \n\n \n\n Fiscal
\n \n		\n \n\n \n\n Salary
\n \n		\n \n\n \n\n Bonus
\n \n		\n \n\n \n\n Options/SAR
\n \n		\n \n\n \n\n Comp
\n \n		\n \n
\n
\n Name And Principal Position\n
\n		\n \n\n Year\n\n \n\n \n\n ($)\n\n \n\n \n\n ($)(1)\n\n \n\n \n\n (# Of Shares)(3)\n\n \n\n \n\n ($)(2)\n\n \n
 \n
\n
\n F.M. Jaehnert\n \n
\n		\n \n\n \n\n 2006\n\n \n\n \n\n \n\n 573,077\n\n \n\n \n\n \n\n 862,308\n\n \n\n \n\n \n\n 110,000\n\n \n\n \n\n \n\n 104,035\n\n \n
\n
\n President &\n \n
\n		\n \n\n \n\n 2005\n\n \n\n \n\n \n\n 493,269\n\n \n\n \n\n \n\n 734,902\n\n \n\n \n\n \n\n 120,000\n\n \n\n \n\n \n\n 107,632\n\n \n
\n
\n Chief Executive Officer\n \n
\n		\n \n\n \n\n 2004\n\n \n\n \n\n \n\n 468,270\n\n \n\n \n\n \n\n 796,800\n\n \n\n \n\n \n\n 72,000\n\n \n\n \n\n \n\n 37,529\n\n \n
\n
\n D.R. Hawke\n \n
\n		\n \n\n \n\n 2006\n\n \n\n \n\n \n\n 379,616\n\n \n\n \n\n \n\n 418,596\n\n \n\n \n\n \n\n 55,000\n\n \n\n \n\n \n\n 63,072\n\n \n
\n
\n Executive Vice President\n \n
\n		\n \n\n \n\n 2005\n\n \n\n \n\n \n\n 362,304\n\n \n\n \n\n \n\n 363,714\n\n \n\n \n\n \n\n 30,000\n\n \n\n \n\n \n\n 65,080\n\n \n
\n \n\n \n\n \n\n 2004\n\n \n\n \n\n \n\n 350,000\n\n \n\n \n\n \n\n 317,100\n\n \n\n \n\n \n\n 130,000\n\n \n\n \n\n \n\n 31,759\n\n \n
\n
\n P.C. Sephton\n \n
\n		\n \n\n \n\n 2006\n\n \n\n \n\n \n\n 297,786\n\n \n\n \n\n \n\n 288,247\n\n \n\n \n\n \n\n 55,000\n\n \n\n \n\n \n\n 47,827\n\n \n
\n
\n Vice President — Brady\n Europe\n \n
\n		\n \n\n \n\n 2005\n\n \n\n \n\n \n\n 290,714\n\n \n\n \n\n \n\n 281,633\n\n \n\n \n\n \n\n 60,000\n\n \n\n \n\n \n\n 49,584\n\n \n
\n \n\n \n\n \n\n 2004\n\n \n\n \n\n \n\n 257,279\n\n \n\n \n\n \n\n 240,330\n\n \n\n \n\n \n\n 44,000\n\n \n\n \n\n \n\n 41,165\n\n \n
\n
\n D. Mathieson\n \n
\n		\n \n\n \n\n 2006\n\n \n\n \n\n \n\n 264,616\n\n \n\n \n\n \n\n 279,323\n\n \n\n \n\n \n\n 55,000\n\n \n\n \n\n \n\n 41,572\n\n \n
\n
\n Vice President & Chief\n Financial\n \n
\n		\n \n\n \n\n 2005\n\n \n\n \n\n \n\n 244,616\n\n \n\n \n\n \n\n 248,285\n\n \n\n \n\n \n\n 60,000\n\n \n\n \n\n \n\n 33,712\n\n \n
\n
\n Officer\n \n
\n		\n \n\n \n\n 2004\n\n \n\n \n\n \n\n 200,277\n\n \n\n \n\n \n\n 178,148\n\n \n\n \n\n \n\n 44,000\n\n \n\n \n\n \n\n 85,390\n\n \n
\n
\n M. O. Williamson\n \n
\n		\n \n\n \n\n 2006\n\n \n\n \n\n \n\n 254,616\n\n \n\n \n\n \n\n 269,523\n\n \n\n \n\n \n\n 55,000\n\n \n\n \n\n \n\n 39,881\n\n \n
\n
\n Vice President — Brady\n Americas\n \n
\n		\n \n\n \n\n 2005\n\n \n\n \n\n \n\n 237,308\n\n \n\n \n\n \n\n 237,545\n\n \n\n \n\n \n\n 60,000\n\n \n\n \n\n \n\n 35,050\n\n \n
\n \n\n \n\n \n\n 2004\n\n \n\n \n\n \n\n 228,626\n\n \n\n \n\n \n\n 194,236\n\n \n\n \n\n \n\n 44,000\n\n \n\n \n\n \n\n 21,778\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n\n No perquisites or other personal benefits received from the\n Company by any of the named executives exceeded the reporting\n thresholds established by the Securities and Exchange Commission\n (the lesser of $50,000 or 10% of the individual’s cash\n compensation).
 
\n (1) \n Reflects bonus earned during the listed fiscal year, which was\n paid during the next fiscal year.
 
\n (2) \n All other compensation for fiscal 2006 for\n Messrs. Jaehnert, Hawke, Mathieson and Williamson,\n respectively, includes: (i) matching contributions to the\n Company’s Matched 401(k) Plan, Funded Retirement Plan and\n Restoration Plan for each named executive officer of $100,993,\n $58,813, $40,509, and $38,850, respectively and (ii) the\n cost of group term life insurance for each named executive\n officer of $3,042, $4,259, $1,063 and $1,032, respectively.
 
\n\n All other compensation for fiscal 2006 for Mr. Sephton\n includes: (i) matching contributions for the Brady U.K.\n Pension Plan of $47,646 and (ii) the cost of group term\n life insurance of $181.
 
\n\n All other compensation for fiscal 2005 for\n Messrs. Jaehnert, Hawke, Mathieson and Williamson,\n respectively, includes: (i) matching contributions to the\n Company’s Matched 401(k) Plan, Funded Retirement Plan and\n Restoration Plan for each named executive officer of $102,706,\n $61,506, $32,944, and $34,314, respectively and (ii) the\n cost of group term life insurance for each named executive\n officer of $4,926, $3,574, $768 and $736, respectively.
 
\n\n All other compensation for fiscal 2005 for Mr. Sephton\n includes: (i) matching contributions for the Brady U.K.\n Pension Plan of $46,514 and (ii) the cost of group term\n life insurance of $3,070.
 
\n\n All other compensation for fiscal 2004 for\n Messrs. Jaehnert, Hawke, Mathieson and Williamson,\n respectively, includes: (i) matching contributions to the\n Company’s Matched 401(k) Plan, Funded Retirement Plan and\n Restoration Plan for each named executive officer of $34,191,\n $27,462, $13,298 and $21,082, respectively and (ii) the\n cost of group term life insurance for each named executive\n officer of $3,338, $4,297, $509 and $696, respectively and\n (iii) costs related to relocation for Mr. Mathieson of\n $71,583.
 
\n\n All other compensation for fiscal 2004 for Mr. Sephton\n includes matching contributions for the Brady U.K. Pension Plan\n of $41,165.
 
\n (3) \n Adjusted for\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004.
\n\n

\n
\n III-5\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n Stock\n Options\n
\n\n
 
\n\n
\n The following tables summarize option grants and exercises\n during fiscal 2006 to or by the executive officers named in the\n Summary Compensation Table above, and the value of unexercised\n options held by such persons at July 31, 2006. Stock\n Appreciation Rights are not available under any of the\n Company’s plans.\n
\n\n
 
\n\n
\n\n Option\n Grants in Fiscal 2006\n
\n\n
 
\n\n
\n\n Individual\n Grants\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                   
\n \n\n \n\n \n\n \n\n # of Securities
\n \n		\n \n\n \n\n % of Total
\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n Underlying
\n \n		\n \n\n \n\n Options
\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n Options
\n \n		\n \n\n \n\n Granted to
\n \n		\n \n\n \n\n Exercise
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n Granted
\n \n		\n \n\n \n\n Employees in
\n \n		\n \n\n \n\n Price
\n \n		\n \n\n \n\n \n\n \n
\n
\n Name\n
\n		\n \n\n Grant Date\n\n \n\n (#)(1)\n\n \n\n \n\n Fiscal 2006\n\n \n\n \n\n ($/Share)(2)\n\n \n\n \n\n Expiration Date\n\n \n
 \n
\n
\n F.M. Jaehnert\n \n
\n		\n \n\n Aug. 1, 2005\n \n\n \n\n \n\n 60,000\n\n \n\n \n\n \n\n 6.3\n\n %\n\n \n\n \n\n 33.8900\n\n \n\n \n\n \n\n Aug. 1, 2010\n\n \n
\n \n\n \n\n Nov. 30, 2005\n \n\n \n\n \n\n 50,000\n\n \n\n \n\n \n\n 5.2\n\n %\n\n \n\n \n\n 37.8300\n\n \n\n \n\n \n\n Nov. 30, 2015\n\n \n
\n
\n D.R. Hawke\n \n
\n		\n \n\n Aug. 1, 2005\n \n\n \n\n \n\n 30,000\n\n \n\n \n\n \n\n 3.1\n\n %\n\n \n\n \n\n 33.8900\n\n \n\n \n\n \n\n Aug. 1, 2010\n\n \n
\n \n\n \n\n Nov. 30, 2005\n \n\n \n\n \n\n 25,000\n\n \n\n \n\n \n\n 2.6\n\n %\n\n \n\n \n\n 37.8300\n\n \n\n \n\n \n\n Nov. 30, 2015\n\n \n
\n
\n D. Mathieson\n \n
\n		\n \n\n Aug. 1, 2005\n \n\n \n\n \n\n 30,000\n\n \n\n \n\n \n\n 3.1\n\n %\n\n \n\n \n\n 33.8900\n\n \n\n \n\n \n\n Aug. 1, 2010\n\n \n
\n \n\n \n\n Nov. 30, 2005\n \n\n \n\n \n\n 25,000\n\n \n\n \n\n \n\n 2.6\n\n %\n\n \n\n \n\n 37.8300\n\n \n\n \n\n \n\n Nov. 30, 2015\n\n \n
\n
\n P.C. Sephton\n \n
\n		\n \n\n Aug. 1, 2005\n \n\n \n\n \n\n 30,000\n\n \n\n \n\n \n\n 3.1\n\n %\n\n \n\n \n\n 33.8900\n\n \n\n \n\n \n\n Aug. 1, 2010\n\n \n
\n \n\n \n\n Nov. 30, 2005\n \n\n \n\n \n\n 25,000\n\n \n\n \n\n \n\n 2.6\n\n %\n\n \n\n \n\n 37.8300\n\n \n\n \n\n \n\n Nov. 30, 2015\n\n \n
\n
\n M.O. Williamson\n \n
\n		\n \n\n Aug. 1, 2005\n \n\n \n\n \n\n 30,000\n\n \n\n \n\n \n\n 3.1\n\n %\n\n \n\n \n\n 33.8900\n\n \n\n \n\n \n\n Aug. 1, 2010\n\n \n
\n \n\n \n\n Nov. 30, 2005\n \n\n \n\n \n\n 25,000\n\n \n\n \n\n \n\n 2.6\n\n %\n\n \n\n \n\n 37.8300\n\n \n\n \n\n \n\n Nov. 30, 2015\n\n \n
\n\n
\n\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Potential Realizable Value
\n \n		\n \n
\n \n\n \n\n at Assumed Rates of
\n \n		\n \n
\n \n\n \n\n Stock Price Appreciation(3)\n\n \n
\n
\n Name\n
\n		\n \n\n 0%($)\n\n \n\n \n\n 5%($)(6)\n\n \n\n \n\n 10%($)(6)\n\n \n
 \n
\n
\n F.M. Jaehnert\n \n
\n		\n \n\n \n\n 0\n\n \n\n \n\n \n\n 2,057,653\n\n \n\n \n\n \n\n 4,642,497\n\n \n
\n
\n D.R. Hawke\n \n
\n		\n \n\n \n\n 0\n\n \n\n \n\n \n\n 1,028,826\n\n \n\n \n\n \n\n 2,321,249\n\n \n
\n
\n D. Mathieson\n \n
\n		\n \n\n \n\n 0\n\n \n\n \n\n \n\n 1,028,826\n\n \n\n \n\n \n\n 2,321,249\n\n \n
\n
\n P.C. Sephton\n \n
\n		\n \n\n \n\n 0\n\n \n\n \n\n \n\n 1,028,826\n\n \n\n \n\n \n\n 2,321,249\n\n \n
\n
\n M. O. Williamson\n \n
\n		\n \n\n \n\n 0\n\n \n\n \n\n \n\n 1,028,826\n\n \n\n \n\n \n\n 2,321,249\n\n \n
\n
\n All Stockholders’ Gains\n (increase in market value of Brady Corporation Common Stock at\n assumed rates of stock price appreciation)(4)(6)\n \n
\n		\n \n\n \n\n 938,829,144\n\n \n\n \n\n \n\n 2,118,196,030\n\n \n
\n
\n All Optionees’ Gains (as a\n percent of all shareholders’ gains)(5)(6)\n \n
\n		\n \n\n \n\n 1.94\n\n %\n\n \n\n \n\n 1.93\n\n %\n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n (1) \n The options granted August 1, 2005 equally vest upon\n meeting certain financial goals in fiscal 2006, 2007 and 2008.\n The financial goals in 2006 have been met and one-third of the\n options have vested. The options have a term of five years.
 
\n\n The options granted November 30, 2005, become exercisable\n as follows: one-third of the shares on November 30, 2006,\n one-third of the shares on November 30, 2007 and one-third\n of the shares on November 30, 2008. These options have a\n term of ten years.
 
\n (2) \n The exercise price is the average of the highest and lowest sale\n prices of the Company’s Class A Common Stock as\n reported by the New York Stock Exchange on the date of the grant
 
\n (3) \n For options with a ten-year life, represents total potential\n appreciation of approximately 0%, 63% and 159% for assumed\n annual rates of appreciation of 0%, 5% and 10%, respectively,\n compounded annually for ten years.
 
\n\n For options with a five-year life, represents total potential\n appreciation of approximately 0%, 28% and 61% for assumed annual\n rates of appreciation of 0%, 5% and 10%, respectively,\n compounded annually for five years.
\n\n

\n
\n III-6\n

\n\n

\n

Table of Contents

\n\n

\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n (4) \n Calculated from the $33.8900 exercise price applicable to the\n options granted on August 1, 2005 and the $37.8300 exercise\n price applicable to the options granted on November 30,\n 2005 based on the fiscal 2006 average of Class A Common\n Stock outstanding of 45,473,676.
 
\n (5) \n Represents potential realizable value for all options granted in\n fiscal 2006 compared to the increase in market value of Brady\n Corporation Class A Common Stock at assumed rates of stock\n price appreciation.
 
\n (6) \n The Company disavows the ability of any valuation model to\n predict or estimate the Company’s future stock price or to\n place a reasonably accurate present value on these options\n because any model depends on assumptions about the stock’s\n future price movement that the Company is unable to predict.
\n\n
 
\n\n
\n\n AGGREGATED\n OPTION EXERCISES IN FISCAL 2006
\n AND VALUE OF OPTIONS AT END OF FISCAL 2006\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
                 
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Number of Securities Underlying
\n \n		\n \n
\n \n\n \n\n Shares
\n \n		\n \n\n \n\n \n\n \n\n \n\n Unexercised Options at
\n \n		\n \n
\n \n\n \n\n Acquired on
\n \n		\n \n\n \n\n Value
\n \n		\n \n\n \n\n July 31, 2006\n\n \n
\n
\n Name\n
\n		\n \n\n Exercise(#)(2)\n\n \n\n \n\n Realized($)\n\n \n\n \n\n Exercisable(#)\n\n \n\n \n\n Unexercisable(#)\n\n \n
 \n
\n
\n F.M. Jaehnert\n \n
\n		\n \n\n \n\n 45,200\n\n \n\n \n\n \n\n 1,309,477\n\n \n\n \n\n \n\n 286,000\n\n \n\n \n\n \n\n 414,000\n\n \n
\n
\n D.R. Hawke\n \n
\n		\n \n\n \n\n 178,000\n\n \n\n \n\n \n\n 4,400,288\n\n \n\n \n\n \n\n 66,667\n\n \n\n \n\n \n\n 118,333\n\n \n
\n
\n D. Mathieson\n \n
\n		\n \n\n \n\n 0\n\n \n\n \n\n \n\n 0\n\n \n\n \n\n \n\n 60,933\n\n \n\n \n\n \n\n 109,667\n\n \n
\n
\n P.C. Sephton\n \n
\n		\n \n\n \n\n 0\n\n \n\n \n\n \n\n 0\n\n \n\n \n\n \n\n 90,333\n\n \n\n \n\n \n\n 109,667\n\n \n
\n
\n M.O. Williamson\n \n
\n		\n \n\n \n\n 8,000\n\n \n\n \n\n \n\n 176,100\n\n \n\n \n\n \n\n 77,333\n\n \n\n \n\n \n\n 109,667\n\n \n
\n\n
\n\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n Value of Unexercised\n In-the-Money\n Options at July 31, 2006(1)\n\n \n
\n
\n Name\n
\n		\n \n\n Exercisable($)\n\n \n\n \n\n Unexercisable($)\n\n \n
 \n
\n
\n F.M. Jaehnert\n \n
\n		\n \n\n \n\n 5,274,632\n\n \n\n \n\n \n\n 4,914,940\n\n \n
\n
\n D.R. Hawke\n \n
\n		\n \n\n \n\n 989,872\n\n \n\n \n\n \n\n 714,253\n\n \n
\n
\n D. Mathieson\n \n
\n		\n \n\n \n\n 777,386\n\n \n\n \n\n \n\n 422,462\n\n \n
\n
\n P.C. Sephton\n \n
\n		\n \n\n \n\n 1,409,658\n\n \n\n \n\n \n\n 459,427\n\n \n
\n
\n M.O. Williamson\n \n
\n		\n \n\n \n\n 1,145,943\n\n \n\n \n\n \n\n 459,427\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n (1) \n Represents the closing price for the Company’s Class A\n Common Stock on July 31, 2006, of $33.76 less the exercise\n price for all outstanding exercisable and unexercisable options\n for which the exercise price is less than such closing price.
 
\n (2) \n Adjusted for a\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004.
\n\n

\n
\n III-7\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n Common\n Stock Price Performance Graph\n
\n\n
 
\n\n
\n The graph below shows a comparison of the cumulative return over\n the last five fiscal years had $100 been invested at the close\n of business on July 31, 2000, in each of Brady Corporation\n Class A Common Stock, The Standard & Poor’s\n (S&P) 500 index, the Standard and Poor’s Small Cap 600\n index, and the Russell 2000 index.\n
\n\n
 
\n\n
\n\n Comparison\n of 5 Year Cumulative Total Return*\n
\n\n
\n Among Brady Corporation, The S&P 500 Index,\n
\n\n
\n The S&P Smallcap 600 Index and The Russell 2000 Index\n
\n\n
 
\n\n
\n \"(LINE \n
\n\n
 
\n\n
 
\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
\n * \n $100 invested on 7/31/00 in stock or index — including\n reinvestment of dividends. Fiscal year ended July 31.
\n\n
 
\n\n
\n Copyright (C) 2002, Standard & Poor’s, a\n division of The McGraw-Hill Companies, Inc. All rights reserved.\n www.researchdatagroup.com/S&P.htm\n
\n\n
 
\n\n
\n\n Compensation\n of Directors\n
\n\n
 
\n\n
\n Each director who is also an employee of the Company receives no\n additional compensation for service on the Board or on any\n committee of the Board. Effective August 1, 2004, directors\n who were not also employees of the Company received an annual\n retainer of $30,000 plus $5,000 for each committee they chaired\n ($9,000 for the audit committee chair) and $1,250 plus expenses\n for each meeting of the Board or any committee thereof, which\n they attended and were a member or $750 for single issue\n telephonic committee meetings of the Board. Directors also\n received $750 for each meeting they attended of any committee\n for which they were not a member.\n
\n\n
 
\n\n
\n\n Termination\n of Employment and Change in Control Arrangements\n
\n\n
 
\n\n
\n On November 18, 2004, the Board of Directors of Brady\n Corporation approved change of control agreements for certain\n executive officers of the Company including David Mathieson,\n Peter Sephton, and Matthew Williamson. The agreements call for\n payment of an amount equal to two times their annual base salary\n and two times the average bonus payment received in the two\n years immediately prior to the date the Change of Control occurs\n in the event of termination or resignation upon a change of\n control. The agreements also call for reimbursement of any\n excise taxes imposed and up to $25,000 of attorney fees to\n enforce the executive’s rights under the agreement.\n Payments under the agreement will be spread over two years.\n
\n\n
 
\n\n
\n In May 2003, the Board approved a Change in Control Agreement\n for Mr. Jaehnert. The agreement calls for payment of an\n amount equal to three times the annual salary and bonus for\n Mr. Jaehnert in the event of termination or resignation\n upon a change of control. The agreement also calls for\n reimbursement of any excise taxes imposed\n
\n\n

\n
\n III-8\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n and up to $25,000 of attorney fees to enforce the\n executive’s rights under the agreement. Payments under the\n agreement will be spread over three years.\n
\n\n
 
\n\n
\n In January 2001, the Board approved Change in Control Agreements\n for certain of its executive officers, including Mr. Hawke.\n The agreements call for payment of an amount equal to two times\n their annual salary and bonus in the event of termination or\n resignation upon a change in control with payments spread over\n two years. The agreements also call for reimbursement of any\n excise taxes imposed and up to $25,000 of attorney fees to\n enforce the executive’s rights under the agreements.\n
\n\n
 
\n\n
\n\n Compensation\n Committee Interlocks and Insider Participation\n
\n\n
 
\n\n
\n During fiscal 2006, the Board’s Compensation Committee was\n composed of Messrs. Bemis, Buchanan, Nei and Peirce and\n Ms. Bush. None of these persons has at any time been an\n employee of the Company or any of its subsidiaries. There are no\n relationships among the Company’s executive officers,\n members of the Compensation Committee or entities whose\n executives serve on the Board that require disclosure under\n applicable SEC regulations.\n
\n\n
 
\n\n
\n\n Funded\n Retirement and 401(k) Plans\n
\n\n
 
\n\n
\n Substantially all Brady employees in the United States and\n certain expatriate employees working for its international\n subsidiaries are eligible to participate in Brady\n Corporation’s Funded Retirement Plan (“Funded\n Retirement Plan”) and the Brady Corporation Matched 401(k)\n Plan (the “employee 401(k) Plan”). Under these plans\n the Company agrees to contribute certain amounts to both Plans.\n Under the Funded Retirement Plan, the Company contributes 4% of\n the eligible earnings of each person covered by the Funded\n Retirement Plan. In addition, participants may elect to have\n their annual pay reduced by up to 4% and have the amount of this\n reduction contributed to the employee 401(k) Plan and matched by\n an additional, equal contribution by the Company. Participants\n may also elect to have up to another 21% of their eligible\n earnings contributed to the employee 401(k) Plan (without an\n additional matching contribution by the Company). The assets of\n the employee 401(k) Plan and Funded Retirement Plan credited to\n each participant are invested by the trustee of the Plans as\n directed by each plan participant in several investment funds as\n permitted by the employee 401(k) Plan and Funded Retirement Plan.\n
\n\n
 
\n\n
\n Benefits are generally payable upon the death, disability, or\n retirement of the participant or upon termination of employment\n before retirement, although benefits may be withdrawn from the\n employee 401(k) Plan and paid to the participant if required for\n certain emergencies. Under certain specified circumstances, the\n employee 401(k) Plan allows loans to be drawn on a\n participant’s account. The participant is immediately fully\n vested with respect to the contributions attributable to\n reductions in pay; all other contributions become fully vested\n over a three-year period of continuous service for the employee\n 401(k) Plan and after five years of continuous service for the\n Funded Retirement Plan.\n
\n\n
 
\n\n
\n\n Deferred\n Compensation Arrangements\n
\n\n
 
\n\n
\n During fiscal 2002, the Company adopted a deferred compensation\n plan under which executive officers, corporate staff officers\n and certain key management employees of the Company are\n permitted to defer portions of their fees, salary and bonus into\n a plan account, the value of which is measured by the fair value\n of the underlying investments. The assets of the Plan are held\n in a Rabbi Trust and are invested by the trustee of the Plan as\n directed by the participant in several investment funds as\n permitted by the Plan.\n
\n\n
 
\n\n
\n At least one year prior to termination of employment, the\n Executive shall elect whether to receive his Account balance\n following termination of employment in a single lump sum in cash\n or by means of cash distribution under an Annual Installment\n Method. If the Executive does not submit an election form or has\n not submitted one timely, then payment shall be made each year\n for a period of ten years. The first payment must be one-tenth\n of the balance held; the second one-ninth; and so on, with the\n balance held in the Trust reduced by each payment.\n
\n\n

\n
\n III-9\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n Compensation\n Committee Report on Executive Compensation\n
\n\n
 
\n\n
\n The Company’s Compensation Committee (the\n “Committee”) is composed entirely of outside directors\n and is responsible for considering and approving compensation\n arrangements for senior management of the Company, including the\n Company’s executive officers and the chief executive\n officer. It is the philosophy of the Committee to establish a\n total executive compensation program which is competitive with a\n broad range of companies that it considers to be of comparable\n size and complexity.\n
\n\n
 
\n\n
\n The primary components of the Company’s executive\n compensation program are (i) base salary, (ii) annual\n cash incentive plan and (iii) long-term incentive\n compensation in the form of stock options\n and/or\n restricted stock. These are designed to align shareholder and\n management interests, to balance the achievement of annual\n performance targets with actions that focus on the long-term\n success of the Company, and to attract, motivate and retain key\n executives who are important to the continued success of the\n Company. The base salary compensation and the annual cash\n incentive compensation plan are reviewed and approved by the\n Compensation Committee.\n
\n\n
 
\n\n
\n The Committee believes that:\n
\n\n
 
\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
  • \n\n The Company’s pay levels are appropriately targeted to\n attract and retain key executives;\n
 
  • \n\n The Company’s incentive plan provides strong incentives for\n management to increase shareholder value; and\n
 
  • \n\n The Company’s total executive compensation program is a\n cost-effective strategy to increase shareholder value.\n
\n\n
 
\n\n
\n In December 2003 the Committee established stock ownership\n guidelines for executives. The guidelines allow executives up to\n five years to achieve the required stock ownership levels.\n
\n\n
 
\n\n
\n\n Base\n Salary\n
\n\n
 
\n\n
\n Consistent with the Committee’s philosophy, base salaries\n are generally maintained at or modestly above competitive base\n salary levels. Competitive salary level is defined as the median\n base salary for similar responsibilities in a group of companies\n selected by the Committee that the Committee considers to be of\n comparable size and complexity. In setting base salaries for\n fiscal 2006, the Committee reviewed compensation survey data and\n was satisfied that the base salary levels set would achieve the\n Company’s objectives. Specific increases reflect the\n Committee’s subjective evaluation of individual performance.\n
\n\n
 
\n\n
\n\n Annual\n Bonus Plan\n
\n\n
 
\n\n
\n The annual cash incentive compensation plan (the “Bonus\n Plan”) provides for the annual payment of cash bonuses.\n When viewed together with the Company’s base salary, the\n purpose of the Bonus Plan is to provide a balance between fixed\n compensation and variable, results-oriented compensation. The\n Bonus Plan is 80% objective. It stresses maximization of Company\n profitability and revenue growth. In fiscal 2006, the Company\n awarded a special bonus in recognition of achieving consolidated\n net sales greater than $1 billion and consolidated net\n income greater than $100 million.\n
\n\n
 
\n\n
\n\n Stock\n Options\n
\n\n
 
\n\n
\n In November 2005, the holders of the Corporation’s\n Class B Common Stock approved the Brady Corporation 2005\n Nonqualified Stock Option Plan for Non-employee Directors, under\n which 300,000 shares of Class A Common Stock were\n authorized for grant. In November 2004, the holders of the\n Corporation’s Class B Common Stock approved the Brady\n Corporation 2004 Omnibus Incentive Stock Plan under which\n 1,500,000 shares of Class A Common Stock were\n authorized for grant. In July 2003, the Company’s\n Class B Voting Common shareholders approved the Brady\n Corporation 2003 Omnibus Incentive Stock Plan under which\n 1,500,000 shares of Class A Common Stock were\n authorized for grant. In October 2001, the Company approved the\n Brady Corporation 2001 Omnibus Incentive Stock Plan under which\n 1,000,000 shares of Class A Common Stock were\n authorized for grant. In May 1997, the Company approved the\n Brady Corporation 1997 Omnibus Incentive Stock Plan and the\n Brady Corporation 1997 Nonqualified Stock Option Plan for\n Non-Employee Directors (the “Option Plans”) under\n which\n
\n\n

\n
\n III-10\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n 4,000,000 shares and 250,000 shares, respectively, of\n Class A Common Stock were authorized for grant. In 1989,\n the Board approved the Brady Corporation 1989 Non-Qualified\n Stock Option Plan (the “Option Plan”) under which\n 3,000,000 shares of Class A Common Stock were\n authorized for grant. As of July 31, 2006, the Company had\n reserved 3,815,052 shares of Class A Common Stock for\n outstanding stock options and 878,968 shares of\n Class A Common Stock for future issuance of stock options\n under the Option Plans. The Option Plans assist directors,\n executive officers, corporate staff officers and key management\n employees in becoming shareholders with an important stake in\n the Company’s future, aligning their personal financial\n interest with that of all shareholders. Stock options are\n typically granted annually and have a term of ten years.\n Generally, the options become one-third exercisable one year\n after the date of the grant and one-third additional in each of\n the succeeding two years so that at the end of three years after\n the date of the grant they are fully exercisable. In August\n 2004, 2005 and 2006, certain executives and key management\n employees were issued stock options that vest upon meeting\n certain financial performance conditions in addition to the\n vesting schedule described above and have a term of five years.\n All grants under the Option Plans are at market price on the\n date of the grant.\n
\n\n
 
\n\n
\n\n Compliance\n with Tax Regulations Regarding Executive\n Compensation\n
\n\n
 
\n\n
\n Section 162(m) of the Internal Revenue Code, added by the\n Omnibus Budget Reconciliation Act of 1993, generally disallows a\n tax deduction to public companies for compensation over\n $1 million paid to the corporation’s chief executive\n officer and the other named executive officers. Qualifying\n performance-based compensation will not be subject to the\n deduction limit if certain requirements are met. The\n Company’s executive compensation program, as currently\n constructed, is not likely to generate significant nondeductible\n compensation in excess of these limits. The Compensation\n Committee will continue to review these tax regulations as they\n apply to the Company’s executive compensation program. It\n is the Compensation Committee’s intent to preserve the\n deductibility of executive compensation to the extent reasonably\n practicable and to the extent consistent with its other\n compensation objectives. To that end, the Compensation Committee\n has recommended that the Class B Common Stock shareholders\n approve an incentive compensation plan for elected corporate\n officers at the shareholders’ next annual meeting.\n
\n\n
 
\n\n
\n\n Compensation\n of the Chief Executive Officer\n
\n\n
 
\n\n
\n Mr. Jaehnert received $573,077 in base salary in fiscal\n 2006, an increase of 16.2% from the prior year’s base\n salary. Based on the terms of the Company’s objective Bonus\n Plan, discussed above, Mr. Jaehnert earned a bonus\n attributable to fiscal 2006 of $862,308, of which $60,000 is\n attributable to the special bonus discussed above. In 2005,\n Mr. Jaehnert earned a bonus of $734,902 and in 2004,\n Mr. Jaehnert earned a bonus of $796,800.\n Mr. Jaehnert’s compensation reflects:\n
\n\n
 
\n\n
\n (i) continued strong performance as compared to its peers\n with respect to sales, profits and stock price performance;\n
\n\n
 
\n\n
\n (ii) continued efforts to focus the Company’s\n resources on sustainable value-enhancing long-term growth, which\n includes acquisitions and new product developments; and\n
\n\n
 
\n\n
\n (iii) continued involvement in management team development\n and succession planning.\n
\n\n
 
\n\n
\n During fiscal 2006, Mr. Jaehnert was awarded options to\n purchase 110,000 shares of Class A Common Stock.\n
\n\n
 
\n\n
\n ******************************\n
\n\n
 
\n\n
\n The Compensation Committee believes the executive compensation\n programs and practices described above are competitive. They are\n designed to provide increased compensation with improved\n financial performance and to provide additional opportunity for\n capital accumulation.\n
\n\n
 
\n\n
\n Gary E. Nei, Chairman
\n Richard A. Bemis
\n Robert C. Buchanan
\n Mary K. Bush
\n Roger D. Peirce\n
\n\n

\n
\n III-11\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 12.  \n\n Security\n Ownership of Certain Beneficial Owners and Management and\n Related Stockholder Matters\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (a) \n\n Security\n Ownership of Certain Beneficial Owners\n
\n\n
 
\n\n
\n The following table sets forth the current beneficial ownership\n of shareholders who are known by the Company to own more than\n five percent (5%) of any class of the Company’s voting\n shares on August 15, 2006. As of that date, nearly all of\n the voting stock of the Company was held by two trusts\n controlled by direct descendants of the Company’s founder,\n William H. Brady, as follows:\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
           
\n \n\n \n\n \n\n \n\n Amount of
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n Beneficial
\n \n		\n \n\n \n\n Percent of
\n \n		\n \n
\n
\n Title of Class\n
\n		\n \n\n
\n Name and Address of Beneficial Owner\n
\n		\n \n\n Ownership\n\n \n\n \n\n Ownership(2)\n\n \n
 \n
\n
\n Class B Common Stock\n \n
\n		\n \n\n Brady Corporation Class B\n Common Stock Trust(1)\n \n\n \n\n \n\n 1,769,304\n\n \n\n \n\n \n\n 50\n\n %\n
\n \n\n \n\n c/o Elizabeth P. Pungello
\n 2002 S. Hawick Ct.
\n Chapel Hill, NC 27516\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n \n\n \n\n William H. Brady III\n Revocable Trust of 2003(3)\n \n\n \n\n \n\n 1,769,304\n\n \n\n \n\n \n\n 50\n\n %\n
\n \n\n \n\n c/o William H. Brady III
\n 249 Rosemont Ave.
\n Pasadena, CA 91103\n \n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n (1) \n The trustee is Elizabeth P. Pungello, who has sole voting and\n dispositive power and who is the remainder beneficiary.\n Elizabeth Pungello is the great-granddaughter of William H.\n Brady and currently serves on the Company’s Board of\n Directors.
 
\n (2) \n An additional 20 shares are owned by a third trust with\n different trustees.
 
\n (3) \n William H. Brady III is special trustee of this trust and\n has sole voting and dispositive powers with respect to these\n shares. William H. Brady III is the grandson of William H.\n Brady.
\n\n

\n
\n III-12\n

\n\n

\n

Table of Contents

\n\n

\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (b) \n\n Security\n Ownership of Management\n
\n\n
 
\n\n
\n The following table sets forth the current beneficial ownership\n of each class of equity securities of the Company by each\n Director or Nominee and by all Directors and Officers of the\n Company as a group as of August 15, 2006. Unless otherwise\n noted, the address for each of the listed persons is\n c/o Brady Corporation, 6555 West Good Hope Road,\n Milwaukee, Wisconsin 53223. Except as otherwise indicated, all\n shares are owned directly.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n \n\n \n\n \n\n Amount of
\n \n		\n \n\n \n\n \n\n \n
\n \n\n \n\n \n\n \n\n \n\n Beneficial
\n \n		\n \n\n \n\n Percent of
\n \n		\n \n
\n
\n Title of Class\n
\n		\n \n\n \n\n
\n Name of Beneficial Owner & Nature of Beneficial\n Ownership\n
\n		\n \n\n Ownership(8)\n\n \n\n \n\n Ownership\n\n \n
 \n
\n \n\n Class A Common Stock\n\n \n\n \n\n Elizabeth P. Pungello(1)\n \n\n \n\n \n\n 2,247,677\n\n \n\n \n\n \n\n 4.5\n\n %\n
\n \n\n \n\n \n\n \n\n Frank M. Jaehnert(2)\n \n\n \n\n \n\n 294,658\n\n \n\n \n\n \n\n 0.6\n\n \n
\n \n\n \n\n \n\n \n\n Thomas J. Felmer\n \n\n \n\n \n\n 99,402\n\n \n\n \n\n \n\n 0.2\n\n \n
\n \n\n \n\n \n\n \n\n David R. Hawke\n \n\n \n\n \n\n 98,777\n\n \n\n \n\n \n\n 0.2\n\n \n
\n \n\n \n\n \n\n \n\n Peter C. Sephton\n \n\n \n\n \n\n 90,733\n\n \n\n \n\n \n\n 0.2\n\n \n
\n \n\n \n\n \n\n \n\n Matthew O. Williamson\n \n\n \n\n \n\n 77,333\n\n \n\n \n\n \n\n 0.2\n\n \n
\n \n\n \n\n \n\n \n\n Allan J. Klotsche\n \n\n \n\n \n\n 76,705\n\n \n\n \n\n \n\n 0.2\n\n \n
\n \n\n \n\n \n\n \n\n David Mathieson\n \n\n \n\n \n\n 65,448\n\n \n\n \n\n \n\n 0.1\n\n \n
\n \n\n \n\n \n\n \n\n Michael O. Oliver\n \n\n \n\n \n\n 64,303\n\n \n\n \n\n \n\n 0.1\n\n \n
\n \n\n \n\n \n\n \n\n Conrad G. Goodkind\n \n\n \n\n \n\n 43,013\n\n \n\n \n\n \n\n 0.1\n\n \n
\n \n\n \n\n \n\n \n\n Richard A. Bemis\n \n\n \n\n \n\n 43,000\n\n \n\n \n\n \n\n 0.1\n\n \n
\n \n\n \n\n \n\n \n\n Roger D. Peirce(3)\n \n\n \n\n \n\n 24,000\n\n \n\n \n\n \n\n *\n\n \n
\n \n\n \n\n \n\n \n\n Gary E. Nei(4)\n \n\n \n\n \n\n 22,000\n\n \n\n \n\n \n\n *\n\n \n
\n \n\n \n\n \n\n \n\n Frank W. Harris\n \n\n \n\n \n\n 20,066\n\n \n\n \n\n \n\n *\n\n \n
\n \n\n \n\n \n\n \n\n Robert C. Buchanan(5)\n \n\n \n\n \n\n 19,400\n\n \n\n \n\n \n\n *\n\n \n
\n \n\n \n\n \n\n \n\n Frank R. Jarc\n \n\n \n\n \n\n 19,000\n\n \n\n \n\n \n\n *\n\n \n
\n \n\n \n\n \n\n \n\n Peter J. Lettenberger\n \n\n \n\n \n\n 18,575\n\n \n\n \n\n \n\n *\n\n \n
\n \n\n \n\n \n\n \n\n Barbara Bolens\n \n\n \n\n \n\n 12,925\n\n \n\n \n\n \n\n *\n\n \n
\n \n\n \n\n \n\n \n\n Mary K. Bush\n \n\n \n\n \n\n 10,000\n\n \n\n \n\n \n\n *\n\n \n
\n \n\n \n\n \n\n \n\n Robert L. Tatterson(6)\n \n\n \n\n \n\n 0\n\n \n\n \n\n \n\n *\n\n \n
\n \n\n \n\n \n\n \n\n All Officers and Directors as a\n Group (20 persons)(7)\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n 6.6\n\n %\n
\n \n\n Class B Common Stock\n\n \n\n \n\n Elizabeth P. Pungello(1)\n \n\n \n\n \n\n 1,769,304\n\n \n\n \n\n \n\n 50.0\n\n %\n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n * \n Indicates less than one-tenth of one percent.
 
\n (1) \n Represents 2,183,572 shares owned by trusts for which\n Ms. Pungello is a trustee and has either sole or joint\n dispositive and voting authority. In addition, Ms. Pungello\n is the beneficiary of an unrelated trust owning\n 1,833,409 shares, as to which she does not have voting or\n dispositive authority.
 
\n (2) \n Mr. Jaehnert owns 2,020 shares of Class A Common\n Stock directly and 1,173 shares in his 401(k) Plan, and\n holds vested options to acquire an additional\n 286,000 shares of Class A Common Stock.\n Mr. Jaehnert’s spouse owns 5,465 shares of\n Class A Common Stock directly.
 
\n (3) \n Mr. Peirce owns 3,000 shares of Class A Common\n Stock directly, 3,000 shares through his Keogh plan and\n holds vested options to acquire an additional 18,000 shares\n of Class A Common Stock.
 
\n (4) \n Mr. Nei owns 4,000 shares of Class A Common Stock\n directly (with respect to which he shares voting and investment\n power with his spouse) and holds vested options to acquire an\n additional 18,000 shares of Class A Common Stock.
 
\n (5) \n Mr. Buchanan owns 1,200 shares of Class A Common\n Stock directly, 13,200 additional shares as co-trustee of two\n separate trusts and holds vested options to acquire an\n additional 5,000 shares of Class A Common Stock.
 
\n (6) \n Mr. Tatterson joined the Company in October 2006 and owned no\n shares of Class A Common Stock as of the reporting date. Mr.\n Tatterson was granted options to acquire 15,000 shares of Class\n A Common Stock upon joining the Company.
\n\n

\n
\n III-13\n

\n\n

\n

Table of Contents

\n\n

\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n (7) \n The amount shown for all officers and directors as a group (20\n persons) includes options to acquire a total of\n 943,227 shares of Class A Common Stock, which are currently\n exercisable or will be exercisable within 60 days of\n August 15, 2006, including the following: Mr. Felmer,\n 98,667 shares; Mr. Sephton, 90,333 shares; Mr. Williamson,\n 77,333 shares; Mr. Klotsche, 74,801 shares; Mr. Hawke, 66,667\n shares; Mr. Mathieson, 60,933 shares; Mr. Oliver, 52,093 shares;\n Mr. Bemis, 25,000 shares; Mr. Jarc, 19,000 shares; Mr. Harris,\n 16,000 shares; Mr. Lettenberger, 13,000 shares; Ms. Bolens,\n 12,400 shares; Ms. Bush, 10,000 shares; Mr. Tatterson, 0\n shares. It does not include other options for Class A\n Common Stock which have been granted at later dates and are not\n exercisable within 60 days of August 15, 2006.
 
\n (8) \n In addition to the shares shown in this table, the officers and\n directors as a group owned the equivalent of 546,816 shares\n of the Company’s Class A Common Stock in its deferred\n compensation plans.
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (c)  \n\n Changes\n in Control\n
\n\n
 
\n\n
\n No arrangements are known to the Company, which may, at a\n subsequent date, result in a change in control of the Company.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n (d)  \n\n Equity\n Compensation Plan Information\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n Number of securities
\n \n		\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n remaining available for
\n \n		\n \n
\n \n\n \n\n Number of securities
\n \n		\n \n\n \n\n \n\n \n\n \n\n future issuance under
\n \n		\n \n
\n \n\n \n\n to be issued upon
\n \n		\n \n\n \n\n Weighted-average
\n \n		\n \n\n \n\n equity compensation
\n \n		\n \n
\n \n\n \n\n exercise of
\n \n		\n \n\n \n\n exercise price of
\n \n		\n \n\n \n\n plans (excluding
\n \n		\n \n
\n \n\n \n\n outstanding options,
\n \n		\n \n\n \n\n outstanding options,
\n \n		\n \n\n \n\n securities reflected in
\n \n		\n \n
\n \n\n \n\n warrants and rights
\n \n		\n \n\n \n\n warrants and rights
\n \n		\n \n\n \n\n column (a))
\n \n		\n \n
\n
\n Plan Category\n
\n		\n \n\n (a)\n\n \n\n \n\n (b)\n\n \n\n \n\n (c)\n\n \n
 \n
\n
\n Equity compensation plans approved\n by security holders\n \n
\n		\n \n\n \n\n 3,815,052\n\n \n\n \n\n $\n\n 23.27\n\n \n\n \n\n \n\n 1,064,770\n\n \n
\n
\n Equity compensation plans not\n approved by security holders\n \n
\n		\n \n\n \n\n None\n\n \n\n \n\n \n\n None\n\n \n\n \n\n \n\n None\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total\n \n
\n		\n \n\n \n\n 3,815,052\n\n \n\n \n\n $\n\n 23.27\n\n \n\n \n\n \n\n 1,064,770\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n The Company’s Nonqualified Stock Option Plans allow the\n granting of stock options to various officers, directors and\n other employees of the Company at prices equal to fair market\n value at the date of grant. The Company has reserved 3,000,000,\n 4,250,000, 1,000,000, 1,500,000, 1,500,000 and\n 300,000 shares of Class A Nonvoting Common Stock for\n issuance under the 1989, 1997, 2001, 2003, 2004 and 2005 Plans,\n respectively, adjusted for the\n two-for-one\n stock split in the form of a 100% stock dividend, effective\n December 31, 2004. Generally, options will not be\n exercisable until one year after the date of grant, and will be\n exercisable thereafter, to the extent of one-third per year and\n have a maximum term of ten years. In August 2003, 2004, 2005,\n and 2006, certain executives and key management employees were\n issued stock options that vest upon meeting certain financial\n performance conditions in addition to the vesting schedule\n described above. These options have a maximum term of five\n years. All grants under the Option Plans are at market price on\n the date of the grant.\n
\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 13.  \n\n Certain\n Relationships and Related Transactions\n
\n\n
 
\n\n
\n Peter J. Lettenberger serves as a Director of the Company; he\n recently retired as a partner of Quarles & Brady LLP,\n general counsel to the Company. Conrad G. Goodkind serves as\n Secretary to the Company. He is currently a partner of\n Quarles & Brady LLP, general counsel to the Company.\n
\n\n

\n
\n III-14\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 14.  \n\n Principal\n Accounting Fees and Services\n
\n\n
 
\n\n
\n The following table presents the aggregate fees incurred for\n professional services by Deloitte & Touche LLP and\n Deloitte Tax LLP during the years ended July 31, 2006 and\n 2005. Other than as set forth below, no professional services\n were rendered or fees billed by Deloitte & Touche LLP\n or Deloitte Tax LLP during the years ended July 31, 2006\n and 2005.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n
\n \n\n \n\n (Dollars in thousands)\n\n \n
 \n
\n
\n Audit and\n audit-related\n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Audit fees(1)\n \n
\n		\n \n\n $\n\n 1,495\n\n \n\n \n\n $\n\n 1,613\n\n \n
\n
\n Audit-related fees(2)\n \n
\n		\n \n\n \n\n 68\n\n \n\n \n\n \n\n 63\n\n \n
\n
\n Tax fees — compliance\n \n
\n		\n \n\n \n\n 511\n\n \n\n \n\n \n\n 518\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Subtotal audit and\n audit-related fees\n
\n		\n \n\n \n\n 2,074\n\n \n\n \n\n \n\n 2,194\n\n \n
\n
\n Non-audit\n related\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Tax fees — planning and\n advice\n \n
\n		\n \n\n \n\n 1,336\n\n \n\n \n\n \n\n 998\n\n \n
\n
\n Other fees(3)\n \n
\n		\n \n\n \n\n 103\n\n \n\n \n\n \n\n 63\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Subtotal non-audit related\n fees\n
\n		\n \n\n \n\n 1,439\n\n \n\n \n\n \n\n 1,061\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Total fees\n
\n		\n \n\n $\n\n 3,513\n\n \n\n \n\n $\n\n 3,255\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n (1) \n Audit fees consist of professional services rendered for the\n audit of the Company’s annual financial statements,\n attestation of management’s assessment of internal control,\n reviews of the quarterly financial statements and statutory\n reporting compliance.
 
\n (2) \n Audit-related fees include fees related to due diligence and\n employee benefit plan audits.
 
\n (3) \n All other fees include fees related to expatriate activities.
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
         
\n \n\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n
 \n
\n
\n Ratio of Tax Planning and Advice\n Fees and All Other Fees to Audit Fees,\n Audit-Related\n Fees and Tax Compliance Fees\n \n
\n		\n \n\n \n\n .7 to 1\n\n \n\n \n\n \n\n .5 to 1\n\n \n
\n\n
\n\n
\n\n
 
\n\n
\n Pre-Approval Policy — The services performed by\n the Independent Registered Public Accounting Firm\n (“Independent Auditors”) in fiscal 2005 and 2006 were\n pre-approved in accordance with the pre-approval policy and\n procedures adopted by the Audit Committee at its\n November 19, 2003 meeting. The policy requires the Audit\n Committee to pre-approve the audit and non-audit services\n performed by the Independent Auditors in order to assure that\n the provision of such services does not impair the\n auditor’s independence. Unless a type of service to be\n performed by the Independent Auditors has received general\n pre-approval, it will require specific pre-approval by the Audit\n Committee. Any proposed services exceeding pre-approved cost\n levels will require specific pre-approval by the Audit Committee.\n
\n\n

\n
\n III-15\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n PART IV\n
\n\n\n
 
\n\n\n\n\n \n \n\n\n\n \n \n\n\n
\n Item 15.  \n\n Exhibits\n and Financial Statement Schedules\n
\n\n
 
\n\n
\n Item 15 (a) — The following documents are filed\n as part of this report:\n
\n\n
 
\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
  1) \n\n & 2) Consolidated Financial Statement\n Schedule —\n
\n\n
 
\n\n
\n Schedule II Valuation and Qualifying Accounts\n
\n\n
 
\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
   \n\n All other schedules are omitted as they are not required, or the\n required information is shown in the consolidated financial\n statements or notes thereto.\n
\n\n
 
\n\n
\n 3) Exhibits — See Exhibit Index at\n page IV-2\n of this\n Form 10-K.\n
\n\n

\n
\n IV-1\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n EXHIBIT INDEX\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
     
\n Exhibit
\n \n		\n \n\n \n
\n
\n Number\n
\n		\n \n\n
\n Description\n
\n
 \n
\n \n\n 3\n\n .1\n\n \n\n Restated Articles of Incorporation\n of Brady Corporation(1)\n \n
\n \n\n 3\n\n .2\n\n \n\n By-laws of Brady Corporation, as\n amended(2)\n \n
\n \n\n *10\n\n .1\n\n \n\n Form of Brady Corporation\n (2004) Change of Control Agreement entered into with David\n Mathieson, Peter Sephton, and Matthew Williamson(17)\n \n
\n \n\n *10\n\n .2\n\n \n\n Brady Corporation BradyGold Plan,\n as amended(2)\n \n
\n \n\n *10\n\n .3\n\n \n\n Executive Additional Compensation\n Plan, as amended(2)\n \n
\n \n\n *10\n\n .4\n\n \n\n Executive Deferred Compensation\n Plan, as amended(5)\n \n
\n \n\n *10\n\n .5\n\n \n\n Directors’ Deferred\n Compensation Plan, as amended(2)\n \n
\n \n\n *10\n\n .6\n\n \n\n Brady Corporation 1989\n Non-Qualified Stock Option Plan(4)\n \n
\n \n\n *10\n\n .7\n\n \n\n Brady Corporation 2004 Omnibus\n Incentive Stock Plan(17)\n \n
\n \n\n *10\n\n .8\n\n \n\n Form of Brady Corporation 2004\n Nonqualified Stock Option Agreement under the 2004 Omnibus\n Incentive Stock Plan, as amended(18)\n \n
\n \n\n 10\n\n .9\n\n \n\n Brady Corporation Automatic\n Dividend Reinvestment Plan(4)\n \n
\n \n\n *10\n\n .10\n\n \n\n Brady Corporation 2005\n Nonqualified Plan for Non-employee Directors(3)\n \n
\n \n\n *10\n\n .11\n\n \n\n Form of Nonqualified Stock Option\n Agreement under 2005 Non-qualified Plan for Non-employee\n Directors(3)\n \n
\n \n\n *10\n\n .12\n\n \n\n Brady Corporation 1997 Omnibus\n Incentive Stock Plan(7)\n \n
\n \n\n *10\n\n .13\n\n \n\n Brady Corporation 1997\n Nonqualified Stock Option Plan for Non-Employee Directors(7)\n \n
\n \n\n 10\n\n .14\n\n \n\n Revolving Credit Facility Credit\n Agreement\n \n
\n \n\n *10\n\n .17\n\n \n\n Change of Control Agreement dated\n January 5, 2001, between Brady Corporation and David R.\n Hawke(10)\n \n
\n \n\n *10\n\n .23\n\n \n\n Restricted Stock Agreement dated\n August 1, 1997, between Brady Corporation and David R.\n Hawke(8)\n \n
\n \n\n *10\n\n .24\n\n \n\n Amendment to Change of Control\n Agreement dated May 20, 2003, between Brady Corporation and\n Frank M. Jaehnert(14)\n \n
\n \n\n *10\n\n .25\n\n \n\n Restated Brady Corporation\n Restoration Plan(5)\n \n
\n \n\n *10\n\n .26\n\n \n\n Brady Corporation 2001 Omnibus\n Incentive Stock Plan(11)\n \n
\n \n\n 10\n\n .27\n\n \n\n Revolving Credit Facility Credit\n Agreement (Replaced by Exhibit 10.14)(12)\n \n
\n \n\n 10\n\n .28\n\n \n\n First Amendment to Credit\n Agreement (Replaced by Exhibit 10.14)(6)\n \n
\n \n\n *10\n\n .29\n\n \n\n Brady Corporation 2003 Omnibus\n Incentive Stock Plan(16)\n \n
\n \n\n *10\n\n .30\n\n \n\n Restricted Stock Agreement dated\n June 18, 2003, between Brady Corporation and David R.\n Hawke(16)\n \n
\n \n\n 10\n\n .34\n\n \n\n Brady Note Purchase Agreement\n dated June 28, 2004(15)\n \n
\n \n\n 10\n\n .35\n\n \n\n First Supplement to\n Note Purchase Agreement, dated February 14, 2006(13)\n \n
\n \n\n 21\n\n \n\n \n\n Subsidiaries of Brady Corporation\n \n
\n \n\n 23\n\n \n\n \n\n Consent of Deloitte &\n Touche LLP, Independent Registered Public Accounting Firm\n \n
\n \n\n 31\n\n .1\n\n \n\n Rule 13a-14(a)/15d-14(a)\n Certification of Frank M. Jaehnert\n \n
\n \n\n 31\n\n .2\n\n \n\n Rule 13a-14(a)/15d-14(a)\n Certification of David Mathieson\n \n
\n \n\n 32\n\n .1\n\n \n\n Section 1350 Certification of\n Frank M. Jaehnert\n \n
\n \n\n 32\n\n .2\n\n \n\n Section 1350 Certification of\n David Mathieson\n \n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n * \n Management contract or compensatory plan or arrangement
 
\n (1) \n Incorporated by reference to Registrant’s Registration\n Statement\n No. 333-04155\n on\n Form S-3
 
\n (2) \n Incorporated by reference to Registrant’s Current Report on\n Form 8-K\n filed September 15, 2006
 
\n (3) \n Incorporated by reference to Registrant’s Quarterly Report\n on\n Form 10-Q\n for the fiscal quarter ended October 31, 2005
\n\n

\n
\n IV-2\n

\n\n

\n

Table of Contents

\n\n

\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n\n\n\n \n \n \n\n\n
\n (4) \n Incorporated by reference to Registrant’s Annual Report on\n Form 10-K\n for the fiscal year ended July 31, 1992
 
\n (5) \n Incorporated by reference to Registrant’s Current Report on\n Form 8-K\n filed February 22, 2006
 
\n (6) \n Incorporated by reference to Registrant’s Quarterly Report\n on\n Form 10-Q\n for the fiscal quarter ended January 31, 2006
 
\n (7) \n Incorporated by reference to Registrant’s Quarterly Report\n on\n Form 10-Q\n for the fiscal quarter ended April 30, 1997
 
\n (8) \n Incorporated by reference to Registrant’s Annual Report on\n Form 10-K\n for the fiscal year ended July 31, 1997
 
\n (9) \n Incorporated by reference to Registrant’s Annual Report on\n Form 10-K\n for the fiscal year ended July 31, 2000
 
\n (10) \n Incorporated by reference to Registrant’s Annual Report on\n Form 10-K\n for the fiscal year ended July 31, 2001
 
\n (11) \n Incorporated by reference to Registrant’s Quarterly Report\n on\n Form 10-Q\n for the fiscal quarter ended January 31, 2002
 
\n (12) \n Incorporated by reference to Registrant’s Quarterly Report\n on\n Form 10-Q\n for the fiscal quarter ended April 30, 2004
 
\n (13) \n Incorporated by reference to Registrant’s Current Report on\n Form 8-K\n filed February 17, 2006
 
\n (14) \n Incorporated by reference to Registrant’s Quarterly Report\n on\n Form 10-Q\n for the fiscal quarter ended April 30, 2003
 
\n (15) \n Incorporated by reference to Registrant’s\n 8-K/A filed\n August 3, 2004
 
\n (16) \n Incorporated by reference to Registrant’s Annual Report on\n Form 10-K\n for the fiscal year ended July 31, 2003
 
\n (17) \n Incorporated by reference to Registrant’s Current Report on\n Form 8-K\n filed November 24, 2004.
 
\n (18) \n Incorporated by reference to Registrant’s Annual Report on\n Form 10-K\n for the fiscal year ended July 31, 2005
\n\n

\n
\n IV-3\n

\n\n

\n

Table of Contents

\n\n

\n\n
\n\n BRADY\n CORPORATION AND SUBSIDIARIES
\n \n
\n\n
 
\n\n
\n\n SCHEDULE II —\n VALUATION AND QUALIFYING ACCOUNTS\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n Year ended July 31,\n\n \n
\n
\n Description\n
\n		\n \n\n 2006\n\n \n\n \n\n 2005\n\n \n\n \n\n 2004\n\n \n
\n \n\n \n\n (Dollars in thousands)\n\n \n
 \n
\n
\n Valuation accounts deducted in\n balance sheet from assets to which they apply —\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Accounts receivable —\n allowance for losses:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances at beginning of period\n \n
\n		\n \n\n $\n\n 3,726\n\n \n\n \n\n $\n\n 3,869\n\n \n\n \n\n $\n\n 3,166\n\n \n
\n
\n Additions — Charged to\n expense\n \n
\n		\n \n\n \n\n 1,152\n\n \n\n \n\n \n\n 1,216\n\n \n\n \n\n \n\n 1,450\n\n \n
\n
\n Due to acquired businesses\n \n
\n		\n \n\n \n\n 2,861\n\n \n\n \n\n \n\n 111\n\n \n\n \n\n \n\n 295\n\n \n
\n
\n Deductions — Bad debts\n written off, net of recoveries\n \n
\n		\n \n\n \n\n (1,349\n\n )\n\n \n\n \n\n (1,470\n\n )\n\n \n\n \n\n (1,042\n\n )\n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances at end of period\n \n
\n		\n \n\n $\n\n 6,390\n\n \n\n \n\n $\n\n 3,726\n\n \n\n \n\n $\n\n 3,869\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Inventory — reserve for\n slow-moving inventory:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances at beginning of period\n \n
\n		\n \n\n $\n\n 8,573\n\n \n\n \n\n $\n\n 7,434\n\n \n\n \n\n $\n\n 6,715\n\n \n
\n
\n Additions — Charged to\n expense\n \n
\n		\n \n\n \n\n 2,441\n\n \n\n \n\n \n\n 298\n\n \n\n \n\n \n\n 369\n\n \n
\n
\n Due to acquired businesses\n \n
\n		\n \n\n \n\n 2,541\n\n \n\n \n\n \n\n 841\n\n \n\n \n\n \n\n 350\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balances at end of period\n \n
\n		\n \n\n $\n\n 13,555\n\n \n\n \n\n $\n\n 8,573\n\n \n\n \n\n $\n\n 7,434\n\n \n
\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n
\n\n
\n\n
\n\n

\n
\n IV-4\n

\n\n

\n

Table of Contents

\n\n

\n\n
 
\n\n
\n\n SIGNATURES\n
\n\n
 
\n\n
\n Pursuant to the requirements of Section 13 or 15(d) of the\n Securities Exchange Act of 1934, the Registrant has duly caused\n this report to be signed on its behalf by the undersigned,\n thereunto duly authorized this sixth day of October 2006.\n
\n\n
 
\n\n
\n Brady Corporation\n \n
\n\n
 
\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
  By: \n\n
/s/  David\n Mathieson
\n
\n\n
\n\n
\n David Mathieson\n
\n\n
\n Vice President & Chief Financial Officer\n
\n\n
\n (Principal Accounting Officer)\n
\n\n
\n\n
\n\n
\n (Principal Financial Officer)\n
\n\n
 
\n\n
 
\n\n
\n Pursuant to the requirements of the Securities Exchange Act of\n 1934, this report has been signed below by the following persons\n on behalf of the Registrant and in the capacities and on the\n dates indicated.\n
\n\n
 
\n\n\n\n\n \t\n \t\n \t\n \t\n \t\n \t\n \t\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
       
\n
/s/  F.\n M. Jaehnert

\n
F.\n M. Jaehnert\n \n		\n \n\n President and Director
\n (Principal Executive Officer)\n \n		\n \n\n October 6, 2006\n \n
\n \n\n \n\n \n\n \n\n \n
\n
/s/  P.\n J.\n Lettenberger

\n
P.\n J. Lettenberger\n \n		\n \n\n Director\n \n\n \n\n October 6, 2006\n \n
\n \n\n \n\n \n\n \n\n \n
\n
/s/  R.\n A. Bemis

\n
R.\n A. Bemis\n \n		\n \n\n Director\n \n\n \n\n October 6, 2006\n \n
\n \n\n \n\n \n\n \n\n \n
\n
/s/  F.\n W. Harris

\n
F.\n W. Harris\n \n		\n \n\n Director\n \n\n \n\n October 6, 2006\n \n
\n \n\n \n\n \n\n \n\n \n
\n
/s/  R.\n C. Buchanan

\n
R.\n C. Buchanan\n \n		\n \n\n Director\n \n\n \n\n October 6, 2006\n \n
\n \n\n \n\n \n\n \n\n \n
\n
/s/  R.\n D. Peirce

\n
R.\n D. Peirce\n \n		\n \n\n Director\n \n\n \n\n October 6, 2006\n \n
\n \n\n \n\n \n\n \n\n \n
\n
/s/  G.\n E. Nei

\n
G.\n E. Nei\n \n		\n \n\n Director\n \n\n \n\n October 6, 2006\n \n
\n \n\n \n\n \n\n \n\n \n
\n
/s/  M.\n K. Bush

\n
M.\n K. Bush\n \n		\n \n\n Director\n \n\n \n\n October 6, 2006\n \n
\n \n\n \n\n \n\n \n\n \n
\n
/s/  F.\n R. Jarc

\n
F.\n R. Jarc\n \n		\n \n\n Director\n \n\n \n\n October 6, 2006\n \n
\n \n\n \n\n \n\n \n\n \n
\n
/s/  E.\n P. Pungello

\n
E.\n P. Pungello\n \n		\n \n\n Director\n \n\n \n\n October 6, 2006\n \n
\n\n
\n\n
\n\n

\n
\n IV-5\n

\n\n\n
\n\nexv10w14\n\n\n\n
 

\n

\n\n\n
EXHIBIT 10.14\n
\n\n\n
 
\n
\n\n\n
AMENDED AND RESTATED\n
\n\n
CREDIT AGREEMENT
\n\n\n\n
Dated as of October 5, 2006\n\n
\n\n
among\n\n
\n\n
BRADY CORPORATION,
\nBRADY WORLDWIDE, INC.
\nand
\nTRICOR DIRECT, INC.,\n\n
\n\n
as Borrowers,\n\n
\n\n
CERTAIN SUBSIDIARIES OF THE BORROWERS IDENTIFIED HEREIN,
\nas the Guarantors,\n\n
\n\n
BANK OF AMERICA, N.A.,
\nas Administrative Agent, Swing Line Lender and L/C Issuer,\n\n
\n\n
THE OTHER LENDERS PARTY HERETO\n\n
\n\n
and\n\n
\n\n
PNC BANK, N.A.,
\nM&I MARSHALL & ILSLEY BANK, WELLS FARGO BANK, N.A.
\nand HARRIS N.A.,
\nas Co-Agents\n\n
\n\n
Arranged By:\n\n
\n\n
BANC OF AMERICA SECURITIES LLC,\n\n
\n\n
as Sole Lead Arranger and Book Manager\n\n
\n\n
 
\n
\n\n\n\n

 \n

\n\n\n

\n

 

\n\n

\n\n\n\n\n
TABLE OF CONTENTS\n
\n\n
\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n
       
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS  1 
 
 1.01 Defined Terms  1 
 
 1.02 Other Interpretive Provisions  21 
 
 1.03 Accounting Terms  22 
 
 1.04 Rounding  23 
 
 1.05 References to Agreements and Laws  23 
 
 1.06 Exchange Rates; Currency Equivalents  23 
 
 1.07 Additional Alternative Currencies  23 
 
 1.08 Change of Currency  24 
 
 1.09 Times of Day  24 
 
 1.10 Letter of Credit Amounts  25 
ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS  25 
 
 2.01 Revolving Loans  25 
 
 2.02 Borrowings, Conversions and Continuations of Loans  26 
 
 2.03 Letters of Credit  27 
 
 2.04 Swing Line Loans  35 
 
 2.05 Prepayments  38 
 
 2.06 Termination or Reduction of Aggregate Revolving Commitments  39 
 
 2.07 Repayment of Loans  40 
 
 2.08 Interest  40 
 
 2.09 Fees  41 
 
 2.10 Computation of Interest and Fees  41 
 
 2.11 Evidence of Debt  42 
 
 2.12 Payments Generally  42 
 
 2.13 Sharing of Payments  44 
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY  44 
 
 3.01 Taxes  44 
 
 3.02 Illegality  45 
 
 3.03 Inability to Determine Rates  46 
 
 3.04 Increased Cost and Reduced Return; Capital Adequacy  46 
 
 3.05 Compensation for Losses  47 
 
 3.06 Matters Applicable to all Requests for Compensation  48 
 
 3.07 Survival  48 
ARTICLE IV GUARANTY  48 
 
 4.01 The Guaranty  48 
 
 4.02 Obligations Unconditional  48 
 
 4.03 Reinstatement  49 
 
 4.04 Certain Additional Waivers  50 
 
 4.05 Remedies  50 
 
 4.06 Rights of Contribution  50 
 
 4.07 Guarantee of Payment; Continuing Guarantee  50 
ARTICLE V CONDITIONS PRECEDENT TO CREDIT EXTENSIONS  50 
 
 5.01 Conditions of Initial Credit Extension  50 
\n
\n\n\n

i\n

\n\n\n

\n

 

\n\n

\n\n
\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n
       
 
 5.02 Conditions to all Credit Extensions  52 
ARTICLE VI REPRESENTATIONS AND WARRANTIES  53 
 
 6.01 Existence, Qualification and Power  53 
 
 6.02 Authorization; No Contravention  53 
 
 6.03 Governmental Authorization; Other Consents  53 
 
 6.04 Binding Effect  53 
 
 6.05 Financial Statements; No Material Adverse Effect  53 
 
 6.06 Litigation  54 
 
 6.07 No Default  54 
 
 6.08 Ownership of Property; Liens  54 
 
 6.09 Environmental Compliance  55 
 
 6.10 Insurance  55 
 
 6.11 Taxes  56 
 
 6.12 ERISA Compliance  56 
 
 6.13 Subsidiaries  56 
 
 6.14 Margin Regulations; Investment Company Act  56 
 
 6.15 Disclosure  57 
 
 6.16 Compliance with Laws  57 
 
 6.17 Intellectual Property; Licenses, Etc.  57 
 
 6.18 Solvency  57 
 
 6.19 Labor Matters  58 
ARTICLE VII AFFIRMATIVE COVENANTS  58 
 
 7.01 Financial Statements  58 
 
 7.02 Certificates; Other Information  59 
 
 7.03 Notices  60 
 
 7.04 Payment of Obligations  61 
 
 7.05 Preservation of Existence, Etc.  61 
 
 7.06 Maintenance of Properties  61 
 
 7.07 Maintenance of Insurance  61 
 
 7.08 Compliance with Laws  62 
 
 7.09 Books and Records  62 
 
 7.10 Inspection Rights  62 
 
 7.11 Use of Proceeds  62 
 
 7.12 Additional Guarantors  62 
 
 7.13 ERISA Compliance  63 
ARTICLE VIII NEGATIVE COVENANTS  63 
 
 8.01 Liens  63 
 
 8.02 Investments  65 
 
 8.03 Indebtedness  65 
 
 8.04 Fundamental Changes  66 
 
 8.05 Dispositions  67 
 
 8.06 Restricted Payments  67 
 
 8.07 Change in Nature of Business  68 
 
 8.08 Transactions with Affiliates and Insiders  68 
 
 8.09 Burdensome Agreements  68 
 
 8.10 Use of Proceeds  69 
\n
\n\n\n

ii\n

\n\n\n

\n

 

\n\n

\n\n
\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n
       
 
 8.11 Financial Covenants  69 
 
 8.12 Prepayment of Other Indebtedness, Etc.  69 
 
 8.13 Organization Documents; Fiscal Year; Legal Name, State of Formation and Form of Entity  69 
ARTICLE IX EVENTS OF DEFAULT AND REMEDIES  70 
 
 9.01 Events of Default  70 
 
 9.02 Remedies Upon Event of Default  71 
 
 9.03 Application of Funds  72 
ARTICLE X ADMINISTRATIVE AGENT  73 
 
 10.01 Appointment and Authority  73 
 
 10.02 Rights as a Lender  73 
 
 10.03 Exculpatory Provisions  73 
 
 10.04 Reliance by Administrative Agent  74 
 
 10.05 Delegation of Duties  74 
 
 10.06 Resignation of Administrative Agent  75 
 
 10.07 Non-Reliance on Administrative Agent and Other Lenders  76 
 
 10.08 No Other Duties; Etc.  76 
 
 10.09 Administrative Agent May File Proofs of Claim  76 
 
 10.10 Guaranty Matters  77 
ARTICLE XI MISCELLANEOUS  77 
 
 11.01 Amendments, Etc.  77 
 
 11.02 Notices; Effectiveness; Electronic Communications  78 
 
 11.03 No Waiver; Cumulative Remedies  80 
 
 11.04 Expenses  80 
 
 11.05 Indemnification; Damage Waiver  81 
 
 11.06 Payments Set Aside  82 
 
 11.07 Successors and Assigns  82 
 
 11.09 Set-off  86 
 
 11.10 Interest Rate Limitation  87 
 
 11.11 Counterparts  87 
 
 11.12 Integration  87 
 
 11.13 Survival of Representations and Warranties  87 
 
 11.14 Severability  87 
 
 11.15 Tax Forms  88 
 
 11.16 Replacement of Lenders  89 
 
 11.17 Governing Law  90 
 
 11.18 Waiver of Right to Trial by Jury  91 
 
 11.19 USA PATRIOT Act Notice  91 
 
 11.20 Judgment Currency  91 
 
 11.21 Concerning Joint and Several Liability of the Borrowers  91 
 
 11.22 Subordination of Intercompany Debt  93 
 
 11.23 No Advisory or Fiduciary Responsibility  93 
\n
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\n\n\n\n \n \n \n \n \n\n\n\n\n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n
     
SCHEDULES  
 
    
 
 1.01(a) Existing Letters of Credit
 
 1.01(b) Mandatory Cost Formulae
 
 2.01 Commitments and Pro Rata Shares
 
 6.13 Subsidiaries
 
 8.01 Liens Existing on the Closing Date
 
 8.02 Investments Existing on the Closing Date
 
 8.03 Indebtedness Existing on the Closing Date
 
 11.02 Certain Addresses for Notices
 
    
EXHIBITS  
 
    
 
 2.02 Form of Loan Notice
 
 2.04 Form of Swing Line Loan Notice
 
 2.11 Form of Note
 
 7.02 Form of Compliance Certificate
 
 7.12 Form of Joinder Agreement
 
 11.07 Form of Assignment and Assumption
\n
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AMENDED AND RESTATED
\nCREDIT AGREEMENT\n
\n\n\n
     This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of October 5, 2006 among BRADY\nCORPORATION, a Wisconsin corporation (the “Company”), BRADY WORLDWIDE, INC., a Wisconsin\ncorporation (“Worldwide”), and TRICOR DIRECT, INC., a Delaware corporation\n(“Tricor”, together with the Company and Worldwide, the “Borrowers”), the\nGuarantors (defined herein), the Lenders (defined herein) and BANK OF AMERICA, N.A., as\nAdministrative Agent, Swing Line Lender and L/C Issuer.\n
\n\n
     Pursuant to that Credit Agreement (as amended, modified and supplemented, the “Existing\nCredit Agreement”) dated as of March 31, 2004 among the Company, Worldwide, Tricor, the\nguarantors identified therein, the lenders identified therein and Bank of America, N.A., as\nadministrative agent, swing line lender and l/c issuer, the lenders party thereto agreed to provide\n$200 million in credit facilities to the Borrowers. The Company has requested that the credit\nfacilities provided pursuant to the Existing Credit Agreement be amended and restated on the terms\nand conditions set forth herein. The Lenders have agreed to the Company’s request and this\nAgreement is given in amendment to, restatement of and substitution for the Existing Credit\nAgreement.\n
\n\n
     In consideration of the mutual covenants and agreements herein contained, the parties hereto\ncovenant and agree as follows:\n
\n\n
ARTICLE I\n
\n\n\n
DEFINITIONS AND ACCOUNTING TERMS\n\n
\n\n
1.01 Defined Terms.\n
\n\n\n
     As used in this Agreement, the following terms shall have the meanings set forth below:\n
\n\n
     “Acquisition”, by any Person, means the acquisition by such Person, in a single\ntransaction or in a series of related transactions, of all or any substantial portion of the\nProperty of, or of a business unit or division of, another Person or at least a majority of the\nVoting Stock of another Person, in each case whether or not involving a merger or consolidation\nwith such other Person and whether for cash, property, services, assumption of Indebtedness,\nsecurities or otherwise.\n
\n\n
     “Administrative Agent” means Bank of America in its capacity as administrative agent\nunder any of the Loan Documents, or any successor administrative agent.\n
\n\n
     “Administrative Agent’s Office” means, with respect to any currency, the\nAdministrative Agent’s address and, as appropriate, account as set forth on Schedule 11.02\nwith respect to such currency, or such other address or account with respect to such currency as\nthe Administrative Agent may from time to time notify to the Company and the Lenders.\n
\n\n
     “Administrative Questionnaire” means an Administrative Questionnaire in a form\nsupplied by the Administrative Agent.\n
\n\n
     “Affiliate” means, with respect to any Person, another Person that directly, or\nindirectly through one or more intermediaries, Controls or is Controlled by or is under common\nControl with the Person specified. “Control” means the possession, directly or indirectly,\nof the power to direct or cause the\n
\n\n

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\n

 

\n\n

\n
direction of the management or policies of a Person, whether through the ability to exercise\nvoting power, by contract or otherwise. “Controlling” and “Controlled” have\nmeanings correlative thereto. Without limiting the generality of the foregoing, a Person shall be\ndeemed to be Controlled by another Person if such other Person possesses, directly or indirectly,\npower to vote 10% or more of the securities having ordinary voting power for the election of\ndirectors, managing general partners or the equivalent.\n
\n\n\n
     “Aggregate Revolving Commitments” means the Revolving Commitments of all the Lenders.\nThe initial amount of the Aggregate Revolving Commitments in effect on the Closing Date is TWO\nHUNDRED MILLION DOLLARS ($200,000,000).\n
\n\n
     “Agreement” means this Credit Agreement, as amended, modified, supplemented and\nextended from time to time.\n
\n\n
     “Alternative Currency” means each of Euro, Sterling, Australian Dollars, Singapore\nDollars, Japanese Yen, Canadian Dollars and each other currency (other than Dollars) that is\napproved in accordance with Section 1.07.\n
\n\n
     “Alternative Currency Equivalent” means, at any time, with respect to any amount\ndenominated in Dollars, the equivalent amount thereof in the applicable Alternative Currency as\ndetermined by the Administrative Agent or the L/C Issuer, as the case may be, at such time on the\nbasis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase\nof such Alternative Currency with Dollars.\n
\n\n
     “Alternative Currency Sublimit” means an amount equal to the lesser of the Aggregate\nRevolving Commitments and $50,000,000. The Alternative Currency Sublimit is part of, and not in\naddition to, the Aggregate Revolving Commitments.\n
\n\n
     “Applicable Rate” means the following percentages per annum, based upon the\nConsolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the\nAdministrative Agent pursuant to Section 7.02(b):\n
\n
\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n\n\n\n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n\n
                   
  Consolidated        
Pricing Leverage Commitment Letters of Eurocurrency Rate Base Rate
Level Ratio Fee Credit Loans Loans
1
 <1.5:1.0  0.09%  0.500%  0.500%  0.000%
2
 ³1.5:1.0 but <2.0  0.11%  0.625%  0.625%  0.000%
3
 ³2.0:1.0 but <2.5  0.15%  0.750%  0.750%  0.000%
4
 ³2.5:1.0  0.20%  1.000%  1.000%  0.000%
\n
\n\n
Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated\nLeverage Ratio shall become effective as of the first Business Day immediately following the date a\nCompliance Certificate is required to be delivered pursuant to Section 7.02(b);\nprovided, however, that if a Compliance Certificate is not delivered when due in\naccordance with such Section, then Pricing Level 4 shall apply as of the first Business Day after\nthe date on which such Compliance Certificate was required to have been delivered and shall\ncontinue to apply until the first Business Day immediately following the date a Compliance\nCertificate is delivered in accordance with Section 7.02(b), whereupon the Applicable Rate\nshall be adjusted based upon the calculation of the Consolidated Leverage Ratio contained in such\nCompliance Certificate. The Applicable Rate in effect from the Closing Date through the first\nBusiness\n
\n

 \n

\n\n\n

\n

 

\n\n

\n\n\n
Day immediately following the date a Compliance Certificate is required to be delivered pursuant to\nSection 7.02(b) for the fiscal quarter ending October 31, 2006 shall be determined based\nupon Pricing Level 2.\n
\n\n\n
     “Applicable Time” means, with respect to any borrowings and payments in any\nAlternative Currency, the local time in the place of settlement for such Alternative Currency as\nmay be determined by the Administrative Agent or the L/C Issuer, as the case may be, to be\nnecessary for timely settlement on the relevant date in accordance with normal banking procedures\nin the place of payment.\n
\n\n
     “Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an\nAffiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a\nLender.\n
\n\n
     “Assignee Group” means two or more Eligible Assignees that are Affiliates of one\nanother or two or more Approved Funds managed by the same investment advisor.\n
\n\n
     “Assignment and Assumption” means an assignment and assumption entered into by a\nLender and an assignee (with the consent of any party whose consent is required by Section\n11.07(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit\n11.07 or any other form approved by the Administrative Agent.\n
\n\n
     “Attorney Costs” means and includes all reasonable fees, expenses and disbursements of\nany law firm or other external counsel and, without duplication, the allocated cost of internal\nlegal services and all expenses and disbursements of internal counsel.\n
\n\n
     “Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease of\nany Person, the capitalized amount thereof that would appear on a balance sheet of such Person\nprepared as of such date in accordance with GAAP, (b) in respect of any Synthetic Lease, the\ncapitalized amount of the remaining lease payments under the relevant lease that would appear on a\nbalance sheet of such Person prepared as of such date in accordance with GAAP if such lease were\naccounted for as a Capital Lease, (c) in respect of any Securitization Transaction of any Person,\nthe outstanding principal amount of such financing, after taking into account reserve accounts and\nmaking appropriate adjustments, determined by the Administrative Agent in its reasonable judgment\nand (d) in the case of any Sale and Leaseback Transaction, the present value (discounted in\naccordance with GAAP at the debt rate implied in the applicable lease) of the obligations of the\nlessee for rental payments during the term of such lease).\n
\n\n
     “Audited Financial Statements” means the audited consolidated balance sheet of the\nCompany and its Subsidiaries for the fiscal year ended July 31, 2005, and the related consolidated\nstatements of income or operations, shareholders’ equity and cash flows for such fiscal year of the\nCompany and its Subsidiaries, including the notes thereto.\n
\n\n
     “Availability Period” means the period from and including the Closing Date to the\nearliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Revolving\nCommitments pursuant to Section 2.06, and (c) the date of termination of the commitment of\neach Lender to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions\npursuant to Section 9.02.\n
\n\n
     “Bank of America” means Bank of America, N.A. and its successors.\n
\n\n
     “BAS” means Banc of America Securities LLC, in its capacity as sole lead arranger and\nbook manager.\n
\n\n

 \n

\n\n\n

\n

 

\n\n

\n\n
     “Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a)\nthe Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as\npublicly announced from time to time by Bank of America as its “prime rate.” The “prime rate” is a\nrate set by Bank of America based upon various factors including Bank of America’s costs and\ndesired return, general economic conditions and other factors, and is used as a reference point for\npricing some loans, which may be priced at, above, or below such announced rate. Any change in the\n“prime rate” announced by Bank of America shall take effect at the opening of business on the day\nspecified in the public announcement of such change.\n
\n\n
     “Base Rate Loan” means a Loan that bears interest based on the Base Rate. All Base\nRate Loans shall be denominated in Dollars.\n
\n\n
     “Borrowers” has the meaning specified in the introductory paragraph hereto, and\n“Borrower” means any one of them.\n
\n\n
     “Borrowing” means a borrowing consisting of simultaneous Loans of the same Type, in\nthe same currency and, in the case of Eurocurrency Rate Loans, having the same Interest Period made\nby each of the Lenders pursuant to Section 2.01.\n
\n\n
     “Business Day” means any day other than a Saturday, Sunday or other day on which\ncommercial banks are authorized to close under the Laws of, or are in fact closed in, the state\nwhere the Administrative Agent’s Office with respect to Obligations denominated in Dollars is\nlocated and (a) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan\ndenominated in Dollars, any fundings, disbursements, settlements and payments in Dollars in respect\nof any such Eurocurrency Rate Loan, or any other dealings in Dollars to be carried out pursuant to\nthis Agreement in respect of any such Eurocurrency Rate Loan, means any such day on which dealings\nin deposits in Dollars are conducted by and between banks in the London interbank eurodollar\nmarket; (b) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan\ndenominated in Euro, any fundings, disbursements, settlements and payments in Euro in respect of\nany such Eurocurrency Rate Loan, or any other dealings in Euro to be carried out pursuant to this\nAgreement in respect of any such Eurocurrency Rate Loan, means a TARGET Day; (c) if such day\nrelates to any interest rate settings as to a Eurocurrency Rate Loan denominated in a currency\nother than Dollars or Euro, means any such day on which dealings in deposits in the relevant\ncurrency are conducted by and between banks in the London or other applicable offshore interbank\nmarket for such currency; and (d) if such day relates to any fundings, disbursements, settlements\nand payments in a currency other than Dollars or Euro in respect of a Eurocurrency Rate Loan\ndenominated in a currency other than Dollars or Euro, or any other dealings in any currency other\nthan Dollars or Euro to be carried out pursuant to this Agreement in respect of any such\nEurocurrency Rate Loan (other than any interest rate settings), means any such day on which banks\nare open for foreign exchange business in the principal financial center of the country of such\ncurrency.\n
\n\n
     “Businesses” means, at any time, a collective reference to the businesses operated by\nthe Company and its Subsidiaries at such time.\n
\n\n
     “Capital Lease” means, as applied to any Person, any lease of any Property by that\nPerson as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease\non the balance sheet of that Person.\n
\n\n
     “Capital Stock” means (i) in the case of a corporation, capital stock, (ii) in the\ncase of an association or business entity, any and all shares, interests, participations, rights or\nother equivalents (however designated) of capital stock, (iii) in the case of a partnership,\npartnership interests (whether general or limited), (iv) in the case of a limited liability\ncompany, membership interests and (v) any other\n
\n\n

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\n\n\n

\n

 

\n\n

\n
interest or participation that confers on a Person the right to receive a share of the profits\nand losses of, or distributions of assets of, the issuing Person.\n
\n\n\n
     “Cash Collateralize” has the meaning specified in Section 2.03(g).\n
\n\n
     “Cash Equivalents” means, as at any date, (a) treasury bills, treasury cash management\nbills and other securities issued or directly and fully guaranteed or insured by the United States\nor any agency or instrumentality thereof (provided that the full faith and credit of the United\nStates is pledged in support thereof) having maturities of not more than twelve months from the\ndate of acquisition, (b) Eurodollar denominated time deposits and Dollar denominated certificates\nof deposit and bankers acceptances, in each case of (i) any Lender or (ii) any commercial bank of\nrecognized standing having capital and surplus in excess of $100,000,000 (each, an “Approved\nLender”), (c) commercial paper issued by any Approved Lender (or by the parent company thereof)\nwhich is of investment grade or unrated commercial paper issued by Wisconsin corporations,\nprovided, in each case, the aggregate principal amount of commercial paper issued by any one issuer\nshall not exceed $5,000,000, (d) repurchase agreements with an Approved Lender, but only to the\nextent the same is used as an overnight or over weekend investment, (e) obligations of any state of\nthe United States or any political subdivision thereof, the interest with respect to which is\nentirely exempt from federal income taxation under Section 103 of the Internal Revenue Code and\nhaving a rating of A or above by S&P, (f) investments in municipal put bonds and municipal market\nauction notes and bonds rated A or above by S&P, (g) investments, classified in accordance with\nGAAP as current assets, in adjustable rate preferred stock (which must be purchased at the call\nprice or below) and money market investment programs registered under the Investment Company Act of\n1940, as amended, in each case, which are administered by reputable financial institutions having\ncapital of at least $100,000,000, 70% of the interest with respect to which is exempt from federal\nincome taxation under Section 103 of the Internal Revenue Code, and having a rating of A or above\nby S&P, and (h) VEBA investments in municipal put bonds and notes, money market preferred stock and\ncommercial paper, in each case, the interest with respect to which is taxable, and having a long\nterm rating of A or above by S&P.\n
\n\n
     “Change of Control” means an event or series of events by which:\n
\n\n\n
     (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the\nSecurities Exchange Act of 1934 (but excluding (i) any employee benefit plan of such person\nor its subsidiaries, (ii) any person or entity acting in its capacity as trustee, agent or\nother fiduciary or administrator of any such plan, or (iii) Elizabeth Brady, William Brady\nand their descendants or any trusts established for them or their descendants, and the W. H.\nBrady Foundation, Inc.) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5\nunder the Securities Exchange Act of 1934, except that a person or group shall be deemed to\nhave “beneficial ownership” of all Capital Stock that such person or group has the right to\nacquire (such right, an “option right”), whether such right is exercisable\nimmediately or only after the passage of time), directly or indirectly, of 33 1/3% of the\nCapital Stock of the Company entitled to vote for members of the board of directors or\nequivalent governing body of the Company on a fully diluted basis (and taking into account\nall such securities that such person or group has the right to acquire pursuant to any\noption right);\n
\n\n\n
     (b) during any period of 12 consecutive months, 75% of the members of the board of\ndirectors or other equivalent governing body of the Company cease to be composed of\nindividuals (i) who were members of that board or equivalent governing body on the first day\nof such period, (ii) whose election or nomination to that board or equivalent governing body\nwas approved by individuals referred to in clause (i) above constituting at the time of such\nelection or nomination at least a majority of that board or equivalent governing body or\n(iii) whose election or nomination to that board or other equivalent governing body was\napproved by individuals\n
\n\n

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\n\n

\n\n\n\n
referred to in clauses (i) and (ii) above constituting at the time of such election or\nnomination at least a majority of that board or equivalent governing body (excluding, in the\ncase of both clause (ii) and clause (iii), any individual whose initial nomination for, or\nassumption of office as, a member of that board or equivalent governing body occurs as a\nresult of an actual or threatened solicitation of proxies or consents for the election or\nremoval of one or more directors by any person or group other than a solicitation for the\nelection of one or more directors by or on behalf of the board of directors); or\n
\n\n\n
     (c) the Company fails to own (directly or indirectly) 100% of the outstanding Capital\nStock of Worldwide or Tricor.\n
\n\n
     “Closing Date” means the date hereof.\n
\n\n
     “Commitment” means, as to each Lender, the Revolving Commitment of such Lender.\n
\n\n
     “Company” has the meaning specified in the introductory paragraph hereto.\n
\n\n
     “Company Materials” has the meaning specified in Section 7.02.\n
\n\n
     “Compliance Certificate” means a certificate substantially in the form of Exhibit\n7.02.\n
\n\n
     “Consolidated Capital Expenditures” means, for any period, for the Company and its\nSubsidiaries on a consolidated basis, all capital expenditures, as determined in accordance with\nGAAP; provided, however, that Consolidated Capital Expenditures shall not include\n(a) expenditures made with proceeds of any Involuntary Disposition to the extent such expenditures\nare used to purchase Property that is the same as or similar to the Property subject to such\nInvoluntary Disposition or (b) Permitted Acquisitions.\n
\n\n
     “Consolidated EBIT” means, for any period, for the Company and its Subsidiaries on a\nconsolidated basis, an amount equal to Consolidated Net Income for such period plus the\nfollowing to the extent deducted in calculating such Consolidated Net Income: (a) Consolidated\nInterest Charges for such period, (b) consolidated tax expense for federal, state, local and\nforeign income taxes for the Company and its Subsidiaries for such period, (c) non-cash\nrestructuring charges incurred after the Closing Date for such period and (d) cash restructuring\ncharges incurred after the Closing Date not to exceed $5,000,000 during such period, all as\ndetermined in accordance with GAAP.\n
\n\n
     “Consolidated EBITDA” means, for any period, for the Company and its Subsidiaries on a\nconsolidated basis, an amount equal to Consolidated EBIT for such period plus the amount of\ndepreciation and amortization expense for such period that was deducted in calculating Consolidated\nNet Income for such Period, all as determined in accordance with GAAP.\n
\n\n
     “Consolidated Funded Indebtedness” means Funded Indebtedness of the Company and its\nSubsidiaries on a consolidated basis determined in accordance with GAAP.\n
\n\n
     “Consolidated Interest Charges” means, for any period, for the Company and its\nSubsidiaries on a consolidated basis, an amount equal to the sum of (i) all interest, premium\npayments, debt discount, fees, charges and related expenses in connection with borrowed money\n(including capitalized interest) or in connection with the deferred purchase price of assets, in\neach case to the extent treated as interest in accordance with GAAP, plus (ii) the portion\nof rent expense with respect to such period under Capital Leases that is treated as interest in\naccordance with GAAP plus (iii) the implied interest component of Synthetic Leases with\nrespect to such period.\n
\n\n

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\n\n

\n\n
     “Consolidated Interest Coverage Ratio” means, as of any date of determination, the\nratio of (a) Consolidated EBIT for the period of the four fiscal quarters most recently ended for\nwhich the Company has delivered financial statements pursuant to Section 7.01(a) or\n(b) to (b) Consolidated Interest Charges for the period of the four fiscal quarters most\nrecently ended for which the Company has delivered financial statements pursuant to Section\n7.01(a) or (b).\n
\n\n
     “Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a)\nConsolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the\nfour fiscal quarters most recently ended for which the Company has delivered financial statements\npursuant to Section 7.01(a) or (b).\n
\n\n
     “Consolidated Net Income” means, for any period, for the Company and its Subsidiaries\non a consolidated basis, the net income of the Company and its Subsidiaries (excluding (a) all\nextraordinary non-cash items and (b) income or loss of any Person in which the Company owns less\nthan 50% of the Capital Stock thereof) for that period, as determined in accordance with GAAP.\n
\n\n
     “Consolidated Tangible Net Worth” means, as of any date, the consolidated\nshareholders’ equity of the Company and its Subsidiaries minus intangible assets of the\nCompany and its Subsidiaries as of such date, all as determined in accordance with GAAP.\n
\n\n
     “Contractual Obligation” means, as to any Person, any provision of any security issued\nby such Person or of any agreement, instrument or other undertaking to which such Person is a party\nor by which it or any of its property is bound.\n
\n\n
     “Control” has the meaning specified in the definition of “Affiliate.”\n
\n\n
     “Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C Credit\nExtension.\n
\n\n
     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other\nliquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,\nrearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the\nUnited States or other applicable jurisdictions from time to time in effect and affecting the\nrights of creditors generally.\n
\n\n
     “Default” means any event or condition that constitutes an Event of Default or that,\nwith the giving of any notice, the passage of time, or both, would be an Event of Default.\n
\n\n
     “Default Rate” means (a) when used with respect to Obligations other than Letter of\nCredit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if\nany, applicable to Base Rate Loans plus (iii) 2% per annum; provided,\nhowever, that with respect to a Eurocurrency Rate Loan, the Default Rate shall be an\ninterest rate equal to the interest rate (including any Applicable Rate and any Mandatory Cost)\notherwise applicable to such Loan plus 2% per annum, in each case to the fullest extent\npermitted by applicable Laws and (b) when used with respect to Letter of Credit Fees, a rate equal\nto the Applicable Rate plus 2% per annum, in all cases to the fullest extent permitted by\napplicable Laws.\n
\n\n
     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the\nLoans, participations in L/C Obligations or participations in Swing Line Loans required to be\nfunded by it hereunder within one Business Day of the date required to be funded by it hereunder,\n(b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other\namount required to be paid by it hereunder within one Business Day of the date when due, unless the\nsubject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a\nbankruptcy or insolvency proceeding.\n
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     “Disposition” or “Dispose” means the sale, transfer, license, lease or other\ndisposition (including any Sale and Leaseback Transaction) of any Property by the Company or any\nSubsidiary (including the Capital Stock of any Subsidiary), including any sale, assignment,\ntransfer or other disposal, with or without recourse, of any notes or accounts receivable or any\nrights and claims associated therewith, but excluding Involuntary Dispositions.\n
\n\n
     “Dollar” and “$” mean lawful money of the United States.\n
\n\n
     “Dollar Equivalent” means, at any time, (a) with respect to any amount denominated in\nDollars, such amount, and (b) with respect to any amount denominated in any Alternative Currency,\nthe equivalent amount thereof in Dollars as determined by the Administrative Agent or the L/C\nIssuer, as the case may be, at such time on the basis of the Spot Rate (determined in respect of\nthe most recent Revaluation Date) for the purchase of Dollars with such Alternative Currency.\n
\n\n
     “Domestic Subsidiary” means any Subsidiary that is organized under the laws of any\nstate of the United States or the District of Columbia.\n
\n\n
     “Eligible Assignee” means any Person that meets the requirements to be an assignee\nunder Sections 11.07(b)(iii), (v) and (vi) (subject to such consents, if\nany, as may be required under Section 11.07(b)(iii)).\n
\n\n
     “EMU” means the economic and monetary union in accordance with the Treaty of Rome\n1957, as amended by the Single European Act 1986, the Maastricht Treaty of 1992 and the Amsterdam\nTreaty of 1998.\n
\n\n
     “EMU Legislation” means the legislative measures of the European Council for the\nintroduction of, changeover to or operation of a single or unified European currency.\n
\n\n
     “Environmental Laws” means any and all federal, state, local, foreign and other\napplicable statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits,\nconcessions, grants, franchises, licenses, agreements or governmental restrictions relating to\npollution and the protection of the environment or the release of any materials into the\nenvironment, including those related to hazardous substances or wastes, air emissions and\ndischarges to waste or public systems.\n
\n\n
     “Environmental Liability” means any liability, contingent or otherwise (including any\nliability for damages, costs of environmental remediation, fines, penalties or indemnities), of the\nCompany or any of its Subsidiaries directly or indirectly resulting from or based upon (a)\nviolation of any Environmental Law, (b) the generation, use, handling, transportation, storage,\ntreatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the\nrelease or threatened release of any Hazardous Materials into the environment or (e) any contract,\nagreement or other consensual arrangement pursuant to which liability is assumed or imposed with\nrespect to any of the foregoing.\n
\n\n
     “ERISA” means the Employee Retirement Income Security Act of 1974.\n
\n\n
     “ERISA Affiliate” means any trade or business (whether or not incorporated) under\ncommon control with the Company within the meaning of Section 414(b) or (c) of the Internal Revenue\nCode (and Sections 414(m) and (o) of the Internal Revenue Code for purposes of provisions relating\nto Section 412 of the Internal Revenue Code).\n
\n\n

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\n\n

\n\n
     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a\nwithdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of\nERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2)\nof ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e)\nof ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a\nMultiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing\nof a notice of intent to terminate, the treatment of a Plan amendment as a termination under\nSections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a\nPension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under\nSection 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any\nPension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA,\nother than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company\nor any ERISA Affiliate.\n
\n\n
     “Euro” and “EUR” mean the lawful currency of the Participating Member States\nintroduced in accordance with the EMU Legislation.\n
\n\n
     “Eurocurrency Base Rate” means, for any Interest Period with respect to a Eurocurrency\nRate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA\nLIBOR”), as published by Reuters (or other commercially available source providing quotations\nof BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00\na.m., London time, two Business Days prior to the commencement of such Interest Period, for\ndeposits in the relevant currency (for delivery on the first day of such Interest Period) with a\nterm equivalent to such Interest Period. If such rate is not available at such time for any\nreason, then the “Eurocurrency Rate” for such Interest Period shall be the rate per annum\ndetermined by the Administrative Agent to be the rate at which deposits in the relevant currency\nfor delivery on the first day of such Interest Period in Same Day Funds in the approximate amount\nof the Eurocurrency Rate Loan being made, continued or converted by Bank of America and with a term\nequivalent to such Interest Period would be offered by Bank of America’s London Branch (or other\nBank of America branch or Affiliate) to major banks in the London or other offshore interbank\nmarket for such currency at their request at approximately 11:00 a.m. (London time) two Business\nDays prior to the commencement of such Interest Period.\n
\n\n
     “Eurocurrency Rate” means, for any Interest Period with respect to any Eurocurrency\nRate Loan, a rate per annum determined by the Administrative Agent to be equal to the quotient\nobtained by dividing (a) the Eurocurrency Base Rate for such Eurocurrency Rate Loan for such\nInterest Period by (b) one minus the Eurodollar Reserve Percentage for such Eurocurrency Rate Loan\nfor such Interest Period.\n
\n\n
     “Eurocurrency Rate Loan” means a Loan that bears interest at a rate based on the\nEurocurrency Rate. All Loans denominated in an Alternative Currency must be Eurocurrency Rate\nLoans.\n
\n\n
     “Eurodollar Reserve Percentage” means, for any day during any Interest Period, the\nreserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such\nday, whether or not applicable to any Lender, under regulations issued from time to time by the FRB\nfor determining the maximum reserve requirement (including any emergency, supplemental or other\nmarginal reserve requirement) with respect to Eurocurrency funding (currently referred to as\n“Eurocurrency liabilities”). The Eurocurrency Rate for each outstanding Eurocurrency Rate Loan\nshall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve\nPercentage.\n
\n\n
     “Event of Default” has the meaning specified in Section 9.01.\n
\n\n
     “Existing Letters of Credit” means those letters of credit listed on Schedule\n1.01(a).\n
\n\n

 \n

\n\n\n

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\n\n

\n\n
     “Facilities” means, at any time, a collective reference to the facilities and real\nproperties owned, leased or operated by the Company or any Subsidiary.\n
\n\n
     “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted\naverage of the rates on overnight federal funds transactions with members of the Federal Reserve\nSystem arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of\nNew York on the Business Day next succeeding such day; provided that (a) if such day is not\na Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the\nnext preceding Business Day as so published on the next succeeding Business Day, and (b) if no such\nrate is so published on such next succeeding Business Day, the Federal Funds Rate for such day\nshall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)\ncharged to Bank of America on such day on such transactions as determined by the Administrative\nAgent.\n
\n\n
     “Fee Letter” means the letter agreement, dated September 7, 2006 among the Company,\nthe Administrative Agent and BAS.\n
\n\n
     “Foreign Lender” has the meaning specified in Section 11.15(a)(i).\n
\n\n
     “Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.\n
\n\n
     “FRB” means the Board of Governors of the Federal Reserve System of the United States.\n
\n\n
     “Fund” means any Person (other than a natural person) that is (or will be) engaged in\nmaking, purchasing, holding or otherwise investing in commercial loans and similar extensions of\ncredit in the ordinary course of its business.\n
\n\n
     “Funded Indebtedness” means, as to any Person at a particular time, without\nduplication, all of the following, whether or not included as indebtedness or liabilities in\naccordance with GAAP:\n
\n\n\n
     (a) all obligations for borrowed money, whether current or long-term (including the\nObligations) and all obligations of such Person evidenced by bonds, debentures, notes, loan\nagreements or other similar instruments;\n
\n\n\n
     (b) all purchase money Indebtedness;\n
\n\n\n
     (c) the principal portion of all obligations under conditional sale or other title\nretention agreements relating to Property purchased by such Person (other than customary\nreservations or retentions of title under agreements with suppliers entered into in the\nordinary course of business);\n
\n\n\n
     (d) all obligations arising under letters of credit (including standby and commercial),\nbankers’ acceptances, bank guaranties, surety bonds and similar instruments;\n
\n\n\n
     (e) all obligations in respect of the deferred purchase price of property or services\n(other than trade accounts payable in the ordinary course of business);\n
\n\n\n
     (f) the Attributable Indebtedness of Capital Leases, Sale and Leaseback Transactions\nand Synthetic Leases;\n
\n\n\n
     (g) the Attributable Indebtedness of Securitization Transactions;\n
\n\n

 \n

\n\n\n

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\n\n

\n\n\n
     (h) all preferred stock or other equity interests providing for mandatory redemptions,\nsinking fund or like payments prior to the Maturity Date;\n
\n\n\n
     (i) all Funded Indebtedness of others secured by (or for which the holder of such\nFunded Indebtedness has an existing right, contingent or otherwise, to be secured by) any\nLien on, or payable out of the proceeds of production from, Property owned or acquired by\nsuch Person, whether or not the obligations secured thereby have been assumed;\n
\n\n\n
     (j) all Guarantees with respect to Funded Indebtedness of the types specified in\nclauses (a) through (i) above of another Person; and\n
\n\n\n
     (k) all Funded Indebtedness of the types referred to in clauses (a) through (j) above\nof any partnership or joint venture (other than a joint venture that is itself a corporation\nor limited liability company) in which such Person is a general partner or joint venturer,\nexcept to the extent that Funded Indebtedness is expressly made non-recourse to such Person.\n
\n\n
For purposes hereof, the amount of any direct obligation arising under letters of credit\n(including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and\nsimilar instruments shall be the maximum amount available to be drawn thereunder.
\n\n\n
     “GAAP” means generally accepted accounting principles in the United States set forth\nin the opinions and pronouncements of the Accounting Principles Board and the American Institute of\nCertified Public Accountants and statements and pronouncements of the Financial Accounting\nStandards Board, consistently applied and as in effect from time to time.\n
\n\n
     “Governmental Authority” means any nation or government, any state or other political\nsubdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative\ntribunal, central bank or other entity exercising executive, legislative, judicial, taxing,\nregulatory or administrative powers or functions of or pertaining to government.\n
\n\n
     “Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of\nsuch Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other\nobligation payable or performable by another Person (the “primary obligor”) in any manner, whether\ndirectly or indirectly, and including any obligation of such Person, direct or indirect, (i) to\npurchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or\nother obligation, (ii) to purchase or lease property, securities or services for the purpose of\nassuring the obligee in respect of such Indebtedness or other obligation of the payment or\nperformance of such Indebtedness or other obligation, (iii) to maintain working capital, equity\ncapital or any other financial statement condition or liquidity or level of income or cash flow of\nthe primary obligor so as to enable the primary obligor to pay such Indebtedness or other\nobligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in\nrespect of such Indebtedness or other obligation of the payment or performance thereof or to\nprotect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any\nassets of such Person securing any Indebtedness or other obligation of any other Person, whether or\nnot such Indebtedness or other obligation is assumed by such Person. The amount of any Guarantee\nshall be deemed to be an amount equal to the stated or determinable amount of the related primary\nobligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or\ndeterminable, the maximum reasonably anticipated liability in respect thereof as determined by the\nguaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.\n
\n\n
     “Guaranty” means the Guaranty made by the Guarantors in favor of the Administrative\nAgent and the Lenders pursuant to Article IV.\n
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 \n

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\n\n

\n\n
     “Guarantors” means each Domestic Subsidiary of the Company (other than Tradex\nConverting, Inc. and Avenue One, Inc.) identified as a “Guarantor” on the signature pages hereto\nand each other Person that joins as a Guarantor pursuant to Section 7.12, together with\ntheir successors and permitted assigns.\n
\n\n
     “Hazardous Materials” means all explosive or radioactive substances or wastes and all\nhazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum\ndistillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas,\ninfectious or medical wastes and all other substances or wastes of any nature regulated pursuant to\nany Environmental Law.\n
\n\n
     “Honor Date” has the meaning set forth in Section 2.03(c).\n
\n\n
     “Indebtedness” means, as to any Person at a particular time, without duplication, all\nof the following, whether or not included as indebtedness or liabilities in accordance with GAAP:\n
\n\n\n
     (a) all Funded Indebtedness;\n
\n\n\n
     (b) the Swap Termination Value of any Swap Contract;\n
\n\n\n
     (c) all Guarantees with respect to outstanding Indebtedness of the types specified in\nclauses (a) and (b) above of any other Person; and\n
\n\n\n
     (d) all Indebtedness of the types referred to in clauses (a) through (c) above of any\npartnership or joint venture (other than a joint venture that is itself a corporation or\nlimited liability company) in which such Person is a general partner or joint venturer,\nunless such Indebtedness is expressly made non-recourse to such Person.\n
\n\n
     “Indemnitees” has the meaning specified in Section 11.05.\n
\n\n
     “Interest Payment Date” means (a) as to any Eurocurrency Rate Loan, the last day of\neach Interest Period applicable to such Loan and the Maturity Date; provided,\nhowever, that if any Interest Period for a Eurocurrency Rate Loan exceeds three months, the\nrespective dates that fall every three months after the beginning of such Interest Period shall\nalso be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the\nlast Business Day of each March, June, September and December and the Maturity Date.\n
\n\n
     “Interest Period” means, as to each Eurocurrency Rate Loan, the period commencing on\nthe date such Eurocurrency Rate Loan is disbursed or converted to or continued as a Eurocurrency\nRate Loan and ending on the date seven days or one, two, three or six months thereafter as selected\nby the applicable Borrower in its Loan Notice; provided that:\n
\n\n\n
     (a) any Interest Period that would otherwise end on a day that is not a Business Day\nshall be extended to the next succeeding Business Day unless such Business Day falls in\nanother calendar month, in which case such Interest Period shall end on the next preceding\nBusiness Day;\n
\n\n\n
     (b) any Interest Period that begins on the last Business Day of a calendar month (or on\na day for which there is no numerically corresponding day in the calendar month at the end\nof such Interest Period) shall end on the last Business Day of the calendar month at the end\nof such Interest Period; and\n
\n\n\n
     (c) no Interest Period shall extend beyond the Maturity Date.\n
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\n\n
     “Interim Financial Statements” has the meaning set forth in Section 5.01(c).\n
\n\n
     “Internal Revenue Code” means the Internal Revenue Code of 1986.\n
\n\n
     “Investment” means, as to any Person, any direct or indirect acquisition or investment\nby such Person, whether by means of (a) the purchase or other acquisition of Capital Stock of\nanother Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of,\nor purchase or other acquisition of any other debt or equity participation or interest in, another\nPerson, including any partnership or joint venture interest in such other Person, (c) an\nAcquisition or (d) the Disposition of any Property for less than the fair market value thereof\n(other than Dispositions under Sections 8.05(d) and (e)). For purposes of covenant\ncompliance, the amount of any Investment shall be the amount actually invested, without adjustment\nfor subsequent increases or decreases in the value of such Investment.\n
\n\n
     “Involuntary Disposition” means any loss of, damage to or destruction of, or any\ncondemnation or other taking for public use of, any Property of the Company or any of its\nSubsidiaries.\n
\n\n
     “IP Rights” has the meaning specified in Section 6.17.\n
\n\n
     “IRS” means the United States Internal Revenue Service.\n
\n\n
     “ISP” means, with respect to any Letter of Credit, the “International Standby\nPractices 1998” published by the Institute of International Banking Law & Practice (or such later\nversion thereof as may be in effect at the time of issuance).\n
\n\n
     “Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit\nApplication, and any other document, agreement and instrument entered into by the L/C Issuer and\nthe applicable Borrower (or any Subsidiary) or in favor the L/C Issuer and relating to any such\nLetter of Credit.\n
\n\n
     “Joinder Agreement” means a joinder agreement substantially in the form of Exhibit\n7.12 executed and delivered by a Domestic Subsidiary in accordance with the provisions of\nSection 7.12.\n
\n\n
     “Laws” means, collectively, all international, foreign, federal, state and local\nstatutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or\njudicial precedents or authorities, including the interpretation or administration thereof by any\nGovernmental Authority charged with the enforcement, interpretation or administration thereof, and\nall applicable administrative orders, directed duties, requests, licenses, authorizations and\npermits of, and agreements with, any Governmental Authority, in each case whether or not having the\nforce of law.\n
\n\n
     “L/C Advance” means, with respect to each Lender, such Lender’s funding of its\nparticipation in any L/C Borrowing in accordance with its Pro Rata Share. All L/C Advances shall\nbe denominated in Dollars.\n
\n\n
     “L/C Borrowing” means an extension of credit resulting from a drawing under any Letter\nof Credit which has not been reimbursed on the date when made or refinanced as a Borrowing of\nRevolving Loans. All L/C Borrowings shall be denominated in Dollars.\n
\n\n
     “L/C Credit Extension” means, with respect to any Letter of Credit, the issuance\nthereof or extension of the expiry date thereof, or the increase of the amount thereof.\n
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 \n

\n\n\n

\n

 

\n\n

\n\n
     “L/C Issuer” means Bank of America in its capacity as issuer of Letters of Credit\nhereunder, or any successor issuer of Letters of Credit hereunder. Letters of Credit may be issued\nin Dollars or in an Alternative Currency.\n
\n\n
     “L/C Obligations” means, as at any date of determination, the aggregate undrawn amount\nof all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts,\nincluding all L/C Borrowings. For purposes of computing the amount available to be drawn under any\nLetter of Credit, the amount of such Letter of Credit shall be determined in accordance with\nSection 1.10. For all purposes of this Agreement, if on any date of determination a Letter\nof Credit has expired by its terms but any amount may still be drawn thereunder by reason of the\noperation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the\namount so remaining available to be drawn.\n
\n\n
     “Lenders” means each of the Persons identified as a “Lender” on the signature pages\nhereto, any Person that becomes a Lender pursuant to Section 2.01(b) and their successors\nand assigns and, as the context requires, includes the L/C Issuer and the Swing Line Lender.\n
\n\n
     “Lending Office” means, as to any Lender, the office or offices of such Lender\ndescribed as such in such Lender’s Administrative Questionnaire, or such other office or offices as\na Lender may from time to time notify the Company and the Administrative Agent.\n
\n\n
     “Letter of Credit” means any letter of credit issued hereunder and shall include the\nExisting Letters of Credit. A Letter of Credit may be a commercial letter of credit or a standby\nletter of credit.\n
\n\n
     “Letter of Credit Application” means an application and agreement for the issuance or\namendment of a letter of credit in the form from time to time in use by the L/C Issuer.\n
\n\n
     “Letter of Credit Expiration Date” means the day that is thirty days prior to the\nMaturity Date then in effect (or, if such day is not a Business Day, the next preceding Business\nDay).\n
\n\n
     “Letter of Credit Fee” has the meaning specified in Section 2.03(i).\n
\n\n
     “Letter of Credit Sublimit” means an amount equal to the lesser of (a) the Aggregate\nRevolving Commitments and (b) $15,000,000. The Letter of Credit Sublimit is part of, and not in\naddition to, the Aggregate Revolving Commitments.\n
\n\n
     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,\nencumbrance, lien (statutory or other), charge, or preference, priority or other security interest\nor preferential arrangement in the nature of a security interest of any kind or nature whatsoever\n(including any conditional sale or other title retention agreement, and any financing lease having\nsubstantially the same economic effect as any of the foregoing).\n
\n\n
     “Loan” means an extension of credit by a Lender to a Borrower under Article II\nin the form of a Revolving Loan or a Swing Line Loan.\n
\n\n
     “Loan Documents” means this Agreement, each Note, each Issuer Document, each Joinder\nAgreement and the Fee Letter.\n
\n\n
     “Loan Notice” means a notice of (a) a Borrowing of Revolving Loans, (b) a conversion\nof Loans from one Type to the other, or (c) a continuation of Eurocurrency Rate Loans, in each case\npursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of\nExhibit 2.02.\n
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 \n

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\n

 

\n\n

\n\n
     “Loan Parties” means, collectively, each Borrower and each Guarantor.\n
\n\n
     “Mandatory Cost” means, with respect to any period, the percentage rate per annum\ndetermined in accordance with Schedule 1.01(b).\n
\n\n
     “Material Adverse Effect” means (a) a material adverse change in, or a material\nadverse effect upon, the operations, business, properties, liabilities (actual or contingent),\ncondition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a\nwhole; (b) a material impairment of the ability of any Loan Party to perform its obligations under\nany Loan Document to which it is a party; or (c) a material adverse effect upon the legality,\nvalidity, binding effect or enforceability against any Loan Party of any Loan Document to which it\nis a party.\n
\n\n
     “Maturity Date” means October 5, 2011; provided, however that if such\ndate is not a Business Day, the Maturity Date shall be the next preceding Business Day.\n
\n\n
     “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.\n
\n\n
     “Multiemployer Plan” means any employee benefit plan of the type described in Section\n4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make\ncontributions, or during the preceding five plan years, has made or been obligated to make\ncontributions.\n
\n\n
     “Note” has the meaning specified in Section 2.11(a).\n
\n\n
     “Note Purchase Agreement” means that certain Note Purchase Agreement dated as of June\n28, 2004, among the Company and the purchasers party thereto, together with that certain First\nSupplement to the Note Purchase Agreement dated as of February 14, 2006.\n
\n\n
     “Obligations” means all advances to, and debts, liabilities, obligations, covenants\nand duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan\nor Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute\nor contingent, due or to become due, now existing or hereafter arising and including interest and\nfees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of\nany proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding,\nregardless of whether such interest and fees are allowed claims in such proceeding. The foregoing\nshall also include (a) all obligations under any Swap Contract between any Loan Party and any\nLender or Affiliate of a Lender that is permitted to be incurred pursuant to Section\n8.03(d) and (b) all obligations under any Treasury Management Agreement between any Loan Party\nand any Lender or Affiliate of a Lender.\n
\n\n
     “Organization Documents” means, (a) with respect to any corporation, the certificate\nor articles of incorporation and the bylaws (or equivalent or comparable constitutive documents\nwith respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the\ncertificate or articles of formation or organization and operating agreement; and (c) with respect\nto any partnership, joint venture, trust or other form of business entity, the partnership, joint\nventure or other applicable agreement of formation or organization and any agreement, instrument,\nfiling or notice with respect thereto filed in connection with its formation or organization with\nthe applicable Governmental Authority in the jurisdiction of its formation or organization and, if\napplicable, any certificate or articles of formation or organization of such entity.\n
\n\n
     “Outstanding Amount” means (a) with respect to any Revolving Loans on any date, the\nDollar Equivalent amount of the aggregate outstanding principal amount thereof after giving effect\nto any\n
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borrowings and prepayments or repayments of any Revolving Loans occurring on such date; (b)\nwith respect to Swing Line Loans on any date, the aggregate outstanding principal amount thereof\nafter giving effect to any borrowings and prepayments or repayments of such Swing Line Loans\noccurring on such date and (c) with respect to any L/C Obligations on any date, the Dollar\nEquivalent amount of the aggregate outstanding amount of such L/C Obligations on such date after\ngiving effect to any L/C Credit Extension occurring on such date and any other changes in the\naggregate amount of the L/C Obligations as of such date, including as a result of any\nreimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the\nmaximum amount available for drawing under Letters of Credit taking effect on such date.\n
\n\n\n
     “Overnight Rate” means, for any day, (a) with respect to any amount denominated in\nDollars, the greater of (i) the Federal Funds Rate and (ii) an overnight rate determined by the\nAdministrative Agent, the L/C Issuer, or the Swing Line Lender, as the case may be, in accordance\nwith banking industry rules on interbank compensation, and (b) with respect to any amount\ndenominated in an Alternative Currency, the rate of interest per annum at which overnight deposits\nin the applicable Alternative Currency, in an amount approximately equal to the amount with respect\nto which such rate is being determined, would be offered for such day by a branch or Affiliate of\nBank of America in the applicable offshore interbank market for such currency to major banks in\nsuch interbank market. \n
\n\n
     “Participant” has the meaning specified in Section 11.07(d).\n
\n\n
     “Participating Member State” means each state so described in any EMU Legislation.\n
\n\n
     “PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.\n
\n\n
     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in\nSection 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and\nis sponsored or maintained by the Company or any ERISA Affiliate or to which the Company or any\nERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple\nemployer or other plan described in Section 4064(a) of ERISA, has made contributions at any time\nduring the immediately preceding five plan years.\n
\n\n
     “Permitted Acquisitions” means Investments consisting of an Acquisition by a Loan\nParty, provided that (a) the Property acquired (or the Property of the Person acquired) in\nsuch Acquisition is used or useful in the same or a similar line of business as the Company and its\nSubsidiaries were engaged in on the Closing Date (or any reasonable extensions or expansions\nthereof), (b) in the case of an Acquisition of the Capital Stock of another Person, the board of\ndirectors (or other comparable governing body) of such other Person shall have duly approved such\nAcquisition, (c) upon giving effect to such Acquisition on a Pro Forma Basis, the Loan Parties\nwould be in compliance with the financial covenants set forth in Section 8.11 as of the\nmost recent fiscal quarter for which the Company was required to deliver financial statements\npursuant to Section 7.01(a) or (b) (and if the aggregate consideration (including\ncash and non-cash consideration, any assumption of Indebtedness, any acquired Indebtedness,\ndeferred purchase price and any earn-out payments) paid by the Company or any Subsidiary for any\nsuch Acquisition exceeds $100,000,000, the Company shall have delivered to the Administrative Agent\na certificate demonstrating such compliance) (d) the representations and warranties made by the\nLoan Parties in each Loan Document shall be true and correct in all material respects at and as if\nmade as of the date of such Acquisition (after giving effect thereto) except to the extent such\nrepresentations and warranties expressly relate to an earlier date and (e) if such transaction\ninvolves the purchase of an interest in a partnership between the Company (or a Subsidiary) as a\ngeneral partner and entities unaffiliated with the Company or such Subsidiary as the other\npartners, such transaction shall be effected by having such equity interest acquired by a corporate\nholding company directly or indirectly wholly-owned by the Company newly formed for the sole\npurpose of effecting such transaction.\n
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     “Permitted Liens” means, at any time, Liens in respect of Property of the Company or\nany of its Subsidiaries permitted to exist at such time pursuant to the terms of Section\n8.01.\n
\n\n
     “Person” means any natural person, corporation, limited liability company, trust,\njoint venture, association, company, partnership, Governmental Authority or other entity.\n
\n\n
     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of\nERISA) established by the Company or, with respect to any such plan that is subject to Section 412\nof the Internal Revenue Code or Title IV of ERISA, any ERISA Affiliate.\n
\n\n
     “Platform” has the meaning specified in Section 7.02.\n
\n\n
     “Pro Forma Basis” means, for purposes of calculating the financial covenants set forth\nin Section 8.11 (including for purposes of determining the Applicable Rate), that any\nDisposition, Involuntary Disposition or Acquisition shall be deemed to have occurred as of the\nfirst day of the most recent four fiscal quarter period preceding the date of such transaction for\nwhich the Company was required to deliver financial statements pursuant to Section 7.01(a)\nor (b). In connection with the foregoing, (a) with respect to any Disposition or\nInvoluntary Disposition, (i) income statement and cash flow statement items (whether positive or\nnegative) attributable to the Property disposed of shall be excluded to the extent relating to any\nperiod occurring prior to the date of such transaction and (ii) Indebtedness which is retired shall\nbe excluded and deemed to have been retired as of the first day of the applicable period and (b)\nwith respect to any Acquisition, (i) income statement items attributable to the Person or Property\nacquired shall be included to the extent relating to any period applicable in such calculations to\nthe extent (A) such items are not otherwise included in such income statement items for the Company\nand its Subsidiaries in accordance with GAAP or in accordance with any defined terms set forth in\nSection 1.01 and (B) such items are supported by financial statements or other information\nreasonably satisfactory to the Administrative Agent and (ii) any Indebtedness incurred or assumed\nby the Company or any Subsidiary (including the Person or Property acquired) in connection with\nsuch transaction and any Indebtedness of the Person or Property acquired which is not retired in\nconnection with such transaction (A) shall be deemed to have been incurred as of the first day of\nthe applicable period and (B) if such Indebtedness has a floating or formula rate, shall have an\nimplied rate of interest for the applicable period for purposes of this definition determined by\nutilizing the rate which is or would be in effect with respect to such Indebtedness as at the\nrelevant date of determination.\n
\n\n
     “Pro Rata Share” means, as to each Lender at any time, a fraction (expressed as a\npercentage, carried out to the ninth decimal place), the numerator of which is the amount of the\nRevolving Commitment of such Lender at such time and the denominator of which is the amount of the\nAggregate Revolving Commitments at such time; provided that if the commitment of each\nLender to make Revolving Loans and the obligation of the L/C Issuer to make L/C Credit Extensions\nhave been terminated pursuant to Section 9.02, then the Pro Rata Share of each Lender shall\nbe determined based on the Pro Rata Share of such Lender immediately prior to such termination and\nafter giving effect to any subsequent assignments made pursuant to the terms hereof. The initial\nPro Rata Share of each Lender is set forth opposite the name of such Lender on Schedule\n2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto,\nas applicable.\n
\n\n
     “Property” means any interest of any kind in any property or asset, whether real,\npersonal or mixed, or tangible or intangible.\n
\n\n
     “Register” has the meaning specified in Section 11.07(c).\n
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     “Related Parties” means, with respect to any Person, such Person’s Affiliates and the\npartners, directors, officers, employees, agents and advisors of such Person and of such Person’s\nAffiliates.\n
\n\n
     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA,\nother than events for which the thirty-day notice period has been waived.\n
\n\n
     “Request for Credit Extension” means (a) with respect to a Borrowing, conversion or\ncontinuation of Loans, a Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of\nCredit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.\n
\n\n
     “Required Lenders” means, at any time, Lenders holding in the aggregate more than\nfifty percent (50%) of (a) the Commitments or (b) if the Commitments have been terminated, the\noutstanding Loans, L/C Obligations, Swing Line Loans and participations therein. The Commitments\nof, and the outstanding Loans held or deemed held by, any Defaulting Lender shall be excluded for\npurposes of making a determination of Required Lenders.\n
\n\n
     “Responsible Officer” means the chief executive officer, president, treasurer or chief\nfinancial officer of a Loan Party. Any document delivered hereunder that is signed by a\nResponsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all\nnecessary corporate, partnership and/or other action on the part of such Loan Party and such\nResponsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.\n
\n\n
     “Restricted Payment” means any dividend or other distribution (whether in cash,\nsecurities or other property) with respect to any Capital Stock of the Company or any Subsidiary,\nor any payment (whether in cash, securities or other property), including any sinking fund or\nsimilar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or\ntermination of any such Capital Stock or of any option, warrant or other right to acquire any such\nCapital Stock, or any setting apart of funds or Property for any of the foregoing.\n
\n\n
     “Revaluation Date” means (a) with respect to any Loan, each of the following: (i)\neach date of a Borrowing of a Eurocurrency Rate Loan denominated in an Alternative Currency, (ii)\neach date of a continuation of a Eurocurrency Rate Loan denominated in an Alternative Currency\npursuant to Section 2.02, and (iii) such additional dates as the Administrative Agent shall\ndetermine or the Required Lenders shall require; and (b) with respect to any Letter of Credit, each\nof the following: (i) each date of an issuance of a Letter of Credit denominated in an Alternative\nCurrency, (ii) each date of an amendment of any such Letter of Credit having the effect of\nincreasing the amount thereof (solely with respect to the increased amount), (iii) each date of any\npayment by the L/C Issuer of any Letter of Credit denominated in an Alternative Currency, (iv) in\nthe case of the Existing Letters of Credit, the Closing Date and (v) such additional dates as the\nAdministrative Agent or the L/C Issuer shall determine or the Required Lenders shall require.\n
\n\n
     “Revolving Commitment” means, as to each Lender, its obligation to (a) make Revolving\nLoans to the Borrowers pursuant to Section 2.01, (b) purchase participations in L/C\nObligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount\nat any one time outstanding not to exceed the Dollar amount set forth opposite such Lender’s name\non Schedule 2.01, in any documentation executed by such Lender pursuant to Section\n2.01(b) or in the Assignment and Assumption pursuant to which such Lender becomes a party\nhereto, as applicable, as such amount may be adjusted from time to time in accordance with this\nAgreement.\n
\n\n
     “Revolving Loan” has the meaning specified in Section 2.01(a).\n
\n\n

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\n\n\n

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\n\n

\n\n
     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill\nCompanies, Inc. and any successor thereto.\n
\n\n
     “Sale and Leaseback Transaction” means, with respect to the Company or any Subsidiary,\nany arrangement, directly or indirectly, with any Person whereby the Company or such Subsidiary\nshall sell or transfer any Property used or useful in its business, whether now owned or hereafter\nacquired, and thereafter rent or lease such Property or other Property that it intends to use for\nsubstantially the same purpose or purposes as the Property being sold or transferred.\n
\n\n
     “Same Day Funds” means (a) with respect to disbursements and payments in Dollars,\nimmediately available funds, and (b) with respect to disbursements and payments in an Alternative\nCurrency, same day or other funds as may be determined by the Administrative Agent or the L/C\nIssuer, as the case may be, to be customary in the place of disbursement or payment for the\nsettlement of international banking transactions in the relevant Alternative Currency.\n
\n\n
     “SEC” means the Securities and Exchange Commission, or any Governmental Authority\nsucceeding to any of its principal functions.\n
\n\n
     “Securitization Transaction” means, with respect to any Person, any financing\ntransaction or series of financing transactions (including factoring arrangements) pursuant to\nwhich such Person or any Subsidiary of such Person may sell, convey or otherwise transfer, or grant\na security interest in, accounts, payments, receivables, rights to future lease payments or\nresiduals or similar rights to payment to a special purpose subsidiary or affiliate of such Person.\n
\n\n
     “Solvent” or “Solvency” means, with respect to any Person as of a particular\ndate, that on such date (a) such Person is able to pay its debts and other liabilities, contingent\nobligations and other commitments as they mature in the ordinary course of business, (b) such\nPerson does not intend to, and does not believe that it will, incur debts or liabilities beyond\nsuch Person’s ability to pay as such debts and liabilities mature in their ordinary course, (c)\nsuch Person is not engaged in a business or a transaction, and is not about to engage in a business\nor a transaction, for which such Person’s Property would constitute unreasonably small capital\nafter giving due consideration to the prevailing practice in the industry in which such Person is\nengaged or is to engage, (d) the fair value of the Property of such Person is greater than the\ntotal amount of liabilities, including, without limitation, contingent liabilities, of such Person\nand (e) the present fair salable value of the assets of such Person is not less than the amount\nthat will be required to pay the probable liability of such Person on its debts as they become\nabsolute and matured. In computing the amount of contingent liabilities at any time, it is\nintended that such liabilities will be computed at the amount which, in light of all the facts and\ncircumstances existing at such time, represents the amount that can reasonably be expected to\nbecome an actual or matured liability.\n
\n\n
     “Special Notice Currency” means at any time an Alternative Currency, other than the\ncurrency of a country that is a member of the Organization for Economic Cooperation and Development\nat such time located in North America or Europe.\n
\n\n
     “Spot Rate” for a currency means the rate determined by the Administrative Agent or\nthe L/C Issuer, as applicable, to be the rate quoted by the Person acting in such capacity as the\nspot rate for the purchase by such Person of such currency with another currency through its\nprincipal foreign exchange trading office at approximately 11:00 a.m. on the date two Business Days\nprior to the date as of which the foreign exchange computation is made; provided that the\nAdministrative Agent or the L/C Issuer may obtain such spot rate from another financial institution\ndesignated by the Administrative Agent or the L/C Issuer if the Person acting in such capacity does\nnot have as of the date of determination a spot buying rate for any such currency;\n
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and provided further that the L/C Issuer may use such spot rate quoted on the\ndate as of which the foreign exchange computation is made in the case of any Letter of Credit\ndenominated in an Alternative Currency. \n
\n\n\n
     “Sterling” and “£” mean the lawful currency of the United Kingdom.\n
\n\n
     “Subordinated Indebtedness” means unsecured Indebtedness of the Borrower which by its\nterms is subordinated to the Obligations in a manner and to an extent acceptable to the\nAdministrative Agent.\n
\n\n
     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited\nliability company or other business entity of which a majority of the shares of Voting Stock is at\nthe time beneficially owned, or the management of which is otherwise controlled, directly, or\nindirectly through one or more intermediaries, or both, by such Person. Unless otherwise\nspecified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary\nor Subsidiaries of the Company.\n
\n\n
     “Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit\nderivative transactions, forward rate transactions, commodity swaps, commodity options, forward\ncommodity contracts, equity or equity index swaps or options, bond or bond price or bond index\nswaps or options or forward bond or forward bond price or forward bond index transactions, interest\nrate options, forward foreign exchange transactions, cap transactions, floor transactions, collar\ntransactions, currency swap transactions, cross-currency rate swap transactions, currency options,\nspot contracts, or any other similar transactions or any combination of any of the foregoing\n(including any options to enter into any of the foregoing), whether or not any such transaction is\ngoverned by or subject to any master agreement, and (b) any and all transactions of any kind, and\nthe related confirmations, which are subject to the terms and conditions of, or governed by, any\nform of master agreement published by the International Swaps and Derivatives Association, Inc.,\nany International Foreign Exchange Master Agreement, or any other master agreement (any such master\nagreement, together with any related schedules, a “Master Agreement”), including any such\nobligations or liabilities under any Master Agreement.\n
\n\n
     “Swap Termination Value” means, in respect of any one or more Swap Contracts, after\ntaking into account the effect of any legally enforceable netting agreement relating to such Swap\nContracts, (a) for any date on or after the date such Swap Contracts have been closed out and\ntermination value(s) determined in accordance therewith, such termination value(s) and (b) for any\ndate prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market\nvalue(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily\navailable quotations provided by any recognized dealer in such Swap Contracts (which may include a\nLender or any Affiliate of a Lender).\n
\n\n
     “Swing Line Lender” means Bank of America in its capacity as provider of Swing Line\nLoans, or any successor swing line lender hereunder.\n
\n\n
     “Swing Line Loan” has the meaning specified in Section 2.04(a).\n
\n\n
     “Swing Line Loan Notice” means a notice of a Borrowing of Swing Line Loans pursuant to\nSection 2.04(b), which, if in writing, shall be substantially in the form of Exhibit\n2.04.\n
\n\n
     “Swing Line Sublimit” means an amount equal to the lesser of (a) $15,000,000 and (b)\nthe Aggregate Revolving Commitments. The Swing Line Sublimit is part of, and not in addition to,\nthe Aggregate Revolving Commitments.\n
\n\n
     “Synthetic Lease” means any synthetic lease, tax retention operating lease,\noff-balance sheet loan or similar off-balance sheet financing arrangement whereby the arrangement\nis considered borrowed\n
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money indebtedness for tax purposes but is classified as an operating lease or does not\notherwise appear on a balance sheet under GAAP.\n
\n\n\n
     “TARGET Day” means any day on which the Trans-European Automated Real-time Gross\nSettlement Express Transfer (TARGET) payment system (or, if such payment system ceases to be\noperative, such other payment system (if any) determined by the Administrative Agent to be a\nsuitable replacement) is open for the settlement of payments in Euro.\n
\n\n
     “Threshold Amount” means $15,000,000.\n
\n\n
     “Total Revolving Outstandings” means the aggregate Outstanding Amount of all Revolving\nLoans, all Swing Line Loans and all L/C Obligations.\n
\n\n
     “Treasury Management Agreement” means any agreement governing the provision of\ntreasury or cash management services, including deposit accounts, funds transfer, automated\nclearinghouse, zero balance accounts, returned check concentration, controlled disbursement,\nlockbox, account reconciliation and reporting and trade finance services.\n
\n\n
     “Tricor” has the meaning specified in the introductory paragraph hereto.\n
\n\n
     “Type” means, with respect to any Loan, its character as a Base Rate Loan or a\nEurocurrency Rate Loan.\n
\n\n
     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities\nunder Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets,\ndetermined in accordance with the assumptions used for funding that Pension Plan pursuant to\nSection 412 of the Internal Revenue Code for the applicable plan year.\n
\n\n
     “United States” and “U.S.” mean the United States of America.\n
\n\n
     “Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).\n
\n\n
     “Voting Stock” means, with respect to any Person, Capital Stock issued by such Person\nthe holders of which are ordinarily, in the absence of contingencies, entitled to vote for the\nelection of directors (or persons performing similar functions) of such Person, even though the\nright so to vote has been suspended by the happening of such a contingency.\n
\n\n
     “Wholly Owned Subsidiary” means any Person 100% of whose Capital Stock is at the time\nowned by the Company directly or indirectly through other Persons 100% of whose Capital Stock is at\nthe time owned, directly or indirectly, by the Company.\n
\n\n
     “Worldwide” has the meaning specified in the introductory paragraph hereto.\n
\n\n
1.02 Other Interpretive Provisions.\n
\n\n\n
     With reference to this Agreement and each other Loan Document, unless otherwise specified\nherein or in such other Loan Document:\n
\n\n\n
     (a) The meanings of defined terms are equally applicable to the singular and plural\nforms of the defined terms.\n
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\n\n

\n\n\n
     (b) (i) The words “herein,” “hereto,” “hereof” and\n“hereunder” and words of similar import when used in any Loan Document shall\nrefer to such Loan Document as a whole and not to any particular provision thereof.\n
\n\n\n
     (ii) Article, Section, Exhibit and Schedule references are to the Loan Document\nin which such reference appears.\n
\n\n\n
     (iii) The term “including” is by way of example and not limitation.\n
\n\n\n
     (iv) The term “documents” includes any and all instruments, documents,\nagreements, certificates, notices, reports, financial statements and other writings,\nhowever evidenced, whether in physical or electronic form.\n
\n\n\n
     (c) In the computation of periods of time from a specified date to a later specified\ndate, the word “from” means “from and including;” the words “to” and\n“until” each mean “to but excluding;” and the word “through” means\n“to and including.”\n
\n\n\n
     (d) Section headings herein and in the other Loan Documents are included for\nconvenience of reference only and shall not affect the interpretation of this Agreement or\nany other Loan Document.\n
\n\n
1.03 Accounting Terms.\n
\n\n\n
     (a) Except as otherwise specifically prescribed herein, all accounting terms not specifically\nor completely defined herein shall be construed in conformity with, and all financial data\n(including financial ratios and other financial calculations) required to be submitted pursuant to\nthis Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in\neffect from time to time, applied in a manner consistent with that used in preparing the Audited\nFinancial Statements; provided, however, that calculations of Attributable Indebtedness under any\nSynthetic Lease or the implied interest component of any Synthetic Lease shall be made by the\nCompany in accordance with accepted financial practice and consistent with the terms of such\nSynthetic Lease.\n
\n\n
     (b) The Company will provide a written summary of material changes in GAAP and in the\nconsistent application thereof with each annual and quarterly Compliance Certificate delivered in\naccordance with Section 7.02(b). If at any time any change in GAAP would affect the\ncomputation of any financial ratio or requirement set forth in any Loan Document, and either the\nCompany or the Required Lenders shall so request, the Administrative Agent, the Lenders and the\nCompany shall negotiate in good faith to amend such ratio or requirement to preserve the original\nintent thereof in light of such change in GAAP (subject to the approval of the Required Lenders);\nprovided that, until so amended, (i) such ratio or requirement shall continue to be\ncomputed in accordance with GAAP prior to such change therein and (ii) the Company shall provide to\nthe Administrative Agent and the Lenders financial statements and other documents required under\nthis Agreement or as reasonably requested hereunder setting forth a reconciliation between\ncalculations of such ratio or requirement made before and after giving effect to such change in\nGAAP.\n
\n\n
     (c) Notwithstanding the above, the parties hereto acknowledge and agree that all calculations\nof the financial covenants in Section 8.11 (including for purposes of determining the\nApplicable Rate) shall be made on a Pro Forma Basis.\n
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1.04 Rounding.\n
\n\n\n
     Any financial ratios required to be maintained by the Company pursuant to this Agreement shall\nbe calculated by dividing the appropriate component by the other component, carrying the result to\none place more than the number of places by which such ratio is expressed herein and rounding the\nresult up or down to the nearest number (with a rounding-up if there is no nearest number).\n
\n\n
1.05 References to Agreements and Laws.\n
\n\n\n
     Unless otherwise expressly provided herein, (a) references to Organization Documents,\nagreements (including the Loan Documents) and other contractual instruments shall be deemed to\ninclude all subsequent amendments, restatements, extensions, supplements and other modifications\nthereto, but only to the extent that such amendments, restatements, extensions, supplements and\nother modifications are not prohibited by any Loan Document; and (b) references to any Law shall\ninclude all statutory and regulatory provisions consolidating, amending, replacing, supplementing\nor interpreting such Law.\n
\n\n
1.06 Exchange Rates; Currency Equivalents.\n
\n\n\n
     (a) The Administrative Agent or the L/C Issuer, as applicable, shall determine the Spot Rates\nas of each Revaluation Date to be used for calculating Dollar Equivalent amounts of Credit\nExtensions and Outstanding Amounts denominated in Alternative Currencies. Such Spot Rates shall\nbecome effective as of such Revaluation Date and shall be the Spot Rates employed in converting any\namounts between the applicable currencies until the next Revaluation Date to occur. Except for\npurposes of financial statements delivered by Loan Parties hereunder or calculating financial\ncovenants hereunder or except as otherwise provided herein, the applicable amount of any currency\n(other than Dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as\nso determined by the Administrative Agent or the L/C Issuer, as applicable.\n
\n\n
     (b) Wherever in this Agreement in connection with a Borrowing, conversion, continuation or\nprepayment of a Eurocurrency Rate Loan or the issuance, amendment or extension of a Letter of\nCredit, an amount, such as a required minimum or multiple amount, is expressed in Dollars, but such\nBorrowing, Eurocurrency Rate Loan or Letter of Credit is denominated in an Alternative Currency,\nsuch amount shall be the relevant Alternative Currency Equivalent of such Dollar amount (rounded to\nthe nearest unit of such Alternative Currency, with 0.5 of a unit being rounded upward), as\ndetermined by the Administrative Agent or the L/C Issuer, as the case may be.\n
\n\n
1.07 Additional Alternative Currencies.\n
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     (a) The Company may from time to time request that Eurocurrency Rate Loans be made and/or\nLetters of Credit be issued in a currency other than those specifically listed in the definition of\n“Alternative Currency;” provided that such requested currency is a lawful currency (other\nthan Dollars) that is readily available and freely transferable and convertible into Dollars. In\nthe case of any such request with respect to the making of Eurocurrency Rate Loans, such request\nshall be subject to the approval of the Administrative Agent and the Lenders; and in the case of\nany such request with respect to the issuance of Letters of Credit, such request shall be subject\nto the approval of the Administrative Agent and the L/C Issuer.\n
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     (b) Any such request shall be made to the Administrative Agent not later than 11:00 a.m.,\nfifteen Business Days prior to the date of the desired Credit Extension (or such other time or date\nas may be agreed by the Administrative Agent and, in the case of any such request pertaining to\nLetters of Credit, the L/C Issuer, in its or their sole discretion). In the case of any such\nrequest pertaining to Eurocurrency\n
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Rate Loans, the Administrative Agent shall promptly notify each Lender thereof; and in the\ncase of any such request pertaining to Letters of Credit, the Administrative Agent shall promptly\nnotify the L/C Issuer thereof. Each Lender (in the case of any such request pertaining to\nEurocurrency Rate Loans) or the L/C Issuer (in the case of a request pertaining to Letters of\nCredit) shall notify the Administrative Agent, not later than 11:00 a.m., seven Business Days after\nreceipt of such request whether it consents, in its sole discretion, to the making of Eurocurrency\nRate Loans or the issuance of Letters of Credit, as the case may be, in such requested currency.\n
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     (c) Any failure by a Lender or the L/C Issuer, as the case may be, to respond to such request\nwithin the time period specified in the preceding sentence shall be deemed to be a refusal by such\nLender or the L/C Issuer, as the case may be, to permit Eurocurrency Rate Loans to be made or\nLetters of Credit to be issued in such requested currency. If the Administrative Agent and all the\nLenders consent to making Eurocurrency Rate Loans in such requested currency, the Administrative\nAgent shall so notify the Company and such currency shall thereupon be deemed for all purposes to\nbe an Alternative Currency hereunder for purposes of any Borrowings of Eurocurrency Rate Loans; and\nif the Administrative Agent and the L/C Issuer consent to the issuance of Letters of Credit in such\nrequested currency, the Administrative Agent shall so notify the Company and such currency shall\nthereupon be deemed for all purposes to be an Alternative Currency hereunder for purposes of any\nLetter of Credit issuances. If the Administrative Agent shall fail to obtain consent to any request\nfor an additional currency under this Section 1.07, the Administrative Agent shall promptly\nso notify the Company.\n
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1.08 Change of Currency.\n
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     (a) Each obligation of the Borrowers to make a payment denominated in the national currency\nunit of any member state of the European Union that adopts the Euro as its lawful currency after\nthe date hereof shall be redenominated into Euro at the time of such adoption (in accordance with\nthe EMU Legislation). If, in relation to the currency of any such member state, the basis of\naccrual of interest expressed in this Agreement in respect of that currency shall be inconsistent\nwith any convention or practice in the London interbank market for the basis of accrual of interest\nin respect of the Euro, such expressed basis shall be replaced by such convention or practice with\neffect from the date on which such member state adopts the Euro as its lawful currency;\nprovided that if any Borrowing in the currency of such member state is outstanding\nimmediately prior to such date, such replacement shall take effect, with respect to such Borrowing,\nat the end of the then current Interest Period.\n
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     (b) Each provision of this Agreement shall be subject to such reasonable changes of\nconstruction as the Administrative Agent may from time to time specify to be appropriate to reflect\nthe adoption of the Euro by any member state of the European Union and any relevant market\nconventions or practices relating to the Euro.\n
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     (c) Each provision of this Agreement also shall be subject to such reasonable changes of\nconstruction as the Administrative Agent may from time to time specify to be appropriate to reflect\na change in currency of any other country and any relevant market conventions or practices relating\nto the change in currency.\n
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1.09 Times of Day.\n
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     Unless otherwise specified, all references herein to times of day shall be references to\nCentral time (daylight or standard, as applicable).\n
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1.10 Letter of Credit Amounts.\n
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     Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be\ndeemed to be the Dollar Equivalent of the stated amount of such Letter of Credit in effect at such\ntime; provided, however, that with respect to any Letter of Credit that, by its\nterms or the terms of any Issuer Document related thereto, provides for one or more automatic\nincreases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be\nthe Dollar Equivalent of the maximum stated amount of such Letter of Credit after giving effect to\nall such increases, whether or not such maximum stated amount is in effect at such time.\n
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ARTICLE II\n
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THE COMMITMENTS AND CREDIT EXTENSIONS\n\n
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2.01 Revolving Loans.\n
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     (a) Revolving Loans. Subject to the terms and conditions set forth herein, each\nLender severally agrees to make loans (each such loan, a “Revolving Loan”) to the Borrowers\nin Dollars or in one or more Alternative Currencies from time to time on any Business Day during\nthe Availability Period in an aggregate amount not to exceed at any time outstanding the amount of\nsuch Lender’s Revolving Commitment; provided, however, that after giving effect to\nany Borrowing of Revolving Loans, (i) the Total Revolving Outstandings shall not exceed the\nAggregate Revolving Commitments, (ii) the aggregate Outstanding Amount of the Revolving Loans of\nany Lender, plus such Lender’s Pro Rata Share of the Outstanding Amount of all L/C\nObligations, plus such Lender’s Pro Rata Share of the Outstanding Amount of all Swing Line\nLoans shall not exceed such Lender’s Revolving Commitment, and (iii) the aggregate Outstanding\nAmount of all Revolving Loans and L/C Obligations denominated in Alternative Currencies shall not\nexceed the Alternative Currency Sublimit. Within the limits of each Lender’s Revolving Commitment,\nand subject to the other terms and conditions hereof, the Borrowers may borrow under this\nSection 2.01, prepay under Section 2.05, and reborrow under this Section\n2.01. Revolving Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided\nherein.\n
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     (b) Increase of Aggregate Revolving Commitments. The Company may at any time and from\ntime to time, upon prior written notice by the Company to the Administrative Agent, increase the\nAggregate Revolving Commitments by up to ONE HUNDRED MILLION DOLLARS ($100,000,000) with additional\nRevolving Commitments from any existing Lender or new Revolving Commitments from any other Person\nselected by the Company and approved by the Administrative Agent (which approval shall not be\nunreasonably withheld in the absence of a Default); provided that:\n
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     (i) any such increase shall be in a minimum principal amount of $5,000,000 and in\nintegral multiples of $5,000,000 in excess thereof;\n
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     (ii) no Default shall be continuing at the time of any such increase;\n
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     (iii) no existing Lender shall be under any obligation to increase its Revolving\nCommitment and any such decision whether to increase its Revolving Commitment shall be in\nsuch Lender’s sole and absolute discretion; and\n
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     (iv) any new Lender shall join this Agreement by executing such joinder documents\nreasonably required by the Administrative Agent.\n
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2.02 Borrowings, Conversions and Continuations of Loans.\n
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     (a) Each Borrowing, each conversion of Loans from one Type to the other, and each continuation\nof Eurocurrency Rate Loans shall be made upon the applicable Borrower’s irrevocable notice to the\nAdministrative Agent, which may be given by telephone. Each such notice must be received by the\nAdministrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date\nof any Borrowing of, conversion to or continuation of, Eurocurrency Rate Loans denominated in\nDollars or of any conversion of Eurocurrency Rate Loans denominated in Dollars to Base Rate Loans,\n(ii) four Business Days (or five Business Days in the case of a Special Notice Currency)\nprior to the requested date of any Borrowing or continuation of Eurocurrency Rate Loans\ndenominated in Alternative Currencies and (iii) on the requested date of any Borrowing of Base Rate\nLoans. Each telephonic notice by any Borrower pursuant to this Section 2.02(a) must be\nconfirmed promptly by delivery to the Administrative Agent of a written Loan Notice, appropriately\ncompleted and signed by a Responsible Officer of such Borrower. Each Borrowing of, conversion to\nor continuation of Eurocurrency Rate Loans shall be in a principal amount of $5,000,000 or a whole\nmultiple of $1,000,000 in excess thereof. Except as provided in Sections 2.03(c) and\n2.04(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal amount\nof $1,000,000 or a whole multiple of $500,000 in excess thereof. Each Loan Notice (whether\ntelephonic or written) shall specify (i) whether such Borrower is requesting a Borrowing, a\nconversion of Loans from one Type to the other, or a continuation of Eurocurrency Rate Loans, (ii)\nthe requested date of the Borrowing, conversion or continuation, as the case may be (which shall be\na Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv)\nthe Type of Loans to be borrowed or to which existing Loans are to be converted, (v) if applicable,\nthe duration of the Interest Period with respect thereto, and (vi) the currency of the Loans to be\nborrowed. If the applicable Borrower fails to specify a currency in a Loan Notice requesting a\nBorrowing, then the Loans so requested shall be made in Dollars. If the applicable Borrower fails\nto specify a Type of a Loan in a Loan Notice or if such Borrower fails to give a timely notice\nrequesting a conversion or continuation, then the applicable Loans shall be made as, or converted\nto, Base Rate Loans; provided, however, that in the case of a failure to timely\nrequest a continuation of Loans denominated in an Alternative Currency, such Loans shall be\ncontinued as Eurocurrency Rate Loans in their original currency with an Interest Period of one\nmonth. Any automatic conversion to Base Rate Loans shall be effective as of the last day of the\nInterest Period then in effect with respect to the applicable Eurocurrency Rate Loans. If a\nBorrower requests a Borrowing of, conversion to, or continuation of Eurocurrency Rate Loans in any\nLoan Notice, but fails to specify an Interest Period, it will be deemed to have specified an\nInterest Period of one month. No Loan may be converted into or continued as a Loan denominated in\na different currency, but instead must be prepaid in the original currency of such Loan and\nreborrowed in the other currency.\n
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     (b) Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each\nLender of the amount (and currency) of its Pro Rata Share of the applicable Loans, and if no timely\nnotice of a conversion or continuation is provided by the applicable Borrower, the Administrative\nAgent shall notify each Lender of the details of any automatic conversion to Base Rate Loans or\ncontinuation of Loans denominated in a currency other than Dollars, in each case as described in\nthe preceding subsection. In the case of a Borrowing, each Lender shall make the amount of its\nLoan available to the Administrative Agent in Same Day Funds at the Administrative Agent’s Office\nfor the applicable currency not later than 1:00 p.m., in the case of any Loan denominated in\nDollars, and not later than the Applicable Time specified by the Administrative Agent in the case\nof any Loan in an Alternative Currency, in each case on the Business Day specified in the\napplicable Loan Notice. Upon satisfaction of the applicable conditions set forth in Section\n5.02 (and, if such Borrowing is the initial Credit Extension, Section 5.01), the\nAdministrative Agent shall make all funds so received available to the applicable Borrower in like\nfunds as received by the Administrative Agent either by (i) crediting the account of such Borrower\non the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds,\nin each case in accordance with instructions provided to (and reasonably acceptable to) the\n
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Administrative Agent by such Borrower; provided, however, that if, on the date\nof a Borrowing of Revolving Loans denominated in Dollars, there are L/C Borrowings outstanding,\nthen the proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C\nBorrowings and second, shall be made available to such Borrower as provided above.\n
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     (c) Except as otherwise provided herein, a Eurocurrency Rate Loan may be continued or\nconverted only on the last day of the Interest Period for such Eurocurrency Rate Loan. During the\nexistence of a Default, no Loans may be requested as, converted to or continued as Eurocurrency\nRate Loans (whether in Dollars or an Alternative Currency) without the consent of the Required\nLenders, and the Required Lenders may demand that any or all of the then outstanding Eurocurrency\nRate Loans denominated in an Alternative Currency be prepaid, or redenominated into Dollars in the\namount of the Dollar Equivalent thereof, on the last day of the then current Interest Period with\nrespect thereto.\n
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     (d) The Administrative Agent shall promptly notify the Borrowers and the Lenders of the\ninterest rate applicable to any Interest Period for Eurocurrency Rate Loans upon determination of\nsuch interest rate. The determination of the Eurocurrency Rate by the Administrative Agent shall\nbe conclusive in the absence of manifest error. At any time that Base Rate Loans are outstanding,\nthe Administrative Agent shall notify the Borrowers and the Lenders of any change in Bank of\nAmerica’s prime rate used in determining the Base Rate promptly following the public announcement\nof such change.\n
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     (e) After giving effect to all Borrowings, all conversions of Loans from one Type to the\nother, and all continuations of Loans as the same Type, there shall not be more than 8 Interest\nPeriods in effect with respect to Revolving Loans (no more than 4 of such Interest Periods may be\nfor 7 days).\n
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2.03 Letters of Credit.\n
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     (a)  The Letter of Credit Commitment.\n
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     (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in\nreliance upon the agreements of the other Lenders set forth in this Section 2.03,\n(1) from time to time on any Business Day during the period from the Closing Date until the\nLetter of Credit Expiration Date, to issue Letters of Credit denominated in Dollars or in\none or more Alternative Currencies for the account of the Borrowers or any of their\nSubsidiaries, and to amend or extend Letters of Credit previously issued by it, in\naccordance with subsection (b) below, and (2) to honor drawings under the Letters of Credit;\nand (B) the Lenders severally agree to participate in Letters of Credit issued for the\naccount of the Borrowers or their Subsidiaries and any drawings thereunder; provided\nthat after giving effect to any L/C Credit Extension with respect to any Letter of Credit,\n(w) the Total Revolving Outstandings shall not exceed the Aggregate Revolving Commitments,\n(x) the aggregate Outstanding Amount of the Revolving Loans of any Lender, plus such\nLender’s Pro Rata Share of the Outstanding Amount of all L/C Obligations, plus such\nLender’s Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed\nsuch Lender’s Revolving Commitment, (y) the Outstanding Amount of the L/C Obligations shall\nnot exceed the Letter of Credit Sublimit or (z) the aggregate Outstanding Amount of all L/C\nObligations and all Loans denominated in Alternative Currencies shall not exceed the\nAlternative Currency Sublimit. Each request by a Borrower for the issuance or amendment of\na Letter of Credit shall be deemed to be a representation by such Borrower that the L/C\nCredit Extension so requested complies with the conditions set forth in the proviso to the\npreceding sentence. Within the foregoing limits, and subject to the terms and conditions\nhereof, the Borrowers’ ability to obtain Letters of Credit shall be fully revolving, and\naccordingly the Borrowers may, during the foregoing period, obtain Letters of Credit to\nreplace Letters of Credit that have expired or that\n
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have been drawn upon and reimbursed. All Existing Letters of Credit shall be deemed to\nhave been issued pursuant hereto, and from and after the Closing Date shall be subject to\nand governed by the terms and conditions hereof.\n
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     (ii) The L/C Issuer shall not issue any Letter of Credit if:\n
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     (A) subject to Section 2.03(b)(iii), the expiry date of such requested\nLetter of Credit would occur more than twelve months after the date of issuance or\nlast extension, unless the Required Lenders have approved such expiry date;\n
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     (B) the expiry date of such requested Letter of Credit would occur after the\nLetter of Credit Expiration Date, unless all the Lenders have approved such expiry\ndate; or\n
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     (C) such Letter of Credit is to be denominated in a currency other than Dollars\nor an Alternative Currency, unless all the Lenders have consented thereto\n
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     (iii) The L/C Issuer shall not be under any obligation to issue any Letter of Credit\nif:\n
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     (A) any order, judgment or decree of any Governmental Authority or arbitrator\nshall by its terms purport to enjoin or restrain the L/C Issuer from issuing such\nLetter of Credit, or any Law applicable to the L/C Issuer or any request or\ndirective (whether or not having the force of law) from any Governmental Authority\nwith jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer\nrefrain from, the issuance of letters of credit generally or such Letter of Credit\nin particular or shall impose upon the L/C Issuer with respect to such Letter of\nCredit any restriction, reserve or capital requirement (for which the L/C Issuer is\nnot otherwise compensated hereunder) not in effect on the Closing Date, or shall\nimpose upon the L/C Issuer any unreimbursed loss, cost or expense which was not\napplicable on the Closing Date and which the L/C Issuer in good faith deems material\nto it;\n
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     (B) the issuance of such Letter of Credit would violate any Laws or one or more\npolicies of the L/C Issuer;\n
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     (C) except as otherwise agreed by the Administrative Agent and the L/C Issuer,\nsuch Letter of Credit is in an initial face amount less than $100,000, in the case\nof a commercial Letter of Credit, or $500,000, in the case of a standby Letter of\nCredit;\n
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     (D) the L/C Issuer does not as of the issuance date of such requested Letter of\nCredit issue Letters of Credit in the requested currency;\n
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     (E) such Letter of Credit contains any provisions for automatic reinstatement\nof the stated amount after any drawing thereunder; or\n
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     (F) a default of any Lender’s obligations to fund under Section 2.03(c)\nexists or any Lender is at such time a Defaulting Lender hereunder, unless the L/C\nIssuer has entered into satisfactory arrangements with the Company or such Lender to\neliminate the L/C Issuer’s risk with respect to such Lender.\n
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     (iv) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be\npermitted at such time to issue such Letter of Credit in its amended form under the terms\nhereof.\n
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     (v) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A)\nthe L/C Issuer would have no obligation at such time to issue such Letter of Credit in its\namended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does\nnot accept the proposed amendment to such Letter of Credit.\n
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     (vi) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of\nCredit issued by it and the documents associated therewith, and the L/C Issuer shall have\nall of the benefits and immunities (A) provided to the Administrative Agent in Article\nX with respect to any acts taken or omissions suffered by the L/C Issuer in connection\nwith Letters of Credit issued by it or proposed to be issued by it and Issuer Documents\npertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used\nin Article X included the L/C Issuer with respect to such acts or omissions, and (B)\nas additionally provided herein with respect to the L/C Issuer.\n
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     (b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of\nCredit.\n
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     (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the\nrequest of the applicable Borrower delivered to the L/C Issuer (with a copy to the\nAdministrative Agent) in the form of a Letter of Credit Application, appropriately completed\nand signed by a Responsible Officer of such Borrower. Such Letter of Credit Application\nmust be received by the L/C Issuer and the Administrative Agent (A) not later than 11:00\na.m. at least two Business Days prior to the proposed issuance date or date of amendment, as\nthe case may be, of any Letter of Credit denominated in Dollars, and (B) not later than\n11:00 a.m. at least ten Business Days prior to the proposed issuance date or date of\namendment, as the case may be, of any Letter of Credit denominated in an Alternative\nCurrency; or in each case such later date and time as the Administrative Agent and the L/C\nIssuer may agree in a particular instance in their sole discretion. In the case of a\nrequest for an initial issuance of a Letter of Credit, such Letter of Credit Application\nshall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance\ndate of the requested Letter of Credit (which shall be a Business Day); (B) the amount and\ncurrency thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary\nthereof; (E) the documents to be presented by such beneficiary in case of any drawing\nthereunder; (F) the full text of any certificate to be presented by such beneficiary in case\nof any drawing thereunder; and (G) such other matters as the L/C Issuer may require. In the\ncase of a request for an amendment of any outstanding Letter of Credit, such Letter of\nCredit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the\nLetter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a\nBusiness Day); (C) the nature of the proposed amendment; and (D) such other matters as the\nL/C Issuer may require. Additionally, the applicable Borrower shall furnish to the L/C\nIssuer and the Administrative Agent such other documents and information pertaining to such\nrequested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C\nIssuer or the Administrative Agent may require.\n
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     (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will\nconfirm with the Administrative Agent (by telephone or in writing) that the Administrative\nAgent has received a copy of such Letter of Credit Application from the applicable Borrower\nand, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof.\nUnless the L/C Issuer has received written notice from any Lender, the Administrative Agent\nor any Loan Party, at least\n
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one Business Day prior to the requested date of issuance or amendment of the applicable\nLetter of Credit, that one or more applicable conditions contained in Article V\nshall not be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer\nshall, on the requested date, issue a Letter of Credit for the account of the applicable\nBorrower or the applicable Subsidiary or enter into the applicable amendment, as the case\nmay be, in each case in accordance with the L/C Issuer’s usual and customary business\npractices. Immediately upon the issuance of each Letter of Credit, each Lender shall be\ndeemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C\nIssuer a risk participation in such Letter of Credit in an amount equal to the product of\nsuch Lender’s Pro Rata Share times the amount of such Letter of Credit.\n
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     (iii) If a Borrower so requests in any applicable Letter of Credit Application, the L/C\nIssuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has\nautomatic extension provisions (each, an “Auto-Extension Letter of Credit”);\nprovided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to\nprevent any such extension at least once in each twelve-month period (commencing with the\ndate of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof\nnot later than a day (the “Non-Extension Notice Date”) in each such twelve-month\nperiod to be agreed upon at the time such Letter of Credit is issued. Unless otherwise\ndirected by the L/C Issuer, the applicable Borrower shall not be required to make a specific\nrequest to the L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit\nhas been issued, the Lenders shall be deemed to have authorized (but may not require) the\nL/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date\nnot later than the Letter of Credit Expiration Date; provided, however, that\nthe L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that\nit would not be permitted, or would have no obligation, at such time to issue such Letter of\nCredit in its revised form (as extended) under the terms hereof (by reason of the provisions\nof clause (ii) or (iii) of Section 2.03(a) or otherwise), or (B) it has received\nnotice (which may be by telephone or in writing) on or before the day that is five Business\nDays before the Non-Extension Notice Date (1) from the Administrative Agent that the\nRequired Lenders have elected not to permit such extension or (2) from the Administrative\nAgent, any Lender or any Loan Party that one or more of the applicable conditions specified\nin Section 5.02 is not then satisfied, and in each case directing the L/C Issuer not\nto permit such extension.\n
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     (iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter\nof Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C\nIssuer will also deliver to the applicable Borrower and the Administrative Agent a true and\ncomplete copy of such Letter of Credit or amendment.\n
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     (c) Drawings and Reimbursements; Funding of Participations.\n
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     (i) Upon receipt from the beneficiary of any Letter of Credit of any notice of drawing\nunder such Letter of Credit, the L/C Issuer shall notify the applicable Borrower and the\nAdministrative Agent thereof. In the case of a Letter of Credit denominated in an\nAlternative Currency, the applicable Borrower shall reimburse the L/C Issuer in such\nAlternative Currency, unless (A) the L/C Issuer (at its option) shall have specified in such\nnotice that it will require reimbursement in Dollars, or (B) in the absence of any such\nrequirement for reimbursement in Dollars, the Borrower shall have notified the L/C Issuer\npromptly following receipt of the notice of drawing that such Borrower will reimburse the\nL/C Issuer in Dollars. In the case of any such reimbursement in Dollars of a drawing under\na Letter of Credit denominated in an Alternative Currency, the L/C Issuer shall notify the\napplicable Borrower of the Dollar Equivalent of the amount of the drawing promptly following\nthe determination thereof. Not later than 11:00 a.m. on the date of any payment by the L/C\nIssuer under a Letter of Credit to be reimbursed in Dollars,\n
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or the Applicable Time on the date of any payment by the L/C Issuer under a Letter of Credit\nto be reimbursed in an Alternative Currency (each such date, an “Honor Date”), the\napplicable Borrower shall reimburse the L/C Issuer through the Administrative Agent in an\namount equal to the amount of such drawing and in the applicable currency. If the\napplicable Borrower fails to so reimburse the L/C Issuer by such time, the Administrative\nAgent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed\ndrawing (expressed in Dollars in the amount of the Dollar Equivalent thereof in the case of\na Letter of Credit denominated in an Alternative Currency) (the “Unreimbursed\nAmount”), and the amount of such Lender’s Pro Rata Share thereof. In such event, the\napplicable Borrower shall be deemed to have requested a Borrowing of Base Rate Loans to be\ndisbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to\nthe minimum and multiples specified in Section 2.02 for the principal amount of Base\nRate Loans, but subject to the conditions set forth in Section 5.02 (other than the\ndelivery of a Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent\npursuant to this Section 2.03(c)(i) may be given by telephone if immediately\nconfirmed in writing; provided that the lack of such an immediate confirmation shall\nnot affect the conclusiveness or binding effect of such notice.\n
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     (ii) Each Lender (including the Lender acting as L/C Issuer) shall upon any notice\npursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for\nthe account of the L/C Issuer, in Dollars, at the Administrative Agent’s Office for\nDollar-denominated payments in an amount equal to its Pro Rata Share of the Unreimbursed\nAmount not later than 1:00 p.m. on the Business Day specified in such notice by the\nAdministrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii),\neach Lender that so makes funds available shall be deemed to have made a Base Rate Loan to\nthe applicable Borrower in such amount. The Administrative Agent shall remit the funds so\nreceived to the L/C Issuer in Dollars.\n
\n\n\n
     (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a\nBorrowing of Base Rate Loans because the conditions set forth in Section 5.02 cannot\nbe satisfied or for any other reason, the applicable Borrower shall be deemed to have\nincurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that\nis not so refinanced, which L/C Borrowing shall be due and payable on demand (together with\ninterest) and shall bear interest at the Default Rate. In such event, each Lender’s payment\nto the Administrative Agent for the account of the L/C Issuer pursuant to Section\n2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C\nBorrowing and shall constitute an L/C Advance from such Lender in satisfaction of its\nparticipation obligation under this Section 2.03.\n
\n\n\n
     (iv) Until each Lender funds its Revolving Loan or L/C Advance pursuant to this\nSection 2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of\nCredit, interest in respect of such Lender’s Pro Rata Share of such amount shall be solely\nfor the account of the L/C Issuer.\n
\n\n\n
     (v) Each Lender’s obligation to make Revolving Loans or L/C Advances to reimburse the\nL/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section\n2.03(c), shall be absolute and unconditional and shall not be affected by any\ncircumstance, including (A) any set-off, counterclaim, recoupment, defense or other right\nwhich such Lender may have against the L/C Issuer, the Borrowers or any other Person for any\nreason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other\noccurrence, event or condition, whether or not similar to any of the foregoing;\nprovided, however, that each Lender’s obligation to make Revolving Loans\npursuant to this Section 2.03(c) is subject to the conditions set forth in\nSection 5.02 (other than delivery by the applicable Borrower of a Loan Notice). No\nsuch making of an L/C Advance shall relieve or otherwise impair the obligation of any\nBorrower\n
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to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any\nLetter of Credit, together with interest as provided herein.\n
\n\n\n
     (vi) If any Lender fails to make available to the Administrative Agent for the account\nof the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing\nprovisions of this Section 2.03(c) by the time specified in Section\n2.03(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting\nthrough the Administrative Agent), on demand, such amount with interest thereon for the\nperiod from the date such payment is required to the date on which such payment is\nimmediately available to the L/C Issuer at a rate per annum equal to the applicable\nOvernight Rate from time to time in effect , plus any administrative, processing or similar\nfees customarily charged by the L/C Issuer in connection with the foregoing. If such Lender\npays such amount (with interest and fees as aforesaid), the amount so paid shall constitute\nsuch Lender’s Revolving Loan included in the relevant Borrowing or L/C Advance in respect of\nthe relevant L/C Borrowing, as the case may be. A certificate of the L/C Issuer submitted\nto any Lender (through the Administrative Agent) with respect to any amounts owing under\nthis clause (vi) shall be conclusive absent manifest error.\n
\n\n
     (d) Repayment of Participations.\n
\n\n\n
     (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and\nhas received from any Lender such Lender’s L/C Advance in respect of such payment in\naccordance with Section 2.03(c), if the Administrative Agent receives for the\naccount of the L/C Issuer any payment in respect of the related Unreimbursed Amount or\ninterest thereon (whether directly from the applicable Borrower or otherwise, including\nproceeds of cash collateral applied thereto by the Administrative Agent), the Administrative\nAgent will distribute to such Lender its Pro Rata Share thereof in Dollars and in the same\nfunds as those received by the Administrative Agent.\n
\n\n\n
     (ii) If any payment received by the Administrative Agent for the account of the L/C\nIssuer pursuant to Section 2.03(c)(i) is required to be returned under any of the\ncircumstances described in Section 11.06 (including pursuant to any settlement\nentered into by the L/C Issuer in its discretion), each Lender shall pay to the\nAdministrative Agent for the account of the L/C Issuer its Pro Rata Share thereof on demand\nof the Administrative Agent, plus interest thereon from the date of such demand to the date\nsuch amount is returned by such Lender, at a rate per annum equal to the applicable\nOvernight Rate from time to time in effect. The obligations of the Lenders under this\nclause shall survive the payment in full of the Obligations and the termination of this\nAgreement.\n
\n\n
     (e) Obligations Absolute. The obligation of the Borrowers to reimburse the L/C Issuer\nfor each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute,\nunconditional and irrevocable, and shall be paid strictly in accordance with the terms of this\nAgreement under all circumstances, including the following:\n
\n\n\n
     (i) any lack of validity or enforceability of such Letter of Credit, this Agreement,\nany other Loan Document;\n
\n\n\n
     (ii) the existence of any claim, counterclaim, set-off, defense or other right that the\nBorrowers or any Subsidiary may have at any time against any beneficiary or any transferee\nof such Letter of Credit (or any Person for whom any such beneficiary or any such transferee\nmay be acting), the L/C Issuer or any other Person, whether in connection with this\nAgreement, the\n
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transactions contemplated hereby or by such Letter of Credit or any agreement or instrument\nrelating thereto, or any unrelated transaction;\n
\n\n\n
     (iii) any draft, demand, certificate or other document presented under such Letter of\nCredit proving to be forged, fraudulent, invalid or insufficient in any respect or any\nstatement therein being untrue or inaccurate in any respect; or any loss or delay in the\ntransmission or otherwise of any document required in order to make a drawing under such\nLetter of Credit;\n
\n\n\n
     (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of\na draft or certificate that does not strictly comply with the terms of such Letter of\nCredit; or any payment made by the L/C Issuer under such Letter of Credit to any Person\npurporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of\ncreditors, liquidator, receiver or other representative of or successor to any beneficiary\nor any transferee of such Letter of Credit, including any arising in connection with any\nproceeding under any Debtor Relief Law;\n
\n\n\n
     (v) any adverse change in the relevant exchange rates or in the availability of the\nrelevant Alternative Currency to the Borrowers or any Subsidiary or in the relevant currency\nmarkets generally; or\n
\n\n\n
     (vi) any other circumstance or happening whatsoever, whether or not similar to any of\nthe foregoing, including any other circumstance that might otherwise constitute a defense\navailable to, or a discharge of, the Borrowers or any Subsidiary.\n
\n\n
     The applicable Borrower shall promptly examine a copy of each Letter of Credit and each\namendment thereto that is delivered to it and, in the event of any claim of noncompliance with such\nBorrower’s instructions or other irregularity, such Borrower will immediately notify the L/C\nIssuer. The Borrowers shall be conclusively deemed to have waived any such claim against the L/C\nIssuer and its correspondents unless such notice is given as aforesaid.\n
\n\n
     (f) Role of L/C Issuer. Each Lender and each Borrower agree that, in paying any\ndrawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any\ndocument (other than any sight draft, certificates and documents expressly required by such Letter\nof Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the\nauthority of the Person executing or delivering any such document. None of the L/C Issuer, the\nAdministrative Agent, any of their respective Related Parties nor any correspondent, participant or\nassignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in\nconnection herewith at the request or with the approval of the Lenders or the Required Lenders, as\napplicable; (ii) any action taken or omitted in the absence of gross negligence or willful\nmisconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document\nor instrument related to any Letter of Credit or Issuer Document. The Borrowers hereby assume all\nrisks of the acts or omissions of any beneficiary or transferee with respect to its use of any\nLetter of Credit; provided, however, that this assumption is not intended to, and\nshall not, preclude any Borrower’s pursuing such rights and remedies as it may have against the\nbeneficiary or transferee at law or under any other agreement. None of the L/C Issuer, the\nAdministrative Agent, any of their respective Related Parties nor any correspondent, participant or\nassignee of the L/C Issuer, shall be liable or responsible for any of the matters described in\nclauses (i) through (v) of Section 2.03(e); provided, however, that\nanything in such clauses to the contrary notwithstanding, a Borrower may have a claim against the\nL/C Issuer, and the L/C Issuer may be liable to such Borrower, to the extent, but only to the\nextent, of any direct, as opposed to consequential or exemplary, damages suffered by such Borrower\nwhich such Borrower proves were caused by the L/C Issuer’s willful misconduct or gross negligence\nor the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it\nby the beneficiary of a sight draft and certificate(s) strictly complying with the terms and\nconditions of a Letter\n
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 \n

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of Credit unless the L/C Issuer is prevented or prohibited from so paying as a result of any\norder or directive of any court or other Governmental Authority. In furtherance and not in\nlimitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in\norder, without responsibility for further investigation, regardless of any notice or information to\nthe contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any\ninstrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the\nrights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be\ninvalid or ineffective for any reason; provided, however, that the Borrower may\nhave a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the\nextent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages\nsuffered by the Borrower which the Borrower proves were caused by the L/C Issuer’s willful\nmisconduct or gross negligence.\n
\n\n\n
     (g) Cash Collateral. (i) Upon the request of the Administrative Agent, (A) if the\nL/C Issuer has honored any full or partial drawing request under any Letter of Credit and such\ndrawing has resulted in an L/C Borrowing, or (B) if, as of the Letter of Credit Expiration Date,\nany Letter of Credit for any reason remains outstanding and partially or wholly undrawn, the\nBorrowers shall immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations\n(in an amount equal to such Outstanding Amount determined as of the date of such L/C Borrowing or\nthe Letter of Credit Expiration Date, as the case may be).\n
\n\n
     (ii) In addition, if the Administrative Agent notifies the Company at any time that the\nOutstanding Amount of all L/C Obligations at such time exceeds the Letter of Credit Sublimit then\nin effect, then, within two Business Days after receipt of such notice, the Borrowers shall Cash\nCollateralize the L/C Obligations in an amount equal to the amount by which the Outstanding Amount\nof all L/C Obligations exceeds the Letter of Credit Sublimit.\n
\n\n
     (iii) The Administrative Agent may, at any time and from time to time after the initial\ndeposit of Cash Collateral, request that additional Cash Collateral be provided in order to protect\nagainst the results of exchange rate fluctuations.\n
\n\n
     (iv) Sections 2.05 and 9.02(c) set forth certain additional requirements to\ndeliver Cash Collateral hereunder. For purposes of this Section 2.03, Section 2.05\nand Section 9.02(c), “Cash Collateralize” means to pledge and deposit with or\ndeliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as\ncollateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in\nform and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are\nhereby consented to by the Lenders). Derivatives of such term have corresponding meanings. Each\nBorrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuer and the\nLenders, a security interest in all such cash, deposit accounts and all balances therein and all\nproceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing\ndeposit accounts at Bank of America.\n
\n\n
     (h) Applicability of ISP and UCP. Unless otherwise expressly agreed by the L/C Issuer\nand the applicable Borrower when a Letter of Credit is issued (including any such agreement\napplicable to an Existing Letter of Credit), (i) the rules of the ISP shall apply to each standby\nLetter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits,\nas most recently published by the International Chamber of Commerce at the time of issuance shall\napply to each commercial Letter of Credit.\n
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     (i) Letter of Credit Fees. The Borrowers shall pay to the Administrative Agent for\nthe account of each Lender in accordance with its Pro Rata Share, in Dollars, a Letter of Credit\nfee (the “Letter of Credit Fee”) for each Letter of Credit equal to the Applicable Rate\ntimes the Dollar Equivalent\n
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of the actual daily amount available to be drawn under such Letter of Credit. For purposes of\ncomputing the daily amount available to be drawn under any Letter of Credit, the amount of such\nLetter of Credit shall be determined in accordance with Section 1.10. Letter of Credit\nFees shall be (i) computed on a quarterly basis in arrears and (ii) due and payable on the first\nBusiness Day after the end of each March, June, September and December, commencing with the first\nsuch date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration\nDate and thereafter on demand. If there is any change in the Applicable Rate during any quarter,\nthe daily amount available to be drawn under each Letter of Credit shall be computed and multiplied\nby the Applicable Rate separately for each period during such quarter that such Applicable Rate was\nin effect. Notwithstanding anything to the contrary contained herein, upon the request of the\nRequired Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the\nDefault Rate.\n
\n\n\n
     (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The\nBorrowers shall pay directly to the L/C Issuer for its own account, in Dollars, a fronting fee (i)\nwith respect to each commercial Letter of Credit, at the rate specified in the Fee Letter, computed\non the Dollar Equivalent of the amount of such Letter of Credit, and payable upon the issuance\nthereof, (ii) with respect to any amendment of a commercial Letter of Credit increasing the amount\nof such Letter of Credit, at a rate separately agreed between the Borrowers and the L/C Issuer,\ncomputed on the Dollar Equivalent of the amount of such increase, and payable upon the\neffectiveness of such amendment, and (iii) with respect to each standby Letter of Credit, at the\nrate per annum specified in the Fee Letter, computed on the Dollar Equivalent of the daily amount\navailable to be drawn under such Letter of Credit and on a quarterly basis in arrears. Such\nfronting fee shall be due and payable on the tenth Business Day after the end of each March, June,\nSeptember and December in respect of the most recently-ended quarterly period (or portion thereof,\nin the case of the first payment), commencing with the first such date to occur after the issuance\nof such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. For\npurposes of computing the daily amount available to be drawn under any Letter of Credit, the amount\nof such Letter of Credit shall be determined in accordance with Section 1.10. In addition,\nthe Borrowers shall pay directly to the L/C Issuer for its own account the customary issuance,\npresentation, amendment and other processing fees, and other standard costs and charges, of the L/C\nIssuer relating to letters of credit as from time to time in effect, in Dollars or such Alternative\nCurrency as shall be separately agreed. Such customary fees and standard costs and charges are due\nand payable on demand and are nonrefundable.\n
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     (k) Conflict with Issuer Documents. In the event of any conflict between the terms\nhereof and the terms of any Issuer Document, the terms hereof shall control.\n
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     (l) Letters of Credit Issued for Subsidiaries. Notwithstanding that a Letter of\nCredit issued or outstanding hereunder is in support of any obligations of, or is for the account\nof, a Subsidiary, the Borrowers shall be obligated to reimburse the L/C Issuer hereunder for any\nand all drawings under such Letter of Credit. The Borrowers hereby acknowledge that the issuance\nof Letters of Credit for the account of Subsidiaries inures to the benefit of the Borrowers, and\nthat the Borrowers’ business derives substantial benefits from the businesses of such Subsidiaries.\n
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2.04 Swing Line Loans.\n
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     (a) Swing Line Facility. Subject to the terms and conditions set forth herein, the\nSwing Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this\nSection 2.04, to make loans (each such loan, a “Swing Line Loan”) to the Borrowers\nin Dollars from time to time on any Business Day during the Availability Period in an aggregate\namount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding\nthe fact that such Swing Line Loans, when aggregated with the Pro Rata Share of the Outstanding\nAmount of Revolving Loans and L/C Obligations of the Swing Line Lender in its capacity as a Lender\nof Revolving Loans, may exceed the amount of such\n
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Lender’s Revolving Commitment; provided, however, that after giving effect to\nany Swing Line Loan, (i) the Total Revolving Outstandings shall not exceed the Aggregate Revolving\nCommitments, and (ii) the aggregate Outstanding Amount of the Revolving Loans of any Lender,\nplus such Lender’s Pro Rata Share of the Outstanding Amount of all L/C Obligations,\nplus such Lender’s Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall\nnot exceed such Lender’s Revolving Commitment, and provided, further, that no\nBorrower shall use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line\nLoan. Within the foregoing limits, and subject to the other terms and conditions hereof, the\nBorrowers may borrow under this Section 2.04, prepay under Section 2.05, and\nreborrow under this Section 2.04. Each Swing Line Loan shall be a Base Rate Loan.\nImmediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby\nirrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation\nin such Swing Line Loan in an amount equal to the product of such Lender’s Pro Rata Share\ntimes the amount of such Swing Line Loan.\n
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     (b) Borrowing Procedures. Each Borrowing of Swing Line Loans shall be made upon the\napplicable Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent,\nwhich may be given by telephone. Each such notice must be received by the Swing Line Lender and\nthe Administrative Agent not later than 1:00 p.m. on the requested borrowing date, and shall\nspecify (i) the amount to be borrowed, which shall be a minimum principal amount of $250,000 and\nintegral multiples of $100,000 in excess thereof, and (ii) the requested borrowing date, which\nshall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the\nSwing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately\ncompleted and signed by a Responsible Officer of the applicable Borrower. Promptly after receipt\nby the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will\nconfirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent\nhas also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the\nAdministrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line\nLender has received notice (by telephone or in writing) from the Administrative Agent (including at\nthe request of any Lender) prior to 2:00 p.m. on the date of the proposed Borrowing of Swing Line\nLoans (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the\nlimitations set forth in the proviso to the first sentence of Section 2.04(a), or (B) that\none or more of the applicable conditions specified in Article V is not then satisfied,\nthen, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00\np.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing\nLine Loan available to the applicable Borrower.\n
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     (c) Refinancing of Swing Line Loans.\n
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     (i) The Swing Line Lender at any time in its sole and absolute discretion may request,\non behalf of the Borrowers (which hereby irrevocably request and authorize the Swing Line\nLender to so request on their behalf), that each Lender make a Base Rate Loan in an amount\nequal to such Lender’s Pro Rata Share of the amount of Swing Line Loans then outstanding.\nSuch request shall be made in writing (which written request shall be deemed to be a Loan\nNotice for purposes hereof) and in accordance with the requirements of Section 2.02,\nwithout regard to the minimum and multiples specified therein for the principal amount of\nBase Rate Loans, but subject to the unutilized portion of the Aggregate Revolving\nCommitments and the conditions set forth in Section 5.02. The Swing Line Lender\nshall furnish the applicable Borrower with a copy of the applicable Loan Notice promptly\nafter delivering such notice to the Administrative Agent. Each Lender shall make an amount\nequal to its Pro Rata Share of the amount specified in such Loan Notice available to the\nAdministrative Agent in Same Day Funds for the account of the Swing Line Lender at the\nAdministrative Agent’s Office for Dollar-denominated payments not later than 1:00 p.m. on\nthe day specified in such Loan Notice, whereupon, subject to Section 2.04(c)(ii),\neach Lender that so makes funds available shall be deemed to have made a Base Rate\n
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Loan to the applicable Borrower in such amount. The Administrative Agent shall remit the\nfunds so received to the Swing Line Lender.\n
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     (ii) If for any reason any Swing Line Loan cannot be refinanced by such a Borrowing of\nRevolving Loans in accordance with Section 2.04(c)(i), the request for Base Rate\nLoans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request\nby the Swing Line Lender that each of the Lenders fund its risk participation in the\nrelevant Swing Line Loan and each Lender’s payment to the Administrative Agent for the\naccount of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed\npayment in respect of such participation.\n
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     (iii) If any Lender fails to make available to the Administrative Agent for the account\nof the Swing Line Lender any amount required to be paid by such Lender pursuant to the\nforegoing provisions of this Section 2.04(c) by the time specified in Section\n2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting\nthrough the Administrative Agent), on demand, such amount with interest thereon for the\nperiod from the date such payment is required to the date on which such payment is\nimmediately available to the Swing Line Lender at a rate per annum equal to the applicable\nOvernight Rate from time to time in effect. A certificate of the Swing Line Lender\nsubmitted to any Lender (through the Administrative Agent) with respect to any amounts owing\nunder this clause (iii) shall be conclusive absent manifest error.\n
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     (iv) Each Lender’s obligation to make Revolving Loans or to purchase and fund risk\nparticipations in Swing Line Loans pursuant to this Section 2.04(c) shall be\nabsolute and unconditional and shall not be affected by any circumstance, including (A) any\nset-off, counterclaim, recoupment, defense or other right that such Lender may have against\nthe Swing Line Lender, the Borrowers or any other Person for any reason whatsoever, (B) the\noccurrence or continuance of a Default, or (C) any other occurrence, event or condition,\nwhether or not similar to any of the foregoing; provided, however, that each\nLender’s obligation to make Revolving Loans pursuant to this Section 2.04(c) is\nsubject to the conditions set forth in Section 5.02. No such purchase or funding of\nrisk participations shall relieve or otherwise impair the obligation of the Borrowers to\nrepay Swing Line Loans, together with interest as provided herein.\n
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     (d) Repayment of Participations.\n
\n\n\n
     (i) At any time after any Lender has purchased and funded a risk participation in a\nSwing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line\nLoan, the Swing Line Lender will distribute to such Lender its Pro Rata Share of such\npayment (appropriately adjusted, in the case of interest payments, to reflect the period of\ntime during which such Lender’s risk participation was funded) in the same funds as those\nreceived by the Swing Line Lender.\n
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     (ii) If any payment received by the Swing Line Lender in respect of principal or\ninterest on any Swing Line Loan is required to be returned by the Swing Line Lender under\nany of the circumstances described in Section 11.06 (including pursuant to any\nsettlement entered into by the Swing Line Lender in its discretion), each Lender shall pay\nto the Swing Line Lender its Pro Rata Share thereof on demand of the Administrative Agent,\nplus interest thereon from the date of such demand to the date such amount is returned, at a\nrate per annum equal to the applicable Overnight Rate. The Administrative Agent will make\nsuch demand upon the request of the Swing Line Lender.\n
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     (e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be\nresponsible for invoicing the Borrowers for interest on the Swing Line Loans. Until each Lender\nfunds its Revolving Loans that are Base Rate Loans or risk participation pursuant to this\nSection 2.04 to refinance such Lender’s Pro Rata Share of any Swing Line Loan, interest in\nrespect of such Pro Rata Share shall be solely for the account of the Swing Line Lender.\n
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     (f) Payments Directly to Swing Line Lender. The Borrowers shall make all payments of\nprincipal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.\n
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2.05 Prepayments.\n
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     (a) Voluntary Prepayments of Loans.\n
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     (i) Revolving Loans. A Borrower may, upon notice from such Borrower to the\nAdministrative Agent, at any time or from time to time voluntarily prepay Revolving Loans in\nwhole or in part without premium or penalty; provided that (A) such notice must be\nreceived by the Administrative Agent not later than 11:00 a.m. (1) three Business Days prior\nto any date of prepayment of Eurocurrency Rate Loans denominated in Dollars, (2) four\nBusiness Days (or five, in the case of prepayment of Loans denominated in Special Notice\nCurrencies) prior to any date of prepayment of Eurocurrency Rate Loans denominated in\nAlternative Currencies, and (3) on the date of prepayment of Base Rate Loans; (B) any such\nprepayment of Eurocurrency Rate Loans denominated in Dollars shall be in a principal amount\nof $2,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if less, the entire\nprincipal amount thereof then outstanding); (C) any prepayment of Eurocurrency Rate Loans\ndenominated in Alternative Currencies shall be in a principal amount of $1,000,000 or a\nwhole multiple of $500,000 in excess thereof (or, if less, the entire principal amount\nthereof then outstanding) and (D) any prepayment of Base Rate Loans shall be in a principal\namount of $500,000 or a whole multiple of $100,000 in excess thereof (or, if less, the\nentire principal amount thereof then outstanding). Each such notice shall specify the date\nand amount of such prepayment and the Type(s) of Loans to be prepaid and, if Eurocurrency\nRate Loans are to be prepaid, the Interest Period(s) of such Loans. The Administrative\nAgent will promptly notify each Lender of its receipt of each such notice, and of the amount\nof such Lender’s Pro Rata Share of such prepayment. If such notice is given by a Borrower,\nsuch Borrower shall make such prepayment and the payment amount specified in such notice\nshall be due and payable on the date specified therein. Any prepayment of a Eurocurrency\nRate Loan shall be accompanied by all accrued interest on the amount prepaid, together with\nany additional amounts required pursuant to Section 3.05. Each such prepayment\nshall be applied to the Loans of the Lenders in accordance with their respective Pro Rata\nShares.\n
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     (ii) Swing Line Loans. A Borrower may, upon notice to the Swing Line Lender\n(with a copy to the Administrative Agent), at any time or from time to time, voluntarily\nprepay Swing Line Loans in whole or in part without premium or penalty; provided\nthat (i) such notice must be received by the Swing Line Lender and the Administrative Agent\nnot later than 1:00 p.m. on the date of the prepayment, and (ii) any such prepayment shall\nbe in a minimum principal amount of $250,000 or a whole multiple of $100,000 in excess\nthereof (or, if less, the entire principal thereof then outstanding). Each such notice\nshall specify the date and amount of such prepayment. If such notice is given by a\nBorrower, such Borrower shall make such prepayment and the payment amount specified in such\nnotice shall be due and payable on the date specified therein.\n
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     (b) Mandatory Prepayments of Loans.\n
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     (i) Total Revolving Outstandings. If the Administrative Agent notifies the\nCompany at any time that the Total Revolving Outstandings at such time exceed the Aggregate\nRevolving Commitments then in effect, then, within two Business Days after receipt of such\nnotice, the Borrowers shall prepay Loans and/or the Borrowers shall Cash Collateralize the\nL/C Obligations in an aggregate amount sufficient to reduce such Outstanding Amount as of\nsuch date of payment to an amount not to exceed 100% of the Aggregate Revolving Commitments\nthen in effect; provided, however, that, subject to the provisions of\nSection 2.03(g)(ii), the Borrowers shall not be required to Cash Collateralize the\nL/C Obligations pursuant to this Section 2.05(b)(i) unless after the prepayment in\nfull of the Loans the Total Revolving Outstandings exceed the Aggregate Revolving\nCommitments then in effect. The Administrative Agent may, at any time and from time to time\nafter the initial deposit of such Cash Collateral, request that additional Cash Collateral\nbe provided in order to protect against the results of further exchange rate fluctuations.\n
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     (ii) Alternative Currency Sublimit. If the Administrative Agent notifies the\nCompany at any time that the Outstanding Amount of all Loans and L/C Obligations denominated\nin Alternative Currencies at such time exceeds the Alternative Currency Sublimit then in\neffect, then, within two Business Days after receipt of such notice, the Borrowers shall\nprepay Loans and/or the Borrowers shall Cash Collateralize the L/C Obligations in an\naggregate amount sufficient to reduce such Outstanding Amount as of such date of payment to\nan amount not to exceed 100% of the Alternative Currency Sublimit then in effect;\nprovided, however, that, subject to the provisions of Section\n2.03(g)(ii), the Borrowers shall not be required to Cash Collateralize the L/C\nObligations pursuant to this Section 2.05(b)(ii) unless after the prepayment in full\nof the Loans the Total Revolving Outstandings denominated in Alternative Currencies exceed\nthe Alternative Currency Sublimit then in effect. The Administrative Agent may, at any time\nand from time to time after the initial deposit of such Cash Collateral, request that\nadditional Cash Collateral be provided in order to protect against the results of further\nexchange rate fluctuations.\n
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     (iii) Application of Mandatory Prepayments. All amounts required to be paid\npursuant to this Section 2.05(b) shall be applied as follows:\n
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     (A) with respect to all amounts prepaid pursuant to Section 2.05(b)(i),\nto Revolving Loans and Swing Line Loans and (after all Revolving Loans and all Swing\nLine Loans have been repaid) to Cash Collateralize L/C Obligations and\n
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     (B) with respect to all amounts prepaid pursuant to Section\n2.05(b)(ii), to Revolving Loans and (after all Revolving Loans have been repaid)\nto Cash Collateralize L/C Obligations.\n
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Within the parameters of the applications set forth above, prepayments shall be\napplied first to Base Rate Loans and then to Eurocurrency Rate Loans in direct order\nof Interest Period maturities. All prepayments under this Section 2.05(b)\nshall be subject to Section 3.05, but otherwise without premium or penalty,\nand shall be accompanied by interest on the principal amount prepaid through the\ndate of prepayment.
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2.06 Termination or Reduction of Aggregate Revolving Commitments.\n
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     The Company may, upon notice to the Administrative Agent, terminate the Aggregate Revolving\nCommitments, or from time to time permanently reduce the Aggregate Revolving Commitments to an\namount not less than the Outstanding Amount of Revolving Loans, Swing Line Loans and L/C\nObligations; provided that (i) any such notice shall be received by the Administrative\nAgent not later than\n
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12:00 noon five (5) Business Days prior to the date of termination or reduction, (ii) any such\npartial reduction shall be in an aggregate amount of $2,000,000 or any whole multiple of $1,000,000\nin excess thereof and (iii) if, after giving effect to any reduction of the Aggregate Revolving\nCommitments, the Alternative Currency Sublimit, the Letter of Credit Sublimit or the Swing Line\nSublimit exceeds the amount of the Aggregate Revolving Commitments, such sublimit shall be\nautomatically reduced by the amount of such excess. The Administrative Agent will promptly notify\nthe Lenders of any such notice of termination or reduction of the Aggregate Revolving Commitments.\nThe amount of any such Aggregate Revolving Commitment reduction shall not be applied to the\nAlternative Currency Sublimit or the Letter of Credit Sublimit unless otherwise specified by the\nCompany. Any reduction of the Aggregate Revolving Commitments shall be applied to the Revolving\nCommitment of each Lender according to its Pro Rata Share. All fees accrued with respect thereto\nuntil the effective date of any termination of the Aggregate Revolving Commitments shall be paid on\nthe effective date of such termination.\n
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2.07 Repayment of Loans.\n
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     (a) Revolving Loans. The Borrowers shall repay to the Lenders on the Maturity Date\nthe aggregate principal amount of all Revolving Loans outstanding on such date.\n
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     (b) Swing Line Loans. The Borrowers shall repay each Swing Line Loan on the earlier\nto occur of (i) the date ten Business Days after such Swing Line Loan is made and (ii) the Maturity\nDate.\n
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2.08 Interest.\n
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     (a) Subject to the provisions of subsection (b) below, (i) each Eurocurrency Rate Loan shall\nbear interest on the outstanding principal amount thereof for each Interest Period at a rate per\nannum equal to the sum of (A) the Eurocurrency Rate for such Interest Period plus (B) the\nApplicable Rate plus (C) in the case of a Eurocurrency Rate Loan of any Lender which is\nlent from a Lending Office in the United Kingdom or a Participating Member State, the Mandatory\nCost; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from\nthe applicable borrowing date at a rate per annum equal to the Base Rate plus the\nApplicable Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal\namount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate\nplus the Applicable Rate.\n
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(b)   (i) If any amount of principal of any Loan is not paid when due, whether at stated\nmaturity, by acceleration or otherwise, such amount shall thereafter bear interest at a\nfluctuating interest rate per annum at all times equal to the Default Rate to the fullest\nextent permitted by applicable Laws.\n
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     (ii) If any amount (other than principal of any Loan) payable by the Borrowers under\nany Loan Document is not paid when due, whether at stated maturity, by acceleration or\notherwise, then upon the request of the Required Lenders, such amount shall thereafter bear\ninterest at a fluctuating interest rate per annum at all times equal to the Default Rate to\nthe fullest extent permitted by applicable Laws.\n
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     (iii) Upon the request of the Required Lenders, while any Event of Default exists, the\nBorrowers shall pay interest on the principal amount of all outstanding Obligations\nhereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to\nthe fullest extent permitted by applicable Laws.\n
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     (iv) Accrued and unpaid interest on past due amounts (including interest on past due\ninterest) shall be due and payable upon demand.\n
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     (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date\napplicable thereto and at such other times as may be specified herein. Interest hereunder shall be\ndue and payable in accordance with the terms hereof before and after judgment, and before and after\nthe commencement of any proceeding under any Debtor Relief Law.\n
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     (d) For the purposes of the Interest Act (Canada), (i) whenever a rate of interest or fee rate\nhereunder is calculated on the basis of a year (the “deemed year”) that contains fewer days than\nthe actual number of days in the calendar year of calculation, such rate of interest or fee rate\nshall be expressed as a yearly rate by multiplying such rate of interest or fee rate by the actual\nnumber of days in the calendar year of calculation and dividing it by the number of days in the\ndeemed year, (ii) the principle of deemed reinvestment of interest shall not apply to any interest\ncalculation hereunder and (iii) the rates of interest stipulated herein are intended to be nominal\nrates and not effective rates or yields.\n
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2.09 Fees.\n
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     In addition to certain fees described in subsections (i) and (j) of Section 2.03:\n
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     (a) Commitment Fee. The Company shall pay to the Administrative Agent, for the\naccount of each Lender in accordance with its Pro Rata Share, a commitment fee in Dollars\nequal to the product of (A) the Applicable Rate times (B) the actual daily amount by\nwhich the Aggregate Revolving Commitments exceed the sum of (1) the Outstanding Amount of\nRevolving Loans and (2) the Outstanding Amount of L/C Obligations. Such commitment fee shall\naccrue at all times during the Availability Period, including at any time during which one\nor more of the conditions in Article V is not met, and shall be due and payable\nquarterly in arrears on the last Business Day of each March, June, September and December,\ncommencing with the first such date to occur after the Closing Date, and on the Maturity\nDate. Such commitment fee shall be calculated quarterly in arrears, and if there is any\nchange in the Applicable Rate during any quarter, the actual daily amount shall be computed\nand multiplied by the Applicable Rate separately for each period during such quarter that\nsuch Applicable Rate was in effect. For purposes of clarification, Swing Line Loans shall\nnot be considered outstanding for purposes of determining the unused portion of the\nAggregate Revolving Commitments.\n
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     (b) Fee Letter. The Company shall pay to BAS and the Administrative Agent for\ntheir own respective accounts, in Dollars, fees in the amounts and at the times specified in\nthe Fee Letter. Such fees shall be fully earned when paid and shall be non-refundable for\nany reason whatsoever.\n
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2.10 Computation of Interest and Fees.\n
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     All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of\nAmerica’s “prime rate” shall be made on the basis of a year of 365 or 366 days, as the case may be,\nand actual days elapsed. All other computations of fees and interest shall be made on the basis of\na 360-day year and actual days elapsed (which results in more fees or interest, as applicable,\nbeing paid than if computed on the basis of a 365-day year), or, in the case of interest in respect\nof Loans denominated in Alternative Currencies as to which market practice differs from the\nforegoing, in accordance with such market practice. Interest shall accrue on each Loan for the day\non which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on\nwhich the Loan or such portion is paid, provided that any Loan that is repaid on the same\nday on which it is made shall, subject to Section 2.12(a), bear interest for one day.\n
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2.11 Evidence of Debt.\n
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     (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or\nrecords maintained by such Lender and by the Administrative Agent in the ordinary course of\nbusiness. The accounts or records maintained by the Administrative Agent and each Lender shall be\nconclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the\nBorrowers and the interest and payments thereon. Any failure to so record or any error in doing so\nshall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any\namount owing with respect to the Obligations. In the event of any conflict between the accounts\nand records maintained by any Lender and the accounts and records of the Administrative Agent in\nrespect of such matters, the accounts and records of the Administrative Agent shall control in the\nabsence of manifest error. Upon the request of any Lender made through the Administrative Agent,\nthe Borrowers shall execute and deliver to such Lender (through the Administrative Agent) a\npromissory note, which shall evidence such Lender’s Loans in addition to such accounts or records.\nEach such promissory note shall be in the form of Exhibit 2.11(a) (a “Note”). Each\nLender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount,\ncurrency and maturity of its Loans and payments with respect thereto.\n
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     (b) In addition to the accounts and records referred to in subsection (a), each Lender and the\nAdministrative Agent shall maintain in accordance with its usual practice accounts or records\nevidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing\nLine Loans. In the event of any conflict between the accounts and records maintained by the\nAdministrative Agent and the accounts and records of any Lender in respect of such matters, the\naccounts and records of the Administrative Agent shall control in the absence of manifest error.\n
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2.12 Payments Generally.\n
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     (a) All payments to be made by the Borrowers shall be made without condition or deduction for\nany counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein and\nexcept with respect to principal of and interest on Loans denominated in an Alternative Currency,\nall payments by the Borrowers hereunder shall be made to the Administrative Agent, for the account\nof the respective Lenders to which such payment is owed, at the applicable Administrative Agent’s\nOffice in Dollars and in Same Day Funds not later than 2:00 p.m. on the date specified herein.\nExcept as otherwise expressly provided herein, all payments by the Borrowers hereunder with respect\nto principal and interest on Loans denominated in an Alternative Currency shall be made to the\nAdministrative Agent, for the account of the respective Lenders to which such payment is owed, at\nthe applicable Administrative Agent’s Office in such Alternative Currency and in Same Day Funds not\nlater than the Applicable Time specified by the Administrative Agent on the dates specified herein.\nWithout limiting the generality of the foregoing, the Administrative Agent may require that any\npayments due under this Agreement be made in the United States. If, for any reason, a Borrower is\nprohibited by any Law from making any required payment hereunder in an Alternative Currency, such\nBorrower shall make such payment in Dollars in the Dollar Equivalent of the Alternative Currency\npayment amount. The Administrative Agent will promptly distribute to each Lender its Pro Rata\nShare (or other applicable share as provided herein) of such payment in like funds as received by\nwire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent\n(i) after 2:00 p.m., in the case of payments in Dollars, or (ii) after the Applicable Time\nspecified by the Administrative Agent in the case of payments in an Alternative Currency, shall in\neach case shall be deemed received on the next succeeding Business Day and any applicable interest\nor fee shall continue to accrue.\n
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     (b) If any payment to be made by any Borrower shall come due on a day other than a Business\nDay, payment shall be made on the next following Business Day, and such extension of time shall be\nreflected in computing interest or fees, as the case may be.\n
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(c) (i) Unless the Administrative Agent shall have received notice from a Lender prior to\nthe proposed date of any Borrowing of Eurocurrency Rate Loans (or, in the case of any\nBorrowing of Base Rate Loans, prior to 12:00 noon on the date of such Borrowing) that such\nLender will not make available to the Administrative Agent such Lender’s share of such\nBorrowing, the Administrative Agent may assume that such Lender has made such share\navailable on such date in accordance with Section 2.02 (or, in the case of a\nBorrowing of Base Rate Loans, that such Lender has made such share available in accordance\nwith and at the time required by Section 2.02) and may, in reliance upon such\nassumption, make available to the applicable Borrower a corresponding amount. In such\nevent, if a Lender has not in fact made its share of the applicable Borrowing available to\nthe Administrative Agent, then the applicable Lender and the applicable Borrower severally\nagree to pay to the Administrative Agent forthwith on demand such corresponding amount in\nSame Day Funds with interest thereon, for each day from and including the date such amount\nis made available to such Borrower to but excluding the date of payment to the\nAdministrative Agent, at (A) in the case of a payment to be made by such Lender, the\nOvernight Rate, plus any administrative, processing or similar fees customarily charged by\nthe Administrative Agent in connection with the foregoing, and (B) in the case of a payment\nto be made by such Borrower, the interest rate applicable to Base Rate Loans. If such\nBorrower and such Lender shall pay such interest to the Administrative Agent for the same or\nan overlapping period, the Administrative Agent shall promptly remit to such Borrower the\namount of such interest paid by such Borrower for such period. If such Lender pays its\nshare of the applicable Borrowing to the Administrative Agent, then the amount so paid shall\nconstitute such Lender’s Loan included in such Borrowing. Any payment by such Borrower\nshall be without prejudice to any claim such Borrower may have against a Lender that shall\nhave failed to make such payment to the Administrative Agent.\n
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     (ii) Unless the Administrative Agent shall have received notice from a Borrower prior\nto the time at which any payment is due to the Administrative Agent for the account of the\nLenders or the L/C Issuer hereunder that such Borrower will not make such payment, the\nAdministrative Agent may assume that such Borrower has made such payment on such date in\naccordance herewith and may, in reliance upon such assumption, distribute to the Lenders or\nthe L/C Issuer, as the case may be, the amount due. In such event, if such Borrower has not\nin fact made such payment, then each of the Lenders or the L/C Issuer, as the case may be,\nseverally agrees to repay to the Administrative Agent forthwith on demand the amount so\ndistributed to such Lender or the L/C Issuer, in Same Day Funds with interest thereon, for\neach day from and including the date such amount is distributed to it to but excluding the\ndate of payment to the Administrative Agent, at the Overnight Rate.\n
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     A notice of the Administrative Agent to any Lender or any Borrower with respect to any\namount owing under this subsection (c) shall be conclusive, absent manifest error.\n
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     (d) If any Lender makes available to the Administrative Agent funds for any Loan to be made by\nsuch Lender as provided in the foregoing provisions of this Article II, and such funds are\nnot made available to the applicable Borrower by the Administrative Agent because the conditions to\nthe applicable Credit Extension set forth in Article V are not satisfied or waived in\naccordance with the terms hereof, the Administrative Agent shall return such funds (in like funds\nas received from such Lender) to such Lender, without interest.\n
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     (e) The obligations of the Lenders hereunder to make Loans and to fund participations in\nLetters of Credit and Swing Line Loans and to make payments pursuant to Section 11.04(b)\nand 11.05(b) are several and not joint. The failure of any Lender to make any Loan, to\nfund any such participation or\n
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to make any payment under Section 11.04(b) or 11.05(b) on any date required\nhereunder shall not relieve any other Lender of its corresponding obligation to do so on such date,\nand no Lender shall be responsible for the failure of any other Lender to so make its Loan, to\npurchase its participation or to make its payment under Section 11.04(b) or\n11.05(b).\n
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     (f) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in\nany particular place or manner or to constitute a representation by any Lender that it has obtained\nor will obtain the funds for any Loan in any particular place or manner.\n
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2.13 Sharing of Payments.\n
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     If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of\nthe Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it\n(but not including any amounts applied by the Swing Line Lender to outstanding Swing Line Loans),\nany payment (whether voluntary, involuntary, through the exercise of any right of set-off, or\notherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such\nLender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from\nthe other Lenders such participations in the Loans made by them and/or such subparticipations in\nthe participations in L/C Obligations or Swing Line Loans held by them, as the case may be, as\nshall be necessary to cause such purchasing Lender to share the excess payment in respect of such\nLoans or such participations, as the case may be, pro rata with each of them; provided,\nhowever, that if all or any portion of such excess payment is thereafter recovered from the\npurchasing Lender under any of the circumstances described in Section 11.06 (including\npursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase\nshall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the\npurchase price paid therefor, together with an amount equal to such paying Lender’s ratable share\n(according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii)\nthe total amount so recovered from the purchasing Lender) of any interest or other amount paid or\npayable by the purchasing Lender in respect of the total amount so recovered, without further\ninterest thereon. Each Borrower agrees that any Lender so purchasing a participation from another\nLender may, to the fullest extent permitted by law, exercise all its rights of payment (including\nthe right of set-off, but subject to Section 11.09) with respect to such participation as\nfully as if such Lender were the direct creditor of such Borrower in the amount of such\nparticipation. The Administrative Agent will keep records (which shall be conclusive and binding\nin the absence of manifest error) of participations purchased under this Section and will in each\ncase notify the Lenders following any such purchases or repayments. Each Lender that purchases a\nparticipation pursuant to this Section shall from and after such purchase have the right to give\nall notices, requests, demands, directions and other communications under this Agreement with\nrespect to the portion of the Obligations purchased to the same extent as though the purchasing\nLender were the original owner of the Obligations purchased.\n
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ARTICLE III\n
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TAXES, YIELD PROTECTION AND ILLEGALITY\n\n
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3.01 Taxes.\n
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     (a) Any and all payments by any Loan Party to or for the account of the Administrative Agent\nor any Lender under any Loan Document shall be made free and clear of and without deduction for any\nand all present or future taxes, duties, levies, imposts, deductions, assessments, fees,\nwithholdings or similar charges, and all liabilities with respect thereto, excluding, in\nthe case of the Administrative Agent and each Lender, taxes imposed on or measured by its overall\nnet income, and franchise taxes imposed on\n
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it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof)\nunder the Laws of which the Administrative Agent or such Lender, as the case may be, is organized\nor maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions,\nassessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to\nas “Taxes”). If any Loan Party shall be required by any Laws to deduct any Taxes from or\nin respect of any sum payable under any Loan Document to the Administrative Agent or any Lender,\n(i) the sum payable shall be increased as necessary so that after making all required deductions\n(including deductions applicable to additional sums payable under this Section), each of the\nAdministrative Agent and such Lender receives an amount equal to the sum it would have received had\nno such deductions been made, (ii) such Loan Party shall make such deductions, (iii) such Loan\nParty shall pay the full amount deducted to the relevant taxation authority or other authority in\naccordance with applicable Laws, and (iv) within thirty days after the date of such payment, such\nLoan Party shall furnish to the Administrative Agent (which shall forward the same to such Lender)\nthe original or a certified copy of a receipt evidencing payment thereof.\n
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     (b) In addition, the Borrowers agree to pay any and all present or future stamp, court or\ndocumentary taxes and any other excise or property taxes or charges or similar levies which arise\nfrom any payment made under any Loan Document or from the execution, delivery, performance,\nenforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter\nreferred to as “Other Taxes”).\n
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     (c) If the Borrowers shall be required to deduct or pay any Taxes or Other Taxes from or in\nrespect of any sum payable under any Loan Document to the Administrative Agent or any Lender, the\nBorrowers shall also pay to the Administrative Agent or to such Lender, as the case may be, at the\ntime interest is paid, such additional amount that the Administrative Agent or such Lender\nspecifies is necessary to preserve the after-tax yield (after factoring in all taxes, including\ntaxes imposed on or measured by net income) that the Administrative Agent or such Lender would have\nreceived if such Taxes or Other Taxes had not been imposed.\n
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     (d) The Borrowers agree to indemnify the Administrative Agent and each Lender for (i) the full\namount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any\njurisdiction on amounts payable under this Section) paid by the Administrative Agent and such\nLender, (ii) amounts payable under Section 3.01(c) and (iii) any liability (including\nadditions to tax, penalties, interest and expenses) arising therefrom or with respect thereto, in\neach case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by\nthe relevant Governmental Authority. Payment under this subsection (d) shall be made within thirty\ndays after the date the Lender or the Administrative Agent makes a demand therefor.\n
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3.02 Illegality.\n
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     If any Lender determines that any Law has made it unlawful, or that any Governmental Authority\nhas asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain\nor fund Eurocurrency Rate Loans (whether denominated in Dollars or an Alternative Currency), or to\ndetermine or charge interest rates based upon the Eurocurrency Rate, or any Governmental Authority\nhas imposed material restrictions on the authority of such Lender to purchase or sell, or to take\ndeposits of, Dollars or any Alternative Currency in the applicable interbank market, then, on\nnotice thereof by such Lender to the Company through the Administrative Agent, any obligation of\nsuch Lender to make or continue Eurocurrency Rate Loans in the affected currency or currencies or,\nin the case of Eurocurrency Rate Loans denominated in Dollars, to convert Base Rate Loans to\nEurocurrency Rate Loans shall be suspended until such Lender notifies the Administrative Agent and\nthe Company that the circumstances giving rise to such determination no longer exist. Upon receipt\nof such notice by the Company, the Borrowers shall, upon demand from such Lender (with a copy to\nthe Administrative Agent), prepay or, if\n
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applicable and such Loans are denominated in Dollars, convert all Eurocurrency Rate Loans of\nsuch Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such\nLender may lawfully continue to maintain such Eurocurrency Rate Loans to such day, or immediately,\nif such Lender may not lawfully continue to maintain such Eurocurrency Rate Loans. Upon any such\nprepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or\nconverted. Each Lender agrees to designate a different Lending Office if such designation will\navoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise\nbe materially disadvantageous to such Lender.\n
\n\n\n
3.03 Inability to Determine Rates.\n
\n\n\n
     If the Administrative Agent determines that for any reason in connection with any request for\na Eurocurrency Rate Loan or a conversion to or continuation thereof that (i) deposits (whether in\nDollars or an Alternative Currency) are not being offered to banks in the applicable offshore\ninterbank market for such currency for the applicable amount and Interest Period of such\nEurocurrency Rate Loan, (ii) adequate and reasonable means do not exist for determining the\nEurocurrency Base Rate for any requested Interest Period with respect to a proposed Eurocurrency\nRate Loan (whether denominated in Dollars or an Alternative Currency), or (iii) that the\nEurocurrency Base Rate for any requested Interest Period with respect to a proposed Eurocurrency\nRate Loan does not adequately and fairly reflect the cost to the Lenders of funding such Loan, the\nAdministrative Agent will promptly notify the Company and all Lenders. Thereafter, the obligation\nof the Lenders to make or maintain Eurocurrency Rate Loans in the affected currency or currencies\nshall be suspended until the Administrative Agent revokes such notice. Upon receipt of such\nnotice, any Borrower may revoke any pending request for a Borrowing, conversion or continuation of\nEurocurrency Rate Loans in the affected currency or currencies or, failing that, will be deemed to\nhave converted such request into a request for a Borrowing of Base Rate Loans in the amount\nspecified therein.\n
\n\n
3.04 Increased Cost and Reduced Return; Capital Adequacy.\n
\n\n\n
     (a) If any Lender determines that as a result of the introduction of or any change in or in\nthe interpretation of any Law, or such Lender’s compliance therewith, there shall be any increase\nin the cost to such Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate\nLoans or (as the case may be) issuing or participating in Letters of Credit, or a reduction in the\namount received or receivable by such Lender in connection with any of the foregoing (excluding for\npurposes of this subsection (a) any such increased costs or reduction in amount resulting from (i)\nTaxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes in the basis of\ntaxation of the overall net income or overall gross income by the United States or any foreign\njurisdiction or any political subdivision of either thereof under the Laws of which such Lender is\norganized or has its Lending Office, (iii) reserve requirements utilized, as to Eurocurrency Rate\nLoans, in the determination of the Eurocurrency Rate) and (iv) the requirements of the Bank of\nEngland and the Financial Services Authority or the European Central Bank reflected in the\nMandatory Cost, other than as set forth below) or the Mandatory Cost, as calculated hereunder, does\nnot represent the cost to such Lender of complying with the requirements of the Bank of England\nand/or the Financial Services Authority or the European Central Bank in relation to its making,\nfunding or maintaining of Eurocurrency Rate Loans, then from time to time upon demand of such\nLender (with a copy of such demand to the Administrative Agent), the Borrowers shall pay to such\nLender such additional amounts as will compensate such Lender for such increased cost or reduction\nor, if applicable, the portion of such cost that is not represented by the Mandatory Cost.\n
\n\n
     (b) If any Lender determines that the introduction of any Law regarding capital adequacy or\nany change therein or in the interpretation thereof, or compliance by such Lender (or its Lending\nOffice) therewith, has the effect of reducing the rate of return on the capital of such Lender or\nany corporation\n
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\n\n

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controlling such Lender as a consequence of such Lender’s obligations hereunder (taking into\nconsideration its policies with respect to capital adequacy and such Lender’s desired return on\ncapital), then from time to time upon demand of such Lender (with a copy of such demand to the\nAdministrative Agent), the Borrowers shall pay to such Lender such additional amounts as will\ncompensate such Lender for such reduction.\n
\n\n\n
3.05 Compensation for Losses.\n
\n\n\n
     Upon written demand of any Lender (with a copy to the Administrative Agent) from time to time,\nthe Borrowers shall promptly compensate such Lender for and hold such Lender harmless from any\nloss, cost or expense incurred by it as a result of:\n
\n\n\n
     (a) any continuation, conversion, payment or prepayment of any Loan other than a Base\nRate Loan on a day other than the last day of the Interest Period for such Loan (whether\nvoluntary, mandatory, automatic, by reason of acceleration, or otherwise);\n
\n\n\n
     (b) any failure by a Borrower (for a reason other than the failure of such Lender to\nmake a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on\nthe date or in the amount notified by such Borrower;\n
\n\n\n
     (c) any failure by a Borrower to make payment of any Loan or drawing under any Letter\nof Credit (or interest due thereon) denominated in an Alternative Currency on its scheduled\ndue date or any payment thereof in a different currency; or\n
\n\n\n
     (d) any assignment of a Eurocurrency Rate Loan on a day other than the last day of the\nInterest Period therefor as a result of:\n
\n\n\n
     (i) a request by the Company pursuant to Section 11.16; or\n
\n\n\n
     (ii) an assignment by Bank of America pursuant to Section 11.07(b) as\npart of the primary syndication of the Commitments and Loans during the 180-day\nperiod immediately following the Closing Date, provided that Bank of America\nagrees to use reasonable efforts to reduce the breakage costs payable by the\nBorrower in connection therewith (including, without limitation, to the extent\nreasonably practical, closing such assignments at the end of Interest Periods of\noutstanding Eurocurrency Rate Loans);\n
\n
including any loss of anticipated profits, any foreign exchange losses and any loss or expense\narising from the liquidation or reemployment of funds obtained by it to maintain such Loan, from\nfees payable to terminate the deposits from which such funds were obtained or from the performance\nof any foreign exchange contract. The Borrowers shall also pay any customary administrative fees\ncharged by such Lender in connection with the foregoing.\n
\n\n\n
     For purposes of calculating amounts payable by the Borrowers to the Lenders under this\nSection 3.05, each Lender shall be deemed to have funded each Eurocurrency Rate Loan made\nby it at the Eurocurrency Base Rate used in determining the Eurocurrency Rate for such Loan by a\nmatching deposit or other borrowing in the offshore interbank market for such currency for a\ncomparable amount and for a comparable period, whether or not such Eurocurrency Rate Loan was in\nfact so funded.\n
\n\n

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\n\n
3.06 Matters Applicable to all Requests for Compensation.\n
\n\n\n
     (a) A certificate of the Administrative Agent or any Lender claiming compensation under this\nArticle III and setting forth, in reasonable detail, the basis of any loss, cost or expense\nand the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence\nof manifest error. In determining such amount, the Administrative Agent or such Lender may use\nreasonable averaging and attribution methods.\n
\n\n
     (b) Upon any Lender’s making a claim for compensation under Section 3.01 or\n3.04, the Company may replace such Lender in accordance with Section 11.16.\n
\n\n
3.07 Survival.\n
\n\n\n
     All of the Borrowers’ obligations under this Article III shall survive termination of\nthe Aggregate Revolving Commitments and repayment of all other Obligations hereunder.\n
\n\n
ARTICLE IV\n
\n\n\n
GUARANTY\n\n
\n\n
4.01 The Guaranty.\n
\n\n\n
     Each of the Guarantors hereby jointly and severally guarantees to each Lender, each Affiliate\nof a Lender that enters into a Swap Contract or a Treasury Management Agreement with a Loan Party,\nand the Administrative Agent as hereinafter provided, as primary obligor and not as surety, the\nprompt payment of the Obligations in full when due (whether at stated maturity, as a mandatory\nprepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in\naccordance with the terms thereof. The Guarantors hereby further agree that if any of the\nObligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment,\nby acceleration, as a mandatory cash collateralization or otherwise), the Guarantors will, jointly\nand severally, promptly pay the same, without any demand or notice whatsoever, and that in the case\nof any extension of time of payment or renewal of any of the Obligations, the same will be promptly\npaid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as\na mandatory cash collateralization or otherwise) in accordance with the terms of such extension or\nrenewal.\n
\n\n
     Notwithstanding any provision to the contrary contained herein or in any other of the Loan\nDocuments, Swap Contracts or Treasury Management Agreements, the obligations of each Guarantor\nunder this Agreement and the other Loan Documents shall be limited to an aggregate amount equal to\nthe largest amount that would not render such obligations subject to avoidance under the Debtor\nRelief Laws or any comparable provisions of any applicable state law.\n
\n\n
4.02 Obligations Unconditional.\n
\n\n\n
     The obligations of the Guarantors under Section 4.01 are joint and several, absolute\nand unconditional, irrespective of the value, genuineness, validity, regularity or enforceability\nof any of the Loan Documents, Swap Contracts or Treasury Management Agreements, or any other\nagreement or instrument referred to therein, or any substitution, release, impairment or exchange\nof any other guarantee of or security for any of the Obligations, and, to the fullest extent\npermitted by applicable law, irrespective of any other circumstance whatsoever which might\notherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being\nthe intent of this Section 4.02 that the obligations of the Guarantors hereunder shall be\nabsolute and unconditional under any and all circumstances. Each Guarantor agrees that such\nGuarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the\n
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\n\n

\n
Borrowers or any other Guarantor for amounts paid under this Article IV until such\ntime as the Obligations have been paid in full and the Commitments have expired or terminated.\nWithout limiting the generality of the foregoing, it is agreed that, to the fullest extent\npermitted by law, the occurrence of any one or more of the following shall not alter or impair the\nliability of any Guarantor hereunder, which shall remain absolute and unconditional as described\nabove:\n
\n\n\n\n
     (a) at any time or from time to time, without notice to any Guarantor, the time for any\nperformance of or compliance with any of the Obligations shall be extended, or such\nperformance or compliance shall be waived;\n
\n\n\n
     (b) any of the acts mentioned in any of the provisions of any of the Loan Documents,\nany Swap Contract or Treasury Management Agreement between any Loan Party and any Lender, or\nany Affiliate of a Lender, or any other agreement or instrument referred to in the Loan\nDocuments, such Swap Contracts or such Treasury Management Agreements shall be done or\nomitted;\n
\n\n\n
     (c) the maturity of any of the Obligations shall be accelerated, or any of the\nObligations shall be modified, supplemented or amended in any respect, or any right under\nany of the Loan Documents, any Swap Contract or Treasury Management Agreement between any\nLoan Party and any Lender, or any Affiliate of a Lender, or any other agreement or\ninstrument referred to in the Loan Documents, such Swap Contracts or such Treasury\nManagement Agreements shall be waived or any other guarantee of any of the Obligations or\nany security therefor shall be released, impaired or exchanged in whole or in part or\notherwise dealt with;\n
\n\n\n
     (d) any Lien granted to, or in favor of, the Administrative Agent or any Lender or\nLenders as security for any of the Obligations shall fail to attach or be perfected; or\n
\n\n\n
     (e) any of the Obligations shall be determined to be void or voidable (including,\nwithout limitation, for the benefit of any creditor of any Guarantor) or shall be\nsubordinated to the claims of any Person (including, without limitation, any creditor of any\nGuarantor).\n
\n\n
     With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence,\npresentment, demand of payment, protest and all notices whatsoever, and any requirement that the\nAdministrative Agent or any Lender exhaust any right, power or remedy or proceed against any Person\nunder any of the Loan Documents, any Swap Contract or any Treasury Management Agreement between any\nLoan Party and any Lender, or any Affiliate of a Lender, or any other agreement or instrument\nreferred to in the Loan Documents, such Swap Contracts or such Treasury Management Agreements, or\nagainst any other Person under any other guarantee of, or security for, any of the Obligations.\n
\n\n
4.03 Reinstatement.\n
\n\n\n
     The obligations of the Guarantors under this Article IV shall be automatically\nreinstated if and to the extent that for any reason any payment by or on behalf of any Person in\nrespect of the Obligations is rescinded or must be otherwise restored by any holder of any of the\nObligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise,\nand each Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand\nfor all reasonable costs and expenses (including, without limitation, Attorney Costs) incurred by\nthe Administrative Agent or such Lender in connection with such rescission or restoration,\nincluding any such costs and expenses incurred in defending against any claim alleging that such\npayment constituted a preference, fraudulent transfer or similar payment under any bankruptcy,\ninsolvency or similar law.\n
\n\n

 \n

\n\n\n

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\n\n

\n\n
4.04 Certain Additional Waivers.\n
\n\n\n
     Each Guarantor further agrees that such Guarantor shall have no right of recourse to security\nfor the Obligations, except through the exercise of rights of subrogation pursuant to Section\n4.02 and through the exercise of rights of contribution pursuant to Section 4.06.\n
\n\n
4.05 Remedies.\n
\n\n\n
     The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors,\non the one hand, and the Administrative Agent and the Lenders, on the other hand, the Obligations\nmay be declared to be forthwith due and payable as provided in Section 9.02 (and shall be\ndeemed to have become automatically due and payable in the circumstances provided in said\nSection 9.02) for purposes of Section 4.01 notwithstanding any stay, injunction or\nother prohibition preventing such declaration (or preventing the Obligations from becoming\nautomatically due and payable) as against any other Person and that, in the event of such\ndeclaration (or the Obligations being deemed to have become automatically due and payable), the\nObligations (whether or not due and payable by any other Person) shall forthwith become due and\npayable by the Guarantors for purposes of Section 4.01.\n
\n\n
4.06 Rights of Contribution.\n
\n\n\n
     The Guarantors agree among themselves that, in connection with payments made hereunder, each\nGuarantor shall have contribution rights against the other Guarantors as permitted under applicable\nlaw. Such contribution rights shall be subordinate and subject in right of payment to the\nobligations of such Guarantors under the Loan Documents and no Guarantor shall exercise such rights\nof contribution until all Obligations have been paid in full and the Commitments have terminated.\n
\n\n
4.07 Guarantee of Payment; Continuing Guarantee.\n
\n\n\n
     The guarantee in this Article IV is a guaranty of payment and not of collection, is a\ncontinuing guarantee, and shall apply to all Obligations whenever arising.\n
\n\n
ARTICLE V\n
\n\n\n
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS\n\n
\n\n
5.01 Conditions of Initial Credit Extension.\n
\n\n\n
     The obligation of each Lender to make its initial Credit Extension hereunder is subject to\nsatisfaction of the following conditions precedent:\n
\n\n\n
     (a) Loan Documents. Receipt by the Administrative Agent of executed\ncounterparts of this Agreement and the other Loan Documents, each properly executed by a\nResponsible Officer of the signing Loan Party and, in the case of this Agreement, by each\nLender.\n
\n\n\n
     (b) Opinions of Counsel. Receipt by the Administrative Agent of favorable\nopinions of legal counsel to the Loan Parties, addressed to the Administrative Agent and\neach Lender, dated as of the Closing Date, and in form and substance reasonably satisfactory\nto the Administrative Agent.\n
\n\n\n
     (c) Financial Statements. The Administrative Agent shall have received:\n
\n\n

 \n

\n\n\n

\n

 

\n\n

\n\n\n
     (i) consolidated financial statements of the Company and its Subsidiaries for\nthe fiscal years ended July 31, 2003, July 31, 2004 and July 31, 2005, including\nbalance sheets and income and cash flow statements, in each case audited by\nindependent public accountants of recognized national standing and prepared in\nconformity with GAAP; and\n
\n\n\n
     (ii) unaudited consolidated financial statements of the Company and its\nSubsidiaries for the fiscal quarters ending April 30, 2006, including balance sheets\nand statements of income or operations, shareholders’ equity and cash flows (the\n“Interim Financial Statements”).\n
\n\n\n
     (d) No Material Adverse Change. There shall not have occurred a material\nadverse change since July 31, 2005 in the business, assets, liabilities (actual or\ncontingent), operations, condition (financial or otherwise) or prospects of the Company and\nits Subsidiaries, taken as a whole.\n
\n\n\n
     (e) Litigation. There shall not exist any action, suit, investigation or\nproceeding pending or threatened in any court or before an arbitrator or Governmental\nAuthority that could reasonably be expected to have a Material Adverse Effect.\n
\n\n\n
     (f) Organization Documents, Resolutions, Etc. Receipt by the Administrative\nAgent of the following, each of which shall be originals or facsimiles (followed promptly by\noriginals), in form and substance satisfactory to the Administrative Agent and its legal\ncounsel:\n
\n\n\n
     (i) copies of the Organization Documents of each Loan Party certified to be\ntrue and complete as of a recent date by the appropriate Governmental Authority of\nthe state or other jurisdiction of its incorporation or organization, where\napplicable, and certified by a secretary or assistant secretary of such Loan Party\nto be true and correct as of the Closing Date;\n
\n\n\n
     (ii) such certificates of resolutions or other action, incumbency certificates\nand/or other certificates of Responsible Officers of each Loan Party as the\nAdministrative Agent may require evidencing the identity, authority and capacity of\neach Responsible Officer thereof authorized to act as a Responsible Officer in\nconnection with this Agreement and the other Loan Documents to which such Loan Party\nis a party; and\n
\n\n\n
     (iii) such documents and certifications as the Administrative Agent may\nreasonably require to evidence that each Loan Party is duly organized or formed, and\nis validly existing, in good standing and qualified to engage in business in its\nstate of organization or formation and each other jurisdiction where its ownership,\nlease or operation of properties or the conduct of its business requires such\nqualification, except to the extent that failure to do so could not reasonably be\nexpected to have a Material Adverse Effect.\n
\n\n\n
     (g) Closing Certificate. Receipt by the Administrative Agent of a certificate\nsigned by a Responsible Officer of the Company certifying that the conditions specified in\nSections 5.01(d) and (e) and Sections 5.02(a) and (b) have\nbeen satisfied.\n
\n\n\n
     (h) Fees. Receipt by the Administrative Agent and the Lenders of any fees\nrequired to be paid on or before the Closing Date.\n
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     (i) Attorney Costs. Unless waived by the Administrative Agent, the Company\nshall have paid all Attorney Costs of the Administrative Agent to the extent invoiced prior\nto or on the Closing Date, plus such additional amounts of Attorney Costs as shall\nconstitute its reasonable estimate of Attorney Costs incurred or to be incurred by it\nthrough the closing proceedings (provided that such estimate shall not thereafter preclude a\nfinal settling of accounts between the Company and the Administrative Agent).\n
\n\n\n
     (j) Other. Receipt by the Administrative Agent and the Lenders of such other\ndocuments, instruments, agreements and information as reasonably requested by the\nAdministrative Agent or any Lender, including, but not limited to, information regarding\nlitigation, tax, accounting, labor, insurance, pension liabilities (actual or contingent),\nreal estate leases, material contracts, debt agreements, property ownership, environmental\nmatters, contingent liabilities and management of the Company, Emed and their respective\nSubsidiaries.\n
\n\n
     Without limiting the generality of the provisions of Section 10.04, for purposes of\ndetermining compliance with the conditions specified in this Section 5.01, each Lender that\nhas signed this Agreement shall be deemed to have consented to, approved or accepted or to be\nsatisfied with, each document or other matter required thereunder to be consented to or approved by\nor acceptable or satisfactory to a Lender unless the Administrative Agent shall have received\nnotice from such Lender prior to the proposed Closing Date specifying its objection thereto.\n
\n\n
5.02 Conditions to all Credit Extensions.\n
\n\n\n
     The obligation of each Lender to honor any Request for Credit Extension is subject to the\nfollowing conditions precedent:\n
\n\n\n
     (a) The representations and warranties of the Loan Parties contained in Article\nVI or any other Loan Document, or which are contained in any document furnished at any\ntime under or in connection herewith or therewith, shall be true and correct on and as of\nthe date of such Credit Extension, except to the extent that such representations and\nwarranties specifically refer to an earlier date, in which case they shall be true and\ncorrect as of such earlier date, and except that for purposes of this Section 5.02,\nthe representations and warranties contained in subsections (a) and (b) of Section\n6.05 shall be deemed to refer to the most recent statements furnished pursuant to\nclauses (a) and (b), respectively, of Section 7.01.\n
\n\n\n
     (b) No Default shall exist, or would result from such proposed Credit Extension.\n
\n\n\n
     (c) The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line\nLender shall have received a Request for Credit Extension in accordance with the\nrequirements hereof.\n
\n\n\n
     (d) In the case of a Credit Extension to be denominated in an Alternative Currency,\nthere shall not have occurred any change in national or international financial, political\nor economic conditions or currency exchange rates or exchange controls which in the\nreasonable opinion of the Administrative Agent, the Required Lenders (in the case of any\nLoans to be denominated in an Alternative Currency) or the L/C Issuer (in the case of any\nLetter of Credit to be denominated in an Alternative Currency) would make it impracticable\nfor such Credit Extension to be denominated in the relevant Alternative Currency.\n
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\n\n
     Each Request for Credit Extension submitted by a Borrower shall be deemed to be a\nrepresentation and warranty that the conditions specified in Sections 5.02(a) and\n(b) have been satisfied on and as of the date of the applicable Credit Extension.\n
\n\n
ARTICLE VI\n
\n\n\n
REPRESENTATIONS AND WARRANTIES\n\n
\n\n
     The Loan Parties represent and warrant to the Administrative Agent and the Lenders that:\n
\n\n
6.01 Existence, Qualification and Power.\n
\n\n\n
     Each Loan Party (a) is duly organized or formed, validly existing and in good standing under\nthe Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and\nauthority and all requisite governmental licenses, authorizations, consents and approvals to (i)\nown its assets and carry on its business and (ii) execute, deliver and perform its obligations\nunder the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and in\ngood standing under the Laws of each jurisdiction where its ownership, lease or operation of\nproperties or the conduct of its business requires such qualification or license; except in each\ncase referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably\nbe expected to have a Material Adverse Effect.\n
\n\n
6.02 Authorization; No Contravention.\n
\n\n\n
     The execution, delivery and performance by each Loan Party of each Loan Document to which such\nPerson is party have been duly authorized by all necessary corporate or other organizational\naction, and do not (a) contravene the terms of any of such Person’s Organization Documents; (b)\nconflict with or result in any breach or contravention of, or the creation of any Lien under (i)\nany material Contractual Obligation to which such Person is a party or (ii) any material order,\ninjunction, writ or decree of any Governmental Authority or any arbitral award to which such Person\nor its property is subject; or (c) violate any Law (including, without limitation, Regulation U or\nRegulation X issued by the FRB).\n
\n\n
6.03 Governmental Authorization; Other Consents.\n
\n\n\n
     No approval, consent, exemption, authorization, or other action by, or notice to, or filing\nwith, any Governmental Authority or any other Person is necessary or required in connection with\nthe execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement\nor any other Loan Document other than those that have already been obtained and are in full force\nand effect.\n
\n\n
6.04 Binding Effect.\n
\n\n\n
     Each Loan Document has been duly executed and delivered by each Loan Party that is party\nthereto. Each Loan Document constitutes a legal, valid and binding obligation of each Loan Party\nthat is party thereto, enforceable against each such Loan Party in accordance with its terms.\n
\n\n
6.05 Financial Statements; No Material Adverse Effect.\n
\n\n\n
     (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently\napplied throughout the period covered thereby, except as otherwise expressly noted therein; (ii)\nfairly present, in all material respects, the financial condition of the Company and its\nSubsidiaries as of the date thereof and their results of operations for the period covered thereby\nin accordance with GAAP consistently applied throughout the period covered thereby, except as\notherwise expressly noted\n
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\n\n

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therein; and (iii) show all material indebtedness and other liabilities, direct or contingent,\nof the Company and its Subsidiaries as of the date thereof, including liabilities for taxes,\nmaterial commitments and Indebtedness.\n
\n\n\n
     (b) The Interim Financial Statements (i) were prepared in accordance with GAAP consistently\napplied throughout the period covered thereby, except as otherwise expressly noted therein; (ii)\nfairly present, in all material respects, the financial condition of the Company and its\nSubsidiaries as of the date thereof and their results of operations for the period covered thereby,\nsubject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end\naudit adjustments; and (iii) show all material indebtedness and other liabilities, direct or\ncontingent, of the Company and its Subsidiaries as of the date thereof, including liabilities for\ntaxes, material commitments and Indebtedness.\n
\n\n
     (c) From the date of the Audited Financial Statements to and including the Closing Date, there\nhas been no Disposition by the Company or any Subsidiary, or any Involuntary Disposition, of any\nmaterial part of the business or Property of the Company and its Subsidiaries, taken as a whole,\nand no purchase or other acquisition by any of them of any business or property (including any\nCapital Stock of any other Person) material in relation to the consolidated financial condition of\nthe Company and its Subsidiaries, taken as a whole, in each case, which is not reflected in the\nforegoing financial statements or in the notes thereto and has not otherwise been disclosed in\nwriting to the Lenders on or prior to the Closing Date.\n
\n\n
     (d) The financial statements delivered pursuant to Section 7.01(a) and (b) have been\nprepared in accordance with GAAP (except as may otherwise be permitted under Section\n7.01(a) and (b)) and present fairly (on the basis disclosed in the footnotes to such\nfinancial statements) the consolidated financial condition, results of operations and cash flows of\nthe Company and its Subsidiaries as of the dates thereof and for the periods covered thereby.\n
\n\n
     (e) Since the date of the Audited Financial Statements, there has been no event or\ncircumstance that has had or could reasonably be expected to have a Material Adverse Effect.\n
\n\n
6.06 Litigation.\n
\n\n\n
     There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of\nthe Loan Parties after due and diligent investigation, threatened or contemplated, at law, in\nequity, in arbitration or before any Governmental Authority, by or against the Company or any of\nits Subsidiaries or against any of their properties or revenues that (a) purport to affect or\npertain to this Agreement or any other Loan Document, or any of the transactions contemplated\nhereby or (b) if determined adversely, could reasonably be expected to have a Material Adverse\nEffect.\n
\n\n
6.07 No Default.\n
\n\n\n
     (a) Neither the Company nor any Subsidiary is in default under or with respect to any\nContractual Obligation that could reasonably be expected to have a Material Adverse Effect.\n
\n\n
     (b) No Default has occurred and is continuing.\n
\n\n
6.08 Ownership of Property; Liens.\n
\n\n\n
     Each of the Company and its Subsidiaries has good record and marketable title in fee simple\nto, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of\nits business, except for such defects in title as could not, individually or in the aggregate,\nreasonably be expected to\n
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have a Material Adverse Effect. The property of the Company and its Subsidiaries is subject\nto no Liens, other than Permitted Liens.\n
\n\n\n
6.09 Environmental Compliance.\n
\n\n\n
     Except as could not reasonably be expected to have a Material Adverse Effect:\n
\n\n\n
     (a) Each of the Facilities and all operations at the Facilities are in compliance with\nall applicable Environmental Laws, and there is no violation of any Environmental Law with\nrespect to the Facilities or the Businesses, and there are no conditions relating to the\nFacilities or the Businesses that could give rise to liability under any applicable\nEnvironmental Laws.\n
\n\n\n
     (b) None of the Facilities contains any Hazardous Materials at, on or under the\nFacilities in amounts or concentrations that constitute a violation of, or could give rise\nto liability under, Environmental Laws.\n
\n\n\n
     (c) Neither the Company nor any Subsidiary has received any written or verbal notice\nof, or inquiry from any Governmental Authority regarding, any violation, alleged violation,\nnon-compliance, liability or potential liability regarding environmental matters or\ncompliance with Environmental Laws with regard to any of the Facilities or the Businesses,\nnor does any Responsible Officer of any Loan Party have knowledge or reason to believe that\nany such notice will be received or is being threatened.\n
\n\n\n
     (d) Hazardous Materials have not been transported or disposed of from the Facilities,\nor generated, treated, stored or disposed of at, on or under any of the Facilities or any\nother location, in each case by or on behalf the Company or any Subsidiary in violation of,\nor in a manner that would be reasonably likely to give rise to liability under, any\napplicable Environmental Law.\n
\n\n\n
     (e) No judicial proceeding or governmental or administrative action is pending or, to\nthe knowledge of the Responsible Officers of the Loan Parties, threatened, under any\nEnvironmental Law to which the Company or any Subsidiary is or will be named as a party, nor\nare there any consent decrees or other decrees, consent orders, administrative orders or\nother orders, or other administrative or judicial requirements outstanding under any\nEnvironmental Law with respect to the Company, any Subsidiary, the Facilities or the\nBusinesses.\n
\n\n\n
     (f) There has been no release or threat of release of Hazardous Materials at or from\nthe Facilities, or arising from or related to the operations (including, without limitation,\ndisposal) of the Company or any Subsidiary in connection with the Facilities or otherwise in\nconnection with the Businesses, in violation of or in amounts or in a manner that could give\nrise to liability under Environmental Laws.\n
\n\n
6.10 Insurance.\n
\n\n\n
     The properties of the Company and its Subsidiaries are insured with financially sound and\nreputable insurance companies not Affiliates of the Company, in such amounts, with such deductibles\nand covering such risks as are customarily carried by companies engaged in similar businesses and\nowning similar properties in localities where the Company or the applicable Subsidiary operates.\n
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6.11 Taxes.\n
\n\n\n
     The Company and its Subsidiaries have filed all federal, state and other material tax returns\nand reports required to be filed, and have paid all federal, state and other material taxes,\nassessments, fees and other governmental charges levied or imposed upon them or their properties,\nincome or assets otherwise due and payable, except those (i) which are being contested in good\nfaith by appropriate proceedings diligently conducted and for which adequate reserves have been\nprovided in accordance with GAAP and (ii) in respect of amounts involving less than $50,000 in the\naggregate. There is no proposed tax assessment against the Company or any Subsidiary that would,\nif made, have a Material Adverse Effect.\n
\n\n
6.12 ERISA Compliance.\n
\n\n\n
     (a) Each Plan is in compliance in all material respects with the applicable provisions of\nERISA, the Internal Revenue Code and other federal or state Laws. Each Plan that is intended to\nqualify under Section 401(a) of the Internal Revenue Code has received a favorable determination\nletter from the IRS or an application for such a letter is currently being processed by the IRS\nwith respect thereto and, to the best knowledge of the Loan Parties, nothing has occurred which\nwould prevent, or cause the loss of, such qualification. Each Loan Party and each ERISA Affiliate\nhave made all required contributions to each Plan subject to Section 412 of the Internal Revenue\nCode, and no application for a funding waiver or an extension of any amortization period pursuant\nto Section 412 of the Internal Revenue Code has been made with respect to any Plan.\n
\n\n
     (b) There are no pending or, to the best knowledge of the Loan Parties, threatened claims,\nactions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could\nbe reasonably be expected to have a Material Adverse Effect. There has been no prohibited\ntransaction or violation of the fiduciary responsibility rules with respect to any Plan that has\nresulted or could reasonably be expected to result in a Material Adverse Effect.\n
\n\n
     (c) (i) Other than with respect to the termination of certain Plans maintained by Prinzing\nEnterprises, Inc. (which is not reasonably expected to have a Material Adverse Effect), no ERISA\nEvent has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded\nPension Liability; (iii) no Loan Party or any ERISA Affiliate has incurred, or reasonably expects\nto incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than\npremiums due and not delinquent under Section 4007 of ERISA); (iv) no Loan Party or any ERISA\nAffiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred\nwhich, with the giving of notice under Section 4219 of ERISA, would result in such liability) under\nSections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) no Loan Party or any\nERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of\nERISA.\n
\n\n
6.13 Subsidiaries.\n
\n\n\n
     Set forth on Schedule 6.13 is a complete and accurate list as of the Closing Date of\neach Subsidiary, together with (i) jurisdiction of formation and (ii) the percentage of outstanding\nshares of Capital Stock owned (directly or indirectly) by the Company or any Subsidiary. The\noutstanding Capital Stock of each Subsidiary is validly issued, fully paid and non-assessable\n(except as provided in Wisconsin Statute Sect. 180.0622(2)(b), as judicially interpreted).\n
\n\n
6.14 Margin Regulations; Investment Company Act.\n
\n\n\n
     (a) No Borrower is engaged, and no Borrower will not engage, principally or as one of its\nimportant activities, in the business of purchasing or carrying margin stock (within the meaning of\n
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\n\n

\n
Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying\nmargin stock. Following the application of the proceeds of each Borrowing or drawing under each\nLetter of Credit, not more than 25% of the value of the assets (either of such Borrower only or of\nthe Company and its Subsidiaries on a consolidated basis) subject to the provisions of Section\n8.01 or Section 8.05 or subject to any restriction contained in any agreement or\ninstrument between the Borrowers and any Lender or any Affiliate of any Lender relating to\nIndebtedness and within the scope of Section 9.01(e) will be margin stock.\n
\n\n\n
     (b) No Borrower, no Person Controlling a Borrower, nor any Subsidiary is or is required to be\nregistered as an “investment company” under the Investment Company Act of 1940.\n
\n\n
6.15 Disclosure.\n
\n\n\n
     Each Loan Party has disclosed to the Administrative Agent and the Lenders all agreements,\ninstruments and corporate or other restrictions to which it or any of its Subsidiaries is subject,\nand all other matters known to it, that, individually or in the aggregate, could reasonably be\nexpected to result in a Material Adverse Effect. No report, financial statement, certificate or\nother information furnished (whether in writing or orally) by or on behalf of any Loan Party to the\nAdministrative Agent or any Lender in connection with the transactions contemplated hereby and the\nnegotiation of this Agreement or delivered hereunder (as modified or supplemented by other\ninformation so furnished), when taken as a whole, contains as of the applicable delivery date any\nmaterial misstatement of fact or omits to state any material fact necessary to make the statements\ntherein, in the light of the circumstances under which they were made, not misleading;\nprovided that, with respect to projected financial information, the Loan Parties represent\nonly that such information was prepared in good faith based upon assumptions believed to be\nreasonable at the time.\n
\n\n
6.16 Compliance with Laws.\n
\n\n\n
     Each Loan Party and each Subsidiary is in compliance with the requirements of all Laws and all\norders, writs, injunctions and decrees applicable to it or to its properties, except in such\ninstances in which (a) such requirement of Law or order, writ, injunction or decree is being\ncontested in good faith by appropriate proceedings diligently conducted or (b) the failure to\ncomply therewith could not reasonably be expected to have a Material Adverse Effect.\n
\n\n
6.17 Intellectual Property; Licenses, Etc.\n
\n\n\n
     The Company and its Subsidiaries own, or possess the legal right to use, all of the\ntrademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses\nand other intellectual property rights (collectively, “IP Rights”) that are reasonably\nnecessary for the operation of their respective businesses. Except for such claims and\ninfringements that could not reasonably be expected to have a Material Adverse Effect, (i) no claim\nhas been asserted and is pending by any Person challenging or questioning the use of any IP Rights\nor the validity or effectiveness of any IP Rights, nor does any Loan Party know of any such claim,\nand (ii) to the knowledge of the Responsible Officers of the Loan Parties, the use of any IP Rights\nby the Company or any Subsidiary or the granting of a right or a license in respect of any IP\nRights from the Company or any Subsidiary does not infringe on the rights of any Person.\n
\n\n
6.18 Solvency.\n
\n\n\n
     The Loan Parties are Solvent on a consolidated basis.\n
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6.19 Labor Matters.\n
\n\n\n
     There are no collective bargaining agreements or Multiemployer Plans covering the employees of\nthe Company or any Subsidiary as of the Closing Date and neither the Company nor any Subsidiary has\nsuffered any strikes, walkouts, work stoppages or other material labor difficulty within the last\nfive years.\n
\n\n
ARTICLE VII\n
\n\n\n
AFFIRMATIVE COVENANTS\n\n
\n\n
     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation\nhereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the\nLoan Parties shall and shall cause each Subsidiary to:\n
\n\n
7.01 Financial Statements.\n
\n\n\n
     Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the\nAdministrative Agent and the Required Lenders:\n
\n\n\n
     (a) as soon as available, but in any event within ninety days after the end of each\nfiscal year of the Company, a consolidated balance sheet of the Company and its Subsidiaries\nas at the end of such fiscal year, and the related consolidated statements of income or\noperations, shareholders’ equity and cash flows for such fiscal year, setting forth in each\ncase in comparative form the figures for the previous fiscal year, all in reasonable detail\nand prepared in accordance with GAAP, audited and accompanied by a report and opinion of an\nindependent certified public accountant of nationally recognized standing reasonably\nacceptable to the Required Lenders, which report and opinion shall be prepared in accordance\nwith generally accepted auditing standards and shall not be subject to any “going concern”\nor like qualification or exception or any qualification or exception as to the scope of such\naudit; and\n
\n\n\n
     (b) as soon as available, but in any event within forty-five days after the end of each\nof the first three fiscal quarters of each fiscal year of the Company, a consolidated\nbalance sheet of the Company and its Subsidiaries as at the end of such fiscal quarter, and\nthe related consolidated statements of income or operations, shareholders’ equity and cash\nflows for such fiscal quarter and for the portion of the Company’s fiscal year then ended,\nsetting forth in each case in comparative form the figures for the corresponding fiscal\nquarter of the previous fiscal year and the corresponding portion of the previous fiscal\nyear, all in reasonable detail and certified by a Responsible Officer of the Company as\nfairly presenting the financial condition, results of operations, shareholders’ equity and\ncash flows of the Company and its Subsidiaries in accordance with GAAP, subject only to\nnormal year-end audit adjustments and the absence of footnotes.\n
\n\n
As to any information contained in materials furnished pursuant to Section 7.02(d),\nthe Company shall not be separately required to furnish such information under clause (a) or\n(b) above, but the foregoing shall not be in derogation of the obligation of the Company to\nfurnish the information and materials described in subsections (a) and (b) above at the\ntimes specified therein.
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7.02 Certificates; Other Information.\n
\n\n\n
     Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the\nAdministrative Agent and the Required Lenders:\n
\n\n\n
     (a) within the period for the delivery of the financial statements referred to in\nSection 7.01(a), a certificate of its independent certified public accountants\ncertifying such financial statements and stating that in making the examination necessary\ntherefor no knowledge was obtained of any Default in respect of Section 8.11 or, if\nany such Default shall exist, stating the nature and status of such event;\n
\n\n\n
     (b) within the period for the delivery of the financial statements referred to in\nSections 7.01(a) and (b), a duly completed Compliance Certificate signed by\na Responsible Officer of the Company;\n
\n\n\n
     (c) concurrently with the delivery of the financial statements referred to in\nSections 7.01(a) and (b), a certificate of a Responsible Officer of the\nCompany containing information regarding the amount of all Dispositions (in excess of\n$3,000,000) and Acquisitions that occurred during the period covered by such financial\nstatements.\n
\n\n\n
     (d) promptly after any request by the Administrative Agent or any Lender, copies of any\ndetailed audit reports, management letters or recommendations submitted to the board of\ndirectors (or the audit committee of the board of directors) of the Company by independent\naccountants in connection with the accounts or books of the Company or any Subsidiary, or\nany audit of any of them;\n
\n\n\n
     (e) promptly after the same are available, (i) copies of each annual report, proxy or\nfinancial statement or other report or communication sent to the stockholders of the\nCompany, and copies of all annual, regular, periodic and special reports and registration\nstatements which the Company may file or be required to file with the SEC under Section 13\nor 15(d) of the Securities Exchange Act of 1934 or to a holder of any Indebtedness owed by\nthe Company or any Subsidiary in its capacity as such a holder and not otherwise required to\nbe delivered to the Administrative Agent pursuant hereto and (ii) upon the reasonable\nrequest of the Administrative Agent, all reports and written information to and from the\nUnited States Environmental Protection Agency, or any state or local agency responsible for\nenvironmental matters, the United States Occupational Health and Safety Administration, or\nany state or local agency responsible for health and safety matters, or any successor\nagencies or authorities concerning environmental, health or safety matters; and\n
\n\n\n
     (f) promptly, such additional information regarding the business, financial or\ncorporate affairs of the Company or any Subsidiary, or compliance with the terms of the Loan\nDocuments, as the Administrative Agent or any Lender may from time to time reasonably\nrequest.\n
\n\n
     Documents required to be delivered pursuant to Section 7.01(a) or (b) or\nSection 7.02(e) (to the extent any such documents are included in materials otherwise filed\nwith the SEC) may be delivered electronically and if so delivered, shall be deemed to have been\ndelivered on the date (i) on which the Company posts such documents, or provides a link thereto on\nthe Company’s website on the Internet at the website address listed on Schedule 11.02; or\n(ii) on which such documents are posted on the Company’s behalf on an Internet or intranet website,\nif any, to which each Lender and the Administrative Agent have access (whether a commercial,\nthird-party website or whether sponsored by the\n
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Administrative Agent); provided that: (i) the Company shall deliver paper copies of\nsuch documents to the Administrative Agent or any Lender that requests the Company to deliver such\npaper copies until a written request to cease delivering paper copies is given by the\nAdministrative Agent or such Lender and (ii) the Company shall notify (which may be by facsimile or\nelectronic mail) the Administrative Agent and each Lender of the posting of any such documents and\nprovide to the Administrative Agent by electronic mail electronic versions (i.e., soft\ncopies) of such documents. Notwithstanding anything contained herein, in every instance the\nCompany shall be required to provide paper copies of the Compliance Certificates required by\nSection 7.02(b) to the Administrative Agent. Except for such Compliance Certificates, the\nAdministrative Agent shall have no obligation to request the delivery or to maintain copies of the\ndocuments referred to above, and in any event shall have no responsibility to monitor compliance by\nthe Company with any such request for delivery, and each Lender shall be solely responsible for\nrequesting delivery to it or maintaining its copies of such documents.\n
\n\n\n
     The Company hereby acknowledges that (a) the Administrative Agent and/or BAS will make\navailable to the Lenders and the L/C Issuer materials and/or information provided by or on behalf\nof the Company hereunder (collectively, “Company Materials”) by posting the Company\nMaterials on IntraLinks or another similar electronic system (the “Platform”) and (b)\ncertain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive\nmaterial non-public information with respect to the Company or its securities) (each, a “Public\nLender”). The Company hereby agrees that (w) all Company Materials that are to be made\navailable to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum,\nshall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by\nmarking Company Materials “PUBLIC,” the Company shall be deemed to have authorized the\nAdministrative Agent, BAS, the L/C Issuer and the Lenders to treat such Company Materials as not\ncontaining any material non-public information with respect to the Company or its securities for\npurposes of United States federal and state securities laws (provided, however,\nthat to the extent such Company Materials constitute Information, they shall be treated as set\nforth in Section 11.08); (y) all Company Materials marked “PUBLIC” are permitted to be made\navailable through a portion of the Platform designated as “Public Investor;” and (z) the\nAdministrative Agent and BAS shall be entitled to treat any Company Materials that are not marked\n“PUBLIC” as being suitable only for posting on a portion of the Platform not marked as “Public\nInvestor.” Notwithstanding the foregoing, the Company shall not be under any obligation to mark\nany Company Materials “PUBLIC.”\n
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7.03 Notices.\n
\n\n\n
     (a) Promptly (and in any event, within five Business Days) notify the Administrative Agent and\neach Lender of the occurrence of any Default.\n
\n\n
     (b) Promptly notify the Administrative Agent and each Lender of any matter that has resulted\nor could reasonably be expected to result in a Material Adverse Effect, including (i) breach or\nnon-performance of, or any default under, a Contractual Obligation of the Company or any\nSubsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the\nCompany or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any\nmaterial development in, any litigation or proceeding affecting the Company or any Subsidiary,\nincluding pursuant to any applicable Environmental Laws.\n
\n\n
     (c) Other than with respect to the termination of certain Plans maintained by Prinzing\nEnterprises, Inc. (which is not reasonably expected to have a Material Adverse Effect), promptly\nnotify the Administrative Agent and each Lender of the occurrence of any ERISA Event.\n
\n\n
     (d) Promptly notify the Administrative Agent and each Lender of any material change in\naccounting policies or financial reporting practices by the Company or any Subsidiary.\n
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     Each notice pursuant to this Section 7.03(a) through (d) shall be accompanied\nby a statement of a Responsible Officer of the Company setting forth details of the occurrence\nreferred to therein and stating what action the Company has taken and proposes to take with respect\nthereto. Each notice pursuant to Section 7.03(a) shall describe with particularity any and\nall provisions of this Agreement and any other Loan Document that have been breached.\n
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7.04 Payment of Obligations.\n
\n\n\n
     Pay and discharge, as the same shall become due and payable, all its material obligations and\nmaterial liabilities, including (a) all tax liabilities, assessments and governmental charges or\nlevies upon it or its properties or assets, unless the same are being contested in good faith by\nappropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are\nbeing maintained by the Company or such Subsidiary; (b) all lawful claims which, if unpaid, would\nby law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but\nsubject to any subordination provisions contained in any instrument or agreement evidencing such\nIndebtedness.\n
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7.05 Preservation of Existence, Etc.\n
\n\n\n
     (a) Preserve, renew and maintain in full force and effect its legal existence under the Laws\nof the jurisdiction of its organization except in a transaction permitted by Section 8.04\nor 8.05.\n
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     (b) Preserve, renew and maintain in full force and effect its good standing under the Laws of\nthe jurisdiction of its organization, except to the extent the failure to do so could not\nreasonably be expected to have a Material Adverse Effect.\n
\n\n
     (c) Take all reasonable action to maintain all rights, privileges, permits, licenses and\nfranchises necessary or desirable in the normal conduct of its business, except to the extent that\nthe failure to do so could not reasonably be expected to have a Material Adverse Effect.\n
\n\n
     (d) Preserve or renew all of its material registered patents, copyrights, trademarks, trade\nnames and service marks, the non-preservation of which could reasonably be expected to have a\nMaterial Adverse Effect.\n
\n\n
7.06 Maintenance of Properties.\n
\n\n\n
     (a) Maintain, preserve and protect all of its material properties and equipment necessary in\nthe operation of its business in good working order and condition, ordinary wear and tear excepted.\n
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     (b) Make all necessary repairs thereto and renewals and replacements thereof, except where the\nfailure to do so could not reasonably be expected to have a Material Adverse Effect.\n
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     (c) Use the standard of care typical in the industry in the operation and maintenance of its\nfacilities.\n
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7.07 Maintenance of Insurance.\n
\n\n\n
     Maintain in full force and effect insurance (including worker’s compensation insurance,\nliability insurance, casualty insurance and business interruption insurance) with financially sound\nand reputable insurance companies not Affiliates of the Company, in such amounts, with such\ndeductibles and covering\n
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such risks as are customarily carried by companies engaged in similar businesses and owning similar\nproperties in localities where the Company or the applicable Subsidiary operates.\n
\n\n\n
7.08 Compliance with Laws.\n
\n\n\n
     Comply with the requirements of all Laws and all orders, writs, injunctions and decrees\napplicable to it or to its business or property, except in such instances in which (a) such\nrequirement of Law or order, writ, injunction or decree is being contested in good faith by\nappropriate proceedings diligently conducted; or (b) the failure to comply therewith could not\nreasonably be expected to have a Material Adverse Effect.\n
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7.09 Books and Records.\n
\n\n\n
     (a) Maintain proper books of record and account, in which full, true and correct entries in\nconformity with GAAP consistently applied shall be made of all financial transactions and matters\ninvolving the assets and business of the Company or such Subsidiary, as the case may be.\n
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     (b) Maintain such books of record and account in material conformity with all applicable\nrequirements of any Governmental Authority having regulatory jurisdiction over the Company or such\nSubsidiary, as the case may be.\n
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7.10 Inspection Rights.\n
\n\n\n
     Permit representatives and independent contractors of the Administrative Agent and each Lender\nto visit and inspect any of its properties, to examine its corporate, financial and operating\nrecords, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and\naccounts with its directors, officers, and independent public accountants, all at the expense of\nthe Company and at such reasonable times during normal business hours and as often as may be\nreasonably desired, upon reasonable advance notice to the Company; provided,\nhowever, that when an Event of Default exists the Administrative Agent or any Lender (or\nany of their respective representatives or independent contractors) may do any of the foregoing at\nthe expense of the Company at any time during normal business hours and without advance notice.\n
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7.11 Use of Proceeds.\n
\n\n\n
     Use the proceeds of the Credit Extensions to finance working capital, capital expenditures and\nother lawful corporate purposes (including Permitted Acquisitions), provided that in no\nevent shall the proceeds of the Credit Extensions be used in contravention of any Law or of any\nLoan Document.\n
\n\n
7.12 Additional Guarantors.\n
\n\n\n
     Within forty-five (45) days after the acquisition or formation of any Domestic Subsidiary,\ncause such Person to (a) become a Guarantor by executing and delivering to the Administrative Agent\na Joinder Agreement or such other documents as the Administrative Agent shall deem appropriate for\nsuch purpose, and (b) deliver to the Administrative Agent documents of the types referred to in\nSection 5.01(f) and favorable opinions of counsel to such Person (which shall cover, among\nother things, the legality, validity, binding effect and enforceability of the documentation\nreferred to in clause (a)), all in form, content and scope reasonably satisfactory to the\nAdministrative Agent.\n
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7.13 ERISA Compliance.\n
\n\n\n
     Do, and cause each of its ERISA Affiliates to do, each of the following: (a) maintain each\nPlan in compliance in all material respects with the applicable provisions of ERISA, the Internal\nRevenue Code and other federal or state law; (b) cause each Plan that is qualified under Section\n401(a) of the Internal Revenue Code to maintain such qualification; and (c) make all required\ncontributions to any Plan subject to Section 412 of the Internal Revenue Code.\n
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ARTICLE VIII\n
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NEGATIVE COVENANTS\n\n
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     So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation\nhereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, no\nLoan Party shall, nor shall it permit any Subsidiary to, directly or indirectly:\n
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8.01 Liens.\n
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     Create, incur, assume or suffer to exist any Lien upon any of its property, assets or\nrevenues, whether now owned or hereafter acquired, other than the following:\n
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     (a) Liens pursuant to any Loan Document;\n
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     (b) Liens existing on the date hereof and listed on Schedule 8.01 and any\nrenewals or extensions thereof, provided that the property covered thereby is not\nincreased and any renewal or extension of the obligations secured or benefited thereby is\npermitted by Section 8.03(b);\n
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     (c) Liens (other than Liens imposed under ERISA) for taxes, assessments or governmental\ncharges or levies not yet due or which are being contested in good faith and by appropriate\nproceedings diligently conducted, if adequate reserves with respect thereto are maintained\non the books of the applicable Person in accordance with GAAP;\n
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     (d) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,\nmaterialmen and suppliers and other Liens imposed by law or pursuant to customary\nreservations or retentions of title arising in the ordinary course of business,\nprovided that such Liens secure only amounts not yet due and payable or, if due and\npayable, are unfiled and no other action has been taken to enforce the same or are being\ncontested in good faith by appropriate proceedings for which adequate reserves determined in\naccordance with GAAP have been established;\n
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     (e) pledges or deposits in the ordinary course of business in connection with workers’\ncompensation, unemployment insurance and other social security legislation, other than any\nLien imposed by ERISA;\n
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     (f) deposits to secure the performance of bids, trade contracts and leases (other than\nIndebtedness), statutory obligations, surety bonds (other than bonds related to judgments or\nlitigation), performance bonds and other obligations of a like nature incurred in the\nordinary course of business;\n
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     (g) easements, rights-of-way, restrictions and other similar encumbrances affecting\nreal property which, in the aggregate, are not substantial in amount, and which do not in\nany case\n
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materially detract from the value of the property subject thereto or materially\ninterfere with the ordinary conduct of the business of the applicable Person;\n
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     (h) Liens securing judgments for the payment of money (or appeal or other surety bonds\nrelating to such judgments) not in excess of the Threshold Amount (except to the extent\ncovered by independent third-party insurance as to which the insurer has acknowledged in\nwriting its obligation to cover), unless any such judgment remains undischarged for a period\nof more than thirty consecutive days during which execution is not effectively stayed;\n
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     (i) Liens securing Indebtedness permitted under Section 8.03(e);\nprovided that (i) such Liens do not at any time encumber any Property other than the\nProperty financed by such Indebtedness, (ii) the Indebtedness secured thereby does not\nexceed the cost or fair market value, whichever is lower, of the Property being acquired on\nthe date of acquisition and (iii) such Liens attach to such Property concurrently with or\nwithin ninety days after the acquisition thereof;\n
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     (j) licenses or sublicenses and leases or subleases granted to others not interfering\nin any material respect with the business of the Company or any of its Subsidiaries;\n
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     (k) any interest of title of a lessor under, and Liens arising from UCC financing\nstatements (or equivalent filings, registrations or agreements in foreign jurisdictions)\nrelating to, leases permitted by this Agreement;\n
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     (l) Liens deemed to exist in connection with Investments in repurchase agreements\npermitted under Section 8.02;\n
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     (m) normal and customary rights of setoff upon deposits of cash in favor of banks or\nother depository institutions;\n
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     (n) Liens of a collection bank arising under Section 4-210 of the Uniform Commercial\nCode on items in the course of collection;\n
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     (o) Liens of sellers of goods to the Company and any of its Subsidiaries arising under\nArticle 2 of the Uniform Commercial Code or similar provisions of applicable law in the\nordinary course of business, covering only the goods sold and securing only the unpaid\npurchase price for such goods and related expenses;\n
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     (p) Liens on the Property of a Person which becomes a Subsidiary in connection with a\nPermitted Acquisition occurring after the Closing Date that secures Indebtedness permitted\nunder Section 8.03(j), provided that (a) such Liens existed at the time such\nPerson become a Subsidiary and were not created in anticipation of such Permitted\nAcquisition, and (b) no such Lien is spread to cover any additional Property (other than\nproceeds of the collateral originally subject to such Lien in accordance with the instrument\ncreating such Lien) after the Closing Date and that the amount of Indebtedness secured\nthereby is not increased;\n
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     (q) Liens granted by Guarantors to Brady Investment Co. that secure intercompany\nIndebtedness permitted by Section 8.03(c); and\n
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     (r) other Liens securing obligations in an aggregate amount not to exceed $5,000,000 at\nany time outstanding.\n
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8.02 Investments.\n
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     Make any Investments, except:\n
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     (a) Investments held by the Company or such Subsidiary in the form of cash or Cash\nEquivalents;\n
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     (b) Investments existing as of the Closing Date and set forth in Schedule 8.02;\n
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     (c) Investments in any Person that is a Loan Party prior to giving effect to such\nInvestment;\n
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     (d) Investments by any Subsidiary of the Company that is not a Loan Party in any other\nSubsidiary of the Company that is not a Loan Party;\n
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     (e) Investments consisting of extensions of credit in the nature of accounts receivable\nor notes receivable arising from the grant of trade credit in the ordinary course of\nbusiness, and Investments (including debt obligations) received in connection with\nbankruptcy or reorganization of suppliers and customers and in settlement of delinquent\nobligations of, and other disputes with, customers and suppliers arising in the ordinary\ncourse of business;\n
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     (f) loans and advances to officers, directors and employees in an amount not to exceed\n$2,000,000 in the aggregate at any time outstanding;\n
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     (g) Guarantees permitted by Section 8.03;\n
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     (h) Permitted Acquisitions;\n
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     (i) Investments by any Loan Party in its Wholly Owned Subsidiaries that are not Loan\nParties so long as such Investments are made in the ordinary course of business and\nconsistent with the parties’ historical practices with respect to the amounts, terms and\nconditions thereof, and are otherwise made in the reasonable business judgment of the Loan\nParties;\n
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     (j) Investments in partnerships, joint ventures and any other non-Wholly Owned\nSubsidiary where the aggregate amount of such Investments outstanding at any one time do not\nexceed 20% of Consolidated Tangible Net Worth, provided that no Loan Party may become a\ngeneral partner in any partnership; and\n
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     (k) Investments of a nature not contemplated in the foregoing clauses in an amount not\nto exceed $10,000,000 in the aggregate at any time outstanding.\n
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8.03 Indebtedness.\n
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     Create, incur, assume or suffer to exist any Indebtedness, except:\n
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     (a) Indebtedness under the Loan Documents;\n
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     (b) Indebtedness of the Company and its Subsidiaries set forth in Schedule 8.03\n(and renewals, refinancings and extensions thereof on terms and conditions not materially\nless favorable to the applicable debtor(s));\n
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     (c) intercompany Indebtedness permitted under Section 8.02;\n
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     (d) obligations (contingent or otherwise) of the Company or any Subsidiary existing or\narising under any Swap Contract, provided that (i) such obligations are (or were)\nentered into by such Person in the ordinary course of business for the purpose of directly\nmitigating risks associated with liabilities, commitments, investments, assets, or property\nheld or reasonably anticipated by such Person, or changes in the value of securities issued\nby such Person, and not for purposes of speculation or taking a “market view;” and (ii) such\nSwap Contract does not contain any provision exonerating the non-defaulting party from its\nobligation to make payments on outstanding transactions to the defaulting party;\n
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     (e) purchase money Indebtedness (including obligations in respect of Sale and Leaseback\nTransactions, Capital Leases or Synthetic Leases) hereafter incurred by the Company or any\nof its Subsidiaries to finance the purchase of fixed assets, and renewals, refinancings and\nextensions thereof, provided that (i) the total of all such Indebtedness for all\nsuch Persons taken together shall not exceed an aggregate principal amount of $25,000,000 at\nany one time outstanding; (ii) such Indebtedness when incurred shall not exceed the purchase\nprice of the asset(s) financed; and (iii) no such Indebtedness shall be refinanced for a\nprincipal amount in excess of the principal balance outstanding thereon at the time of such\nrefinancing;\n
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     (f) unsecured Indebtedness of the Company arising under the Note Purchase Agreement\n(and renewals, refinancings and extensions thereof);\n
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     (g) so long as no Default or Event of Default exists prior to or after giving effect\nthereto, other unsecured Indebtedness;\n
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     (h) Subordinated Indebtedness;\n
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     (i) Guarantees with respect to Indebtedness permitted under clauses (a) through (h) of\nthis Section 8.03; provided that any Guarantees of any Subordinated Indebtedness\nshall be subordinated to the same extent as such Subordinated Indebtedness;\n
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     (j) purchase money Indebtedness (including obligations in respect of Capital Leases,\nSynthetic Leases, mortgages, industrial revenue bonds, industrial development bonds and\nsimilar financings) of a Person which becomes a Subsidiary after the Closing Date pursuant\nto a Permitted Acquisition, provided that (i) such Indebtedness existed at the time\nsuch Person became a Subsidiary and was not created in anticipation thereof and (ii) that\nthe amount of such Indebtedness is not increased; and\n
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     (k) other Indebtedness of a Person which becomes a Subsidiary after the Closing Date\npursuant to a Permitted Acquisition, provided that (i) the aggregate principal\namount of all such Indebtedness does not to exceed $5,000,000 at any one time outstanding,\n(ii) such Indebtedness existed at the time such Person became a Subsidiary and was not\ncreated in anticipation thereof and (iii) that the amount of such Indebtedness is not\nincreased.\n
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8.04 Fundamental Changes.\n
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     Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in\none transaction or in a series of transactions) all or substantially all of its assets (whether now\nowned or hereafter acquired) to or in favor of any Person; provided that, notwithstanding the\nforegoing provisions of this Section 8.04 but subject to the terms of Sections\n7.12, (a) the Company may merge or consolidate with\n
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any of its Subsidiaries provided that the Company shall be the continuing or surviving\ncorporation, (b) any Loan Party (other than the Company) may merge or consolidate with any other\nLoan Party (other than the Company) provided that, if a Borrower is a party to such transaction, a\nBorrower shall be the continuing or surviving Person, (c) any Foreign Subsidiary may be merged or\nconsolidated with or into any Loan Party provided that such Loan Party shall be the continuing or\nsurviving corporation, (d) any Foreign Subsidiary may be merged or consolidated with or into any\nother Foreign Subsidiary, (e) any Subsidiary of the Company may merge with any Person that is not a\nLoan Party in connection with a Permitted Acquisition and (f) any Subsidiary (other than a\nBorrower) may dissolve, liquidate or wind up its affairs at any time provided that such\ndissolution, liquidation or winding up, as applicable, could not have a Material Adverse Effect.\n
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8.05 Dispositions.\n
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     Make any Disposition except:\n
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     (a) Dispositions of inventory in the ordinary course of business;\n
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     (b) Dispositions of machinery and equipment no longer used or useful in the conduct of\nbusiness of the Company and its Subsidiaries;\n
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     (c) Dispositions of Property in the ordinary course of business to the extent that (i) such\nProperty is exchanged for credit against the purchase price of similar replacement Property or (ii)\nthe proceeds of such Disposition are promptly applied to the purchase price of such replacement\nProperty;\n
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     (d) Dispositions of Property to the Company or any Subsidiary; provided, that if the\ntransferor of such Property is a Loan Party (i) the transferee thereof must be a Loan Party or (ii)\nto the extent such transaction constitutes an Investment, such transaction is permitted under\nSection 8.02;\n
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     (e) Dispositions of accounts receivable in connection with the collection or compromise\nthereof;\n
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     (f) Dispositions of Property in the ordinary course of business so long as the Person\nDisposing of such Property applies the proceeds thereof to acquire replacement Property of the same\nor similar nature within 180 days following such Disposition; and\n
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     (g) other Dispositions so long as (i) the consideration paid in connection therewith shall be\nin an amount not less than the fair market value of the Property disposed of, (ii) such Disposition\ndoes not involve the sale or other disposition of a minority equity interest in any Subsidiary,\n(iii) such Disposition does not involve a sale or other disposition of receivables other than\nreceivables owned by or attributable to other Property concurrently being disposed of in a\ntransaction otherwise permitted under this Section 8.05, and (iv) the aggregate net book\nvalue of all of the assets sold or otherwise disposed of by the Company and its Subsidiaries in all\nsuch Dispositions in any fiscal year of the Company shall not exceed 15% of Consolidated Tangible\nNet Worth.\n
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8.06 Restricted Payments.\n
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     Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation\n(contingent or otherwise) to do so, except that:\n
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     (a) each Subsidiary may make Restricted Payments (directly or indirectly) to any Loan\nParty (and, in the case of a Restricted Payment by a non-wholly-owned Subsidiary, to each\nowner of Capital Stock in such Subsidiary on a pro rata basis based on such owner’s\nrespective ownership interests);\n
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     (b) the Company and each Subsidiary may declare and make dividend payments or other\ndistributions payable solely in the Capital Stock of such Person; and\n
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     (c) so long as no Default exists immediately prior and after giving effect thereto, the\nCompany may make other Restricted Payments in an aggregate amount during any fiscal year of\nthe Company not to exceed the sum of (i) $50,000,000 plus (ii) an amount equal to\n75% of Consolidated Net Income for the prior fiscal year of the Company.\n
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8.07 Change in Nature of Business.\n
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     Engage in any material line of business substantially different from those lines of business\nconducted by the Company and its Subsidiaries on the Closing Date or any business substantially\nrelated or incidental thereto.\n
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8.08 Transactions with Affiliates and Insiders.\n
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     Enter into or permit to exist any transaction or series of transactions with any officer,\ndirector or Affiliate of such Person other than (a) advances of working capital to any Loan Party,\n(b) transfers of cash and assets to any Loan Party, (c) intercompany transactions expressly\npermitted by Section 8.02, Section 8.03, Section 8.04, Section 8.05\nor Section 8.06, (d) normal and reasonable compensation and reimbursement of expenses of\nofficers and directors and (e) except as otherwise specifically limited in this Agreement, other\ntransactions which are entered into in the ordinary course of such Person’s business on terms and\nconditions substantially as favorable to such Person as would be obtainable by it in a comparable\narms-length transaction with a Person other than an officer, director or Affiliate.\n
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8.09 Burdensome Agreements.\n
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     (a) Enter into, or permit to exist, any Contractual Obligation that encumbers or restricts the\nability of any such Person to (i) pay dividends or make any other distributions to any Loan Party\non its Capital Stock or with respect to any other interest or participation in, or measured by, its\nprofits, (ii) pay any Indebtedness or other obligation owed to any Loan Party, (iii) make loans or\nadvances to any Loan Party, (iv) sell, lease or transfer any of its Property to any Loan Party, (v)\npledge its Property pursuant to the Loan Documents or any renewals, refinancings, exchanges,\nrefundings or extension thereof or (vi) act as a Loan Party pursuant to the Loan Documents or any\nrenewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of\nthe matters referred to in clauses (i)-(v) above) for (1) this Agreement and the other Loan\nDocuments, (2) any document or instrument governing Indebtedness incurred pursuant to Section\n8.03(e), provided that any such restriction contained therein relates only to the asset\nor assets constructed or acquired in connection therewith, (3) any Permitted Lien or any document\nor instrument governing any Permitted Lien, provided that any such restriction contained\ntherein relates only to the asset or assets subject to such Permitted Lien, (4) the Note Purchase\nAgreement or (5) customary restrictions and conditions contained in any agreement relating to the\nsale of any Property permitted under Section 8.05 pending the consummation of such sale.\n
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     (b) Enter into, or permit to exist, any Contractual Obligation that prohibits or otherwise\nrestricts the existence of any Lien upon any of its Property in favor of the Administrative Agent\n(for the benefit of the Lenders) for the purpose of securing the Obligations, whether now owned or\nhereafter acquired, or requiring the grant of any security for any obligation if such Property is\ngiven as security for the Obligations, except (i) any document or instrument governing Indebtedness\nincurred pursuant to Section 8.03(e), provided that any such restriction contained\ntherein relates only to the asset or assets constructed or acquired in connection therewith, (ii)\nin connection with any Permitted Lien or any document or\n
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instrument governing any Permitted Lien, provided that any such restriction contained\ntherein relates only to the asset or assets subject to such Permitted Lien, (iii) the Note Purchase\nAgreement and (iv) pursuant to customary restrictions and conditions contained in any agreement\nrelating to the sale of any Property permitted under Section 8.05, pending the consummation\nof such sale.\n
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8.10 Use of Proceeds.\n
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     Use the proceeds of any Credit Extension, whether directly or indirectly, and whether\nimmediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of\nRegulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying\nmargin stock or to refund indebtedness originally incurred for such purpose.\n
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8.11 Financial Covenants.\n
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     (a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as of the end\nof any fiscal quarter of the Company to be greater than 3.00:1.0.\n
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     (b) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage\nRatio as of the end of any fiscal quarter of the Company to be less than 3.00:1.0.\n
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8.12 Prepayment of Other Indebtedness, Etc.\n
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     If any Default has occurred and is continuing or would be directly or indirectly caused as a\nresult thereof:\n
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     (a) Amend or modify any of the terms of any Indebtedness of the Company or any Subsidiary\n(other than Indebtedness arising under the Loan Documents) if such amendment or modification would\nadd or change any terms in a manner adverse to the Company or any Subsidiary, or shorten the final\nmaturity or average life to maturity or require any payment to be made sooner than originally\nscheduled or increase the interest rate applicable thereto.\n
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     (b) Make (or give any notice with respect thereto) any voluntary or optional payment or\nprepayment or redemption or acquisition for value of (including without limitation, by way of\ndepositing money or securities with the trustee with respect thereto before due for the purpose of\npaying when due), refund, refinance or exchange of any Indebtedness of the Company or any\nSubsidiary (other than Indebtedness arising under the Loan Documents).\n
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8.13 Organization Documents; Fiscal Year; Legal Name, State of Formation and Form of Entity.\n
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 (a) Amend, modify or change its Organization Documents in a manner adverse to the Lenders.
 
 (b) Change its fiscal year.
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ARTICLE IX\n
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EVENTS OF DEFAULT AND REMEDIES\n\n
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9.01 Events of Default.\n
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     Any of the following shall constitute an Event of Default:\n
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     (a) Non-Payment. Any Loan Party fails to pay (i) when and as required to be\npaid herein, and in the currency required hereunder, any amount of principal of any Loan or\nany L/C Obligation, or (ii) within three days after the same becomes due, any interest on\nany Loan or on any L/C Obligation, or any fee due hereunder, or (iii) within five days after\nthe same becomes due, any other amount payable hereunder or under any other Loan Document;\nor\n
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     (b) Specific Covenants. The Loan Parties fail to perform or observe any term,\ncovenant or agreement contained in any of Section 7.01, 7.02, 7.03,\n7.05, 7.10, 7.11 or 7.12 or Article VIII or\n
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     (c) Other Defaults. Any Loan Party fails to perform or observe any other\ncovenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan\nDocument on its part to be performed or observed and such failure continues for thirty days\nafter the earlier to occur of notice thereof from the Administrative Agent or a Loan Party\nbecoming aware of such failure; or\n
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     (d) Representations and Warranties. Any representation, warranty,\ncertification or statement of fact made or deemed made by or on behalf of a Loan Party\nherein, in any other Loan Document, or in any document delivered in connection herewith or\ntherewith shall be incorrect or misleading in any material respect when made or deemed made;\nor\n
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     (e) Cross-Default. (i) The Company or any Subsidiary (A) fails to make any\npayment when due (whether by scheduled maturity, required prepayment, acceleration, demand,\nor otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder\nand Indebtedness under Swap Contracts) having an aggregate principal amount (including\nundrawn committed or available amounts and including amounts owing to all creditors under\nany combined or syndicated credit arrangement) of more than the Threshold Amount, or (B)\nfails to observe or perform any other agreement or condition relating to any such\nIndebtedness or Guarantee or contained in any instrument or agreement evidencing, securing\nor relating thereto, or any other event occurs, the effect of which default or other event\nis to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or\nbeneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders\nor beneficiary or beneficiaries) to cause, with the giving of notice if required, such\nIndebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or\nredeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem\nsuch Indebtedness to be made, prior to its stated maturity, or such Guarantee to become\npayable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any\nSwap Contract an Early Termination Date (as defined in such Swap Contract) resulting from\n(A) any event of default under such Swap Contract as to which the Company or any Subsidiary\nis the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as\nso defined) under such Swap Contract as to which the Company or any Subsidiary is an\nAffected Party (as so defined) and, in either event, the Swap Termination Value owed by the\nCompany or such Subsidiary as a result thereof is greater than the Threshold Amount; or\n
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     (f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries\ninstitutes or consents to the institution of any proceeding under any Debtor Relief Law, or\nmakes an assignment for the benefit of creditors; or applies for or consents to the\nappointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or\nsimilar officer for it or for all or any material part of its property; or any receiver,\ntrustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed\nwithout the application or consent of such Person and the appointment continues undischarged\nor unstayed for sixty calendar days; or any proceeding under any Debtor Relief Law relating\nto any such Person or to all or any material part of its property is instituted without the\nconsent of such Person and continues undismissed or unstayed for sixty calendar days, or an\norder for relief is entered in any such proceeding; or\n
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     (g) Inability to Pay Debts; Attachment. (i) The Company or any Subsidiary\nbecomes unable or admits in writing its inability or fails generally to pay its debts as\nthey become due, or (ii) any writ or warrant of attachment or execution or similar process\nis issued or levied against all or any material part of the property of any such Person and\nis not released, vacated or fully bonded within thirty days after its issue or levy; or\n
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     (h) Judgments. There is entered against the Company or any Subsidiary (i) one\nor more final judgments or orders for the payment of money in an aggregate amount exceeding\nthe Threshold Amount (to the extent not covered by independent third-party insurance as to\nwhich the insurer does not dispute coverage), or (ii) any one or more non-monetary final\njudgments that have, or could reasonably be expected to have, individually or in the\naggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are\ncommenced by any creditor upon such judgment or order, or (B) there is a period of ten\nconsecutive days during which a stay of enforcement of such judgment, by reason of a pending\nappeal or otherwise, is not in effect; or\n
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     (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or\nMultiemployer Plan which has resulted or could reasonably be expected to result in liability\nof the Company under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC\nin an aggregate amount in excess of the Threshold Amount, or (ii) the Company or any ERISA\nAffiliate fails to pay when due, after the expiration of any applicable grace period, any\ninstallment payment with respect to its withdrawal liability under Section 4201 of ERISA\nunder a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or\n
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     (j) Invalidity of Loan Documents. Any Loan Document, at any time after its\nexecution and delivery and for any reason other than as expressly permitted hereunder or\nsatisfaction in full of all the Obligations, ceases to be in full force and effect; or any\nLoan Party or any other Person contests in any manner the validity or enforceability of any\nLoan Document; or any Loan Party denies that it has any or further liability or obligation\nunder any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or\n
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     (k) Change of Control. There occurs any Change of Control.\n
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9.02 Remedies Upon Event of Default.\n
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     If any Event of Default occurs and is continuing, the Administrative Agent shall, at the\nrequest of, or may, with the consent of, the Required Lenders, take any or all of the following\nactions:\n
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     (a) declare the commitment of each Lender to make Loans and any obligation of the L/C\nIssuer to make L/C Credit Extensions to be terminated, whereupon such commitments and\nobligation shall be terminated;\n
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     (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued\nand unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan\nDocument to be immediately due and payable, without presentment, demand, protest or other\nnotice of any kind, all of which are hereby expressly waived by the Borrowers;\n
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     (c) require that the Borrowers Cash Collateralize the L/C Obligations (in an amount\nequal to the then Outstanding Amount thereof); and\n
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     (d) exercise on behalf of itself and the Lenders all rights and remedies available to\nit and the Lenders under the Loan Documents or applicable law;\n
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provided, however, that upon the occurrence of an entry of an order for relief with\nrespect to any Borrower under the Bankruptcy Code of the United States, the obligation of each\nLender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall\nautomatically terminate, the unpaid principal amount of all outstanding Loans and all interest and\nother amounts as aforesaid shall automatically become due and payable, and the obligation of the\nBorrowers to Cash Collateralize the L/C Obligations as aforesaid shall automatically become\neffective, in each case without further act of the Administrative Agent or any Lender.\n
\n\n\n
9.03 Application of Funds.\n
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     After the exercise of remedies provided for in Section 9.02 (or after the Loans have\nautomatically become immediately due and payable and the L/C Obligations have automatically been\nrequired to be Cash Collateralized as set forth in the proviso to Section 9.02), any\namounts received on account of the Obligations shall be applied by the Administrative Agent in the\nfollowing order:\n
\n\n\n
First, to payment of that portion of the Obligations constituting fees, indemnities,\nexpenses and other amounts (including Attorney Costs and amounts payable under Article\nIII) payable to the Administrative Agent in its capacity as such;\n
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Second, to payment of that portion of the Obligations constituting fees, indemnities\nand other amounts (other than principal and interest) payable to the Lenders (including\nAttorney Costs and amounts payable under Article III), ratably among them in\nproportion to the amounts described in this clause Second payable to them;\n
\n\n\n
Third, to payment of that portion of the Obligations constituting accrued and unpaid\ninterest on the Loans and L/C Borrowings and fees, premiums and scheduled periodic payments,\nand any interest accrued thereon, due under any Swap Contract between any Loan Party and any\nLender, or any Affiliate of a Lender, to the extent such Swap Contract is permitted by\nSection 8.03(d), ratably among the Lenders (and, in the case of such Swap Contracts,\nAffiliates of Lenders) in proportion to the respective amounts described in this clause\nThird held by them;\n
\n\n\n
Fourth, to (a) payment of that portion of the Obligations constituting unpaid\nprincipal of the Loans and L/C Borrowings, (b) payment of breakage, termination or other\npayments, and any interest accrued thereon, due under any Swap Contract between any Loan\nParty and any Lender, or any Affiliate of a Lender, to the extent such Swap Contract is\npermitted by Section 8.03(d), (c) payments of amounts due under any Treasury\nManagement Agreement between any Loan\n
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Party and any Lender, or any Affiliate of a Lender and (d) Cash Collateralize that portion of L/C\nObligations comprised of the aggregate undrawn amount of Letters of Credit, ratably among\nthe Lenders (and, in the case of such Swap Contracts, Affiliates of Lenders) in proportion\nto the respective amounts described in this clause Fourth held by them; and\n
\n\n\n
Last, the balance, if any, after all of the Obligations have been indefeasibly paid\nin full, to the Borrowers or as otherwise required by Law.\n
\n\n
     Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn\namount of Letters of Credit pursuant to clause Fourth above shall be applied to satisfy\ndrawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash\nCollateral after all Letters of Credit have either been fully drawn or expired, such remaining\namount shall be applied to the other Obligations, if any, in the order set forth above.\n
\n\n
ARTICLE X\n
\n\n\n
ADMINISTRATIVE AGENT\n\n
\n\n
10.01 Appointment and Authority.\n
\n\n\n
     Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on\nits behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes\nthe Administrative Agent to take such actions on its behalf and to exercise such powers as are\ndelegated to the Administrative Agent by the terms hereof or thereof, together with such actions\nand powers as are reasonably incidental thereto. The provisions of this Article are solely for the\nbenefit of the Administrative Agent, the Lenders and the L/C Issuer, and no Loan Party shall have\nrights as a third party beneficiary of any of such provisions.\n
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10.02 Rights as a Lender.\n
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     The Person serving as the Administrative Agent hereunder shall have the same rights and powers\nin its capacity as a Lender as any other Lender and may exercise the same as though it were not the\nAdministrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated\nor unless the context otherwise requires, include the Person serving as the Administrative Agent\nhereunder in its individual capacity. Such Person and its Affiliates may accept deposits from,\nlend money to, act as the financial advisor or in any other advisory capacity for and generally\nengage in any kind of business with any Loan Party or any Subsidiary or other Affiliate thereof as\nif such Person were not the Administrative Agent hereunder and without any duty to account therefor\nto the Lenders.\n
\n\n
10.03 Exculpatory Provisions.\n
\n\n\n
     The Administrative Agent shall not have any duties or obligations except those expressly set\nforth herein and in the other Loan Documents. Without limiting the generality of the foregoing,\nthe Administrative Agent:\n
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     (a) shall not be subject to any fiduciary or other implied duties, regardless of\nwhether a Default has occurred and is continuing;\n
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     (b) shall not have any duty to take any discretionary action or exercise any\ndiscretionary powers, except discretionary rights and powers expressly contemplated hereby\nor by\n
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the other Loan Documents that the Administrative Agent is required to exercise as\ndirected in writing by the Required Lenders (or such other number or percentage of the\nLenders as shall be expressly provided for herein or in the other Loan Documents),\nprovided that the Administrative Agent shall not be required to take any action\nthat, in its opinion or the opinion of its counsel, may expose the Administrative Agent to\nliability or that is contrary to any Loan Document or applicable law; and\n
\n\n\n
     (c) shall not, except as expressly set forth herein and in the other Loan Documents,\nhave any duty to disclose, and shall not be liable for the failure to disclose, any\ninformation relating to any Loan Party or any of its Affiliates that is communicated to or\nobtained by the Person serving as the Administrative Agent or any of its Affiliates in any\ncapacity.\n
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     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with\nthe consent or at the request of the Required Lenders (or such other number or percentage of the\nLenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be\nnecessary, under the circumstances as provided in Sections 11.01 and 9.02) or (ii)\nin the absence of its own gross negligence or willful misconduct. The Administrative Agent shall\nbe deemed not to have knowledge of any Default unless and until notice describing such Default is\ngiven to the Administrative Agent by the Company, a Lender or the L/C Issuer.\n
\n\n
     The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire\ninto (i) any statement, warranty or representation made in or in connection with this Agreement or\nany other Loan Document, (ii) the contents of any certificate, report or other document delivered\nhereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance\nof any of the covenants, agreements or other terms or conditions set forth herein or therein or the\noccurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this\nAgreement, any other Loan Document or any other agreement, instrument or document or (v) the\nsatisfaction of any condition set forth in Article V or elsewhere herein, other than to\nconfirm receipt of items expressly required to be delivered to the Administrative Agent.\n
\n\n
10.04 Reliance by Administrative Agent.\n
\n\n\n
     The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for\nrelying upon, any notice, request, certificate, consent, statement, instrument, document or other\nwriting (including any electronic message, Internet or intranet website posting or other\ndistribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated\nby the proper Person. The Administrative Agent also may rely upon any statement made to it orally\nor by telephone and believed by it to have been made by the proper Person, and shall not incur any\nliability for relying thereon. In determining compliance with any condition hereunder to the\nmaking of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the\nsatisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such\ncondition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall\nhave received notice to the contrary from such Lender or the L/C Issuer prior to the making of such\nLoan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal\ncounsel (who may be counsel for the Loan Parties), independent accountants and other experts\nselected by it, and shall not be liable for any action taken or not taken by it in accordance with\nthe advice of any such counsel, accountants or experts.\n
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10.05 Delegation of Duties.\n
\n\n\n
     The Administrative Agent may perform any and all of its duties and exercise its rights and\npowers hereunder or under any other Loan Document by or through any one or more sub-agents\nappointed by the\n
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Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all\nof its duties and exercise its rights and powers by or through their respective Related Parties.\nThe exculpatory provisions of this Article shall apply to any such sub-agent and to the Related\nParties of the Administrative Agent and any such sub-agent, and shall apply to their respective\nactivities in connection with the syndication of the credit facilities provided for herein as well\nas activities as Administrative Agent.\n
\n\n\n
10.06 Resignation of Administrative Agent.\n
\n\n\n
     The Administrative Agent may at any time give notice of its resignation to the Lenders, the\nL/C Issuer and the Company. Upon receipt of any such notice of resignation, the Required Lenders\nshall have the right, with the consent of Company so long as no Default exists (such consent of the\nCompany not to be unreasonably withheld or delayed), to appoint a successor, which shall be a bank\nwith an office in the United States, or an Affiliate of any such bank with an office in the United\nStates. If no such successor shall have been so appointed by the Required Lenders and shall have\naccepted such appointment within 30 days after the retiring Administrative Agent gives notice of\nits resignation, then the retiring Administrative Agent may on behalf of the Lenders and the L/C\nIssuer, appoint a successor Administrative Agent meeting the qualifications set forth above;\nprovided that if the Administrative Agent shall notify the Company and the Lenders that no\nqualifying Person has accepted such appointment, then such resignation shall nonetheless become\neffective in accordance with such notice and (a) the retiring Administrative Agent shall be\ndischarged from its duties and obligations hereunder and under the other Loan Documents (except\nthat in the case of any collateral security held by the Administrative Agent on behalf of the\nLenders or the L/C Issuer under any of the Loan Documents, the retiring Administrative Agent shall\ncontinue to hold such collateral security until such time as a successor Administrative Agent is\nappointed) and (b) all payments, communications and determinations provided to be made by, to or\nthrough the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer\ndirectly, until such time as the Required Lenders appoint a successor Administrative Agent as\nprovided for above in this Section. Upon the acceptance of a successor’s appointment as\nAdministrative Agent hereunder, such successor shall succeed to and become vested with all of the\nrights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the\nretiring Administrative Agent shall be discharged from all of its duties and obligations hereunder\nor under the other Loan Documents (if not already discharged therefrom as provided above in this\nSection). The fees payable by the Company to a successor Administrative Agent shall be the same as\nthose payable to its predecessor unless otherwise agreed between the Company and such successor.\nAfter the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents,\nthe provisions of this Article, Section 11.04 and Section 11.05 shall continue in\neffect for the benefit of such retiring Administrative Agent, its sub-agents and their respective\nRelated Parties in respect of any actions taken or omitted to be taken by any of them while the\nretiring Administrative Agent was acting as Administrative Agent.\n
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     Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also\nconstitute its resignation as L/C Issuer and Swing Line Lender. Upon the acceptance of a\nsuccessor’s appointment as Administrative Agent hereunder, (i) such successor shall succeed to and\nbecome vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer and\nSwing Line Lender, (ii) the retiring L/C Issuer and Swing Line Lender shall be discharged from all\nof their respective duties and obligations hereunder or under the other Loan Documents, and (iii)\nthe successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit,\nif any, outstanding at the time of such succession or make other arrangements satisfactory to the\nretiring L/C Issuer to effectively assume the obligations of the retiring L/C Issuer with respect\nto such Letters of Credit.\n
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10.07 Non-Reliance on Administrative Agent and Other Lenders.\n
\n\n\n
     Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance\nupon the Administrative Agent or any other Lender or any of their Related Parties and based on such\ndocuments and information as it has deemed appropriate, made its own credit analysis and decision\nto enter into this Agreement. Each Lender and the L/C Issuer also acknowledges that it will,\nindependently and without reliance upon the Administrative Agent or any other Lender or any of\ntheir Related Parties and based on such documents and information as it shall from time to time\ndeem appropriate, continue to make its own decisions in taking or not taking action under or based\nupon this Agreement, any other Loan Document or any related agreement or any document furnished\nhereunder or thereunder.\n
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10.08 No Other Duties; Etc.\n
\n\n\n
     Anything herein to the contrary notwithstanding, none of the bookrunners, arrangers,\nsyndication agents, documentation agents or co-agents shall have any powers, duties or\nresponsibilities under this Agreement or any of the other Loan Documents, except in its capacity,\nas applicable, as the Administrative Agent, a Lender or the L/C Issuer hereunder.\n
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10.09 Administrative Agent May File Proofs of Claim.\n
\n\n\n
     In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial\nproceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the\nprincipal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by\ndeclaration or otherwise and irrespective of whether the Administrative Agent shall have made any\ndemand on any Borrower) shall be entitled and empowered, by intervention in such proceeding or\notherwise:\n
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     (a) to file and prove a claim for the whole amount of the principal and interest owing\nand unpaid in respect of the Loans, L/C Obligations and all other Obligations arising under\nthe Loan Documents that are owing and unpaid and to file such other documents as may be\nnecessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the\nAdministrative Agent (including any claim for the reasonable compensation, expenses,\ndisbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and\ntheir respective agents and counsel and all other amounts due the Lenders, the L/C Issuer\nand the Administrative Agent under Sections 2.03(i) and (j), 2.09,\n11.04 and 11.05) allowed in such judicial proceeding; and\n
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     (b) to collect and receive any monies or other property payable or deliverable on any\nsuch claims and to distribute the same;\n
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and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official\nin any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such\npayments to the Administrative Agent and, if the Administrative Agent shall consent to the making\nof such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any\namount due for the reasonable compensation, expenses, disbursements and advances of the\nAdministrative Agent and its agents and counsel, and any other amounts due the Administrative Agent\nunder Sections 2.09, 11.04 and 11.05.\n
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     Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or\nconsent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization,\narrangement, adjustment or composition affecting the Obligations or the rights of any Lender or the\nL/C Issuer to authorize the Administrative Agent to vote in respect of the claim of any Lender or\nthe L/C Issuer in any such proceeding.\n
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10.10 Guaranty Matters.\n
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     The Lenders and the L/C Issuer irrevocably authorize the Administrative Agent, at its option\nand in its discretion to release any Guarantor from its obligations under the Guaranty if such\nPerson ceases to be a Subsidiary as a result of a transaction permitted hereunder. Upon request by\nthe Administrative Agent at any time, the Required Lenders will confirm in writing the\nAdministrative Agent’s authority or to release any Guarantor from its obligations under the\nGuaranty, pursuant to this Section 10.10.\n
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ARTICLE XI\n
\n\n\n
MISCELLANEOUS\n\n
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11.01 Amendments, Etc.\n
\n\n\n
     No amendment or waiver of any provision of this Agreement or any other Loan Document, and no\nconsent to any departure by the Borrowers or any other Loan Party therefrom, shall be effective\nunless in writing signed by the Required Lenders and the Loan Parties and acknowledged by the\nAdministrative Agent, and each such waiver or consent shall be effective only in the specific\ninstance and for the specific purpose for which given; provided, however, that no\nsuch amendment, waiver or consent shall:\n
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     (a) extend or increase the Commitment of any Lender (or reinstate any Commitment\nterminated pursuant to Section 9.02) without the written consent of such Lender (it\nbeing understood and agreed that a waiver of any condition precedent set forth in\nSection 5.02 or of any Default or a mandatory reduction in Commitments is not\nconsidered an extension or increase in Commitments of any Lender);\n
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     (b) postpone any date fixed by this Agreement or any other Loan Document for any\npayment of principal (excluding mandatory prepayments), interest, fees or other amounts due\nto the Lenders (or any of them) or any scheduled or mandatory reduction of the Aggregate\nRevolving Commitments hereunder or under any other Loan Document without the written consent\nof each Lender directly affected thereby;\n
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     (c) reduce the principal of, or the rate of interest specified herein on, any Loan or\nL/C Borrowing, or any fees or other amounts payable hereunder or under any other Loan\nDocument without the written consent of each Lender directly affected thereby;\nprovided, however, that only the consent of the Required Lenders shall be\nnecessary to amend the definition of “Default Rate” or to waive any obligation of any\nBorrowers to pay interest or Letter of Credit Fees at the Default Rate;\n
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     (d) change Section 2.13 or Section 9.03 in a manner that would alter\nthe pro rata sharing of payments required thereby without the written consent of each Lender\ndirectly affected thereby;\n
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     (e) amend Section 1.07 or the definition of “Alternative Currency” without the\nwritten consent of each Lender;\n
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     (f) change any provision of this Section or the definition of “Required Lenders” or any\nother provision hereof specifying the number or percentage of Lenders required to amend,\nwaive or otherwise modify any rights hereunder or make any determination or grant any\nconsent hereunder without the written consent of each Lender directly affected thereby; or\n
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     (g) release the Company or, except in connection with a merger or consolidation\npermitted under Section 8.04 or a Disposition permitted under Section 8.05,\nany other Borrower or all or substantially all of the Guarantors, from its or their\nobligations under the Loan Documents without the written consent of each Lender directly\naffected thereby;\n
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and, provided further, that (i) no amendment, waiver or consent shall, unless in\nwriting and signed by the L/C Issuer in addition to the Lenders required above, affect the rights\nor duties of the L/C Issuer under this Agreement or any Issuer Documents relating to any Letter of\nCredit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing\nand signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or\nduties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall,\nunless in writing and signed by the Administrative Agent in addition to the Lenders required above,\naffect the rights or duties of the Administrative Agent under this Agreement or any other Loan\nDocument; and (iv) the Fee Letter may be amended, or rights or privileges thereunder waived, in a\nwriting executed only by the parties thereto. Notwithstanding anything to the contrary herein, no\nDefaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent\nhereunder, except that the Commitment of such Lender may not be increased or extended without the\nconsent of such Lender.\n
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Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances\nas set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any bankruptcy\nreorganization plan that affects the Loans, and each Lender acknowledges that the provisions of\nSection 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein\nand (y) the Required Lenders shall determine whether or not to allow a Loan Party to use cash\ncollateral in the context of a bankruptcy or insolvency proceeding and such determination shall be\nbinding on all of the Lenders.\n
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11.02 Notices; Effectiveness; Electronic Communications.\n
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     (a) Notices Generally. Except in the case of notices and other communications\nexpressly permitted to be given by telephone (and except as provided in subsection (b) below), all\nnotices and other communications provided for herein shall be in writing and shall be delivered by\nhand or overnight courier service, mailed by certified or registered mail or sent by telecopier as\nfollows, and all notices and other communications expressly permitted hereunder to be given by\ntelephone shall be made to the applicable telephone number, as follows:\n
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     (i) if to a Loan Party, the Administrative Agent, the L/C Issuer or the Swing Line\nLender, to the address, telecopier number, electronic mail address or telephone number\nspecified for such Person on Schedule 11.02; and\n
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     (ii) if to any other Lender, to the address, telecopier number, electronic mail address\nor telephone number specified in its Administrative Questionnaire.\n
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     Notices sent by hand or overnight courier service, or mailed by certified or registered mail,\nshall be deemed to have been given when received; notices sent by telecopier shall be deemed to\nhave been given when sent (except that, if not given during normal business hours for the\nrecipient, shall be deemed to have been given at the opening of business on the next business day\nfor the recipient). Notices delivered through electronic communications to the extent provided in\nsubsection (b) below, shall be effective as provided in such subsection (b).\n
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     (b) Electronic Communications. Notices and other communications to the Lenders and\nthe L/C Issuer hereunder may be delivered or furnished by electronic communication (including\ne-mail and\n
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Internet or intranet websites) pursuant to procedures approved by the Administrative Agent,\nprovided that the foregoing shall not apply to notices to any Lender or the L/C Issuer\npursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the\nAdministrative Agent that it is incapable of receiving notices under such Article by electronic\ncommunication. The Administrative Agent or the Company (on behalf of itself and the other Loan\nParties) may, in its discretion, agree to accept notices and other communications to it hereunder\nby electronic communications pursuant to procedures approved by it, provided that approval\nof such procedures may be limited to particular notices or communications.\n
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     Unless the Administrative Agent otherwise prescribes, (i) notices and other communications\nsent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement\nfrom the intended recipient (such as by the “return receipt requested” function, as available,\nreturn e-mail or other written acknowledgement), provided that if such notice or other\ncommunication is not sent during the normal business hours of the recipient, such notice or\ncommunication shall be deemed to have been sent at the opening of business on the next business day\nfor the recipient, and (ii) notices or communications posted to an Internet or intranet website\nshall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as\ndescribed in the foregoing clause (i) of notification that such notice or communication is\navailable and identifying the website address therefor.\n
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     (c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT\nPARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMPANY MATERIALS OR\nTHE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE\nCOMPANY MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY\nOF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR\nFREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE\nCOMPANY MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its\nRelated Parties (collectively, the “Agent Parties”) have any liability to any Borrower, any\nLender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of\nany kind (whether in tort, contract or otherwise) arising out of any Borrower’s or the\nAdministrative Agent’s transmission of Company Materials through the Internet, except to the extent\nthat such losses, claims, damages, liabilities or expenses are determined to have resulted from the\ngross negligence or willful misconduct of such Agent Party; provided, however, that\nin no event shall any Agent Party have any liability to any Borrower, any Lender, the L/C Issuer or\nany other Person for indirect, special, incidental, consequential or punitive damages (as opposed\nto direct or actual damages).\n
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     (d) Change of Address, Etc. Each of the Loan Parties, the Administrative Agent, the\nL/C Issuer and the Swing Line Lender may change its address, telecopier or telephone number for\nnotices and other communications hereunder by notice to the other parties hereto. Each other\nLender may change its address, telecopier or telephone number for notices and other communications\nhereunder by notice to the Company, the Administrative Agent, the L/C Issuer and the Swing Line\nLender. In addition, each Lender agrees to notify the Administrative Agent from time to time to\nensure that the Administrative Agent has on record (i) an effective address, contact name,\ntelephone number, telecopier number and electronic mail address to which notices and other\ncommunications may be sent and (ii) accurate wire instructions for such Lender.\n
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     (e) Reliance by Administrative Agent, L/C Issuer and Lenders. The Administrative\nAgent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including\ntelephonic Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of any Loan\nParty even if (i) such notices were not made in a manner specified herein, were incomplete or were\nnot preceded or followed by any other form of notice specified herein, or (ii) the terms thereof,\nas understood by the\n
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recipient, varied from any confirmation thereof. The Loan Parties shall indemnify the\nAdministrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all\nlosses, costs, expenses and liabilities resulting from the reliance by such Person on each notice\npurportedly given by or on behalf of a Loan Party, other than such losses, costs, expenses and\nliabilities resulting from such Person’s gross negligence or willful misconduct.. All telephonic\nnotices to and other telephonic communications with the Administrative Agent may be recorded by the\nAdministrative Agent, and each of the parties hereto hereby consents to such recording.\n
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11.03 No Waiver; Cumulative Remedies.\n
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     No failure by any Lender or the Administrative Agent to exercise, and no delay by any such\nPerson in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver\nthereof; nor shall any single or partial exercise of any right, remedy, power or privilege\nhereunder preclude any other or further exercise thereof or the exercise of any other right,\nremedy, power or privilege. The rights, remedies, powers and privileges herein provided are\ncumulative and not exclusive of any rights, remedies, powers and privileges provided by law.\n
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11.04 Expenses.\n
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     (a) Costs and Expenses. The Loan Parties shall pay (i) all reasonable out-of-pocket\nexpenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees,\ncharges and disbursements of counsel for the Administrative Agent), in connection with the\nsyndication of the credit facilities provided for herein, the preparation, negotiation, execution,\ndelivery and administration of this Agreement and the other Loan Documents or any amendments,\nmodifications or waivers of the provisions hereof or thereof (whether or not the transactions\ncontemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses\nincurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any\nLetter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred\nby the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and\ndisbursements of any counsel for the Administrative Agent, any Lender or the L/C Issuer), and shall\npay all fees and time charges for attorneys who may be employees of the Administrative Agent, any\nLender or the L/C Issuer, in connection with the enforcement or protection of its rights (A) in\nconnection with this Agreement and the other Loan Documents, including its rights under this\nSection, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including\nall such out-of-pocket expenses incurred during any workout, restructuring or negotiations in\nrespect of such Loans or Letters of Credit.\n
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     (b) Reimbursement by Lenders. To the extent that the Loan Parties for any reason fail\nto indefeasibly pay any amount required under subsection (a) of this Section to be paid by them to\nthe Administrative Agent (or any sub-agent thereof), the L/C Issuer or any Related Party of any of\nthe foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such\nsub-agent), the L/C Issuer or such Related Party, as the case may be, such Lender’s Pro Rata Share\n(determined as of the time that the applicable unreimbursed expense or indemnity payment is sought)\nof such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim,\ndamage, liability or related expense, as the case may be, was incurred by or asserted against the\nAdministrative Agent (or any such sub-agent) or the L/C Issuer in its capacity as such, or against\nany Related Party of any of the foregoing acting for the Administrative Agent (or any such\nsub-agent) or L/C Issuer in connection with such capacity. The obligations of the Lenders under\nthis subsection (b) are subject to the provisions of Section 2.12(e).\n
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     (c) Payments. All amounts due under this Section shall be payable not later than ten\nBusiness Days after demand therefor.\n
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     (d) Survival. The agreements in this Section shall survive the resignation of the\nAdministrative Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the\ntermination of the Commitments and the repayment, satisfaction or discharge of all the other\nObligations.\n
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11.05 Indemnification; Damage Waiver.\n
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     (a) Indemnity. The Loan Parties shall indemnify the Administrative Agent (and any\nsub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of the foregoing\nPersons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee\nharmless from, any and all losses, claims, damages, liabilities and related expenses (including\nAttorney Costs), incurred by any Indemnitee or asserted against any Indemnitee by any third party\nor by any Loan Party arising out of, in connection with, or as a result of (i) the execution or\ndelivery of this Agreement, any other Loan Document or any agreement or instrument contemplated\nhereby or thereby, the performance by the parties hereto of their respective obligations hereunder\nor thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the\ncase of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the\nadministration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or\nthe use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor\na demand for payment under a Letter of Credit if the documents presented in connection with such\ndemand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged\npresence or release of Hazardous Materials on or from any property owned or operated by a Loan\nParty or any of its Subsidiaries, or any Environmental Liability related in any way to a Loan Party\nor any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or\nproceeding relating to any of the foregoing, whether based on contract, tort or any other theory,\nwhether brought by a third party or by any Loan Party, and regardless of whether any Indemnitee is\na party thereto; provided that such indemnity shall not, as to any Indemnitee, be available\nto the extent that such losses, claims, damages, liabilities or related expenses are determined to\nhave resulted from the gross negligence or willful misconduct of such Indemnitee, if such Loan\nParty has obtained a final and nonappealable judgment in its favor on such claim as determined by a\ncourt of competent jurisdiction.\n
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     (b) Reimbursement by Lenders. To the extent that the Loan Parties for any reason fail\nto indefeasibly pay any amount required under this Section to be paid by them to the Administrative\nAgent (or any sub-agent thereof), the L/C Issuer or any Related Party of any of the foregoing, each\nLender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer\nor such Related Party, as the case may be, such Lender’s Pro Rata Share (determined as of the time\nthat the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount,\nprovided that the unreimbursed expense or indemnified loss, claim, damage, liability or\nrelated expense, as the case may be, was incurred by or asserted against the Administrative Agent\n(or any such sub-agent) or the L/C Issuer in its capacity as such, or against any Related Party of\nany of the foregoing acting for the Administrative Agent (or any such sub-agent) or L/C Issuer in\nconnection with such capacity. The obligations of the Lenders under this subsection (b) are\nsubject to the provisions of Section 2.12(e).\n
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     (c) Waiver of Consequential Damages, Etc. To the fullest extent permitted by\napplicable law, no Loan Party shall assert, and each Loan Party hereby waives, any claim against\nany Indemnitee, on any theory of liability, for special, indirect, consequential or punitive\ndamages (as opposed to direct or actual damages) arising out of, in connection with, or as a result\nof, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the\ntransactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the\nproceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any\ndamages arising from the use by unintended recipients of any information or other materials\ndistributed to such unintended recipients by such Indemnitee through telecommunications, electronic\nor other information transmission systems in connection with this\n
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Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other\nthan for direct or actual damages resulting from the gross negligence or willful misconduct of such\nIndemnitee.\n
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     (d) Payments. All amounts due under this Section shall be payable not later than ten\nBusiness Days after demand therefor.\n
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     (e) Survival. The agreements in this Section shall survive the resignation of the\nAdministrative Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the\ntermination of the Commitments and the repayment, satisfaction or discharge of all the other\nObligations.\n
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11.06 Payments Set Aside.\n
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     To the extent that any payment by or on behalf of any Loan Party is made to the Administrative\nAgent or any Lender, or the Administrative Agent or any Lender exercises its right of set-off, and\nsuch payment or the proceeds of such set-off or any part thereof is subsequently invalidated,\ndeclared to be fraudulent or preferential, set aside or required (including pursuant to any\nsettlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid\nto a trustee, receiver or any other party, in connection with any proceeding under any Debtor\nRelief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof\noriginally intended to be satisfied shall be revived and continued in full force and effect as if\nsuch payment had not been made or such set-off had not occurred, and (b) each Lender severally\nagrees to pay to the Administrative Agent upon demand its applicable share of any amount so\nrecovered from or repaid by the Administrative Agent, plus interest thereon from the date of such\ndemand to the date such payment is made at a rate per annum equal to the applicable Overnight Rate\nfrom time to time in effect, in the applicable currency of such recovery or payment.\n
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11.07 Successors and Assigns.\n
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     (a) The provisions of this Agreement and the other Loan Documents shall be binding upon and\ninure to the benefit of the parties hereto and thereto and their respective successors and assigns\npermitted hereby, except that the Company may not assign or otherwise transfer any of its rights or\nobligations hereunder or thereunder without the prior written consent of each Lender and no Lender\nmay assign or otherwise transfer any of its rights or obligations hereunder except (i) to an\nassignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of\nparticipation in accordance with the provisions of subsection (d) of this Section or (iii) by way\nof pledge or assignment of a security interest subject to the restrictions of subsection (f) of\nthis Section (and any other attempted assignment or transfer by any party hereto shall be null and\nvoid). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any\nPerson (other than the parties hereto, their respective successors and assigns permitted hereby,\nParticipants to the extent provided in subsection (d) of this Section and, to the extent expressly\ncontemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and\nthe Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.\n
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     (b) Any Lender may at any time assign to one or more assignees all or a portion of its rights\nand obligations under this Agreement and the other Loan Documents (including all or a portion of\nits Commitment and the Loans (including for purposes of this subsection (b), participations in L/C\nObligations and in Swing Line Loans) at the time owing to it); provided that any such\nassignment shall be subject to the following conditions:\n
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     (i) Minimum Amounts.\n
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          (A) in the case of an assignment of the entire remaining amount of the assigning\nLender’s Commitment and the related Loans at the time owing to it or in the case of an\nassignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need\nbe assigned; and\n
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          (B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate\namount of the Commitment (which for this purpose includes Loans outstanding thereunder) or,\nif the Commitment is not then in effect, the principal outstanding balance of the Loans of\nthe assigning Lender subject to each such assignment, determined as of the date the\nAssignment and Assumption with respect to such assignment is delivered to the Administrative\nAgent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade\nDate, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long\nas no Event of Default has occurred and is continuing, the Company otherwise consents (each\nsuch consent not to be unreasonably withheld or delayed); provided, however,\nthat concurrent assignments to members of an Assignee Group and concurrent assignments from\nmembers of an Assignee Group to a single assignee (or to an assignee and members of its\nAssignee Group) will be treated as a single assignment for purposes of determining whether\nsuch minimum amount has been met.\n
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     (ii) Proportionate Amounts. Each partial assignment shall be made as an\nassignment of a proportionate part of all the assigning Lender’s Loans and Commitments, and\nrights and obligations with respect thereto, assigned, except that this clause (ii) shall\nnot apply to the Swing Line Lender’s rights and obligations in respect of Swing Line Loans;\n
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     (iii) Required Consents. No consent shall be required for any assignment\nexcept to the extent required by subsection (b)(i)(B) of this Section and, in addition:\n
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     (A) the consent of the Company (such consent not to be unreasonably withheld or\ndelayed) shall be required unless (1) an Event of Default has occurred and is\ncontinuing at the time of such assignment or (2) such assignment is to a Lender, an\nAffiliate of a Lender or an Approved Fund;\n
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     (B) the consent of the Administrative Agent (such consent not to be\nunreasonably withheld or delayed) shall be required for assignments in respect of\nany Revolving Commitment if such assignment is to a Person that is not a Lender with\na Commitment in respect of the Commitment subject to such assignment, an Affiliate\nof such Lender or an Approved Fund with respect to such Lender; and\n
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     (C) the consent of the L/C Issuer (such consent not to be unreasonably withheld\nor delayed) shall be required for any assignment that increases the obligation of\nthe assignee to participate in exposure under one or more Letters of Credit (whether\nor not then outstanding); and\n
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     (D) the consent of the Swing Line Lender (such consent not to be unreasonably\nwithheld or delayed) shall be required for any assignment in respect of Revolving\nLoans and Revolving Commitments.\n
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     (iv) Assignment and Assumption. The parties to each assignment shall execute\nand deliver to the Administrative Agent an Assignment and Assumption, together with a\nprocessing and recordation fee in the amount of $3,500; provided, however,\nthat the Administrative Agent may, in its sole discretion, elect to waive such processing\nand recordation fee in the case of any\n
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assignment. The assignee, if it shall not be a Lender, shall deliver to the Administrative\nAgent an Administrative Questionnaire.\n
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     (v) No Assignment to Company. No such assignment shall be made to the Company\nor any of the Company’s Affiliates or Subsidiaries.\n
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     (vi) No Assignment to Natural Persons. No such assignment shall be made to a\nnatural person.\n
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     (vii) No Assignment Resulting in Additional Indemnified Taxes. No such\nassignment shall be made to any Person that, through its Lending Offices, is not capable of\nlending the applicable Alternative Currencies to the relevant Borrowers without the\nimposition of any additional Taxes for which the Loan Parties are required to indemnify the\nAdministrative Agent and the Lenders pursuant to Section 3.01.\n
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Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c)\nof this Section, from and after the effective date specified in each Assignment and Assumption, the\nassignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned\nby such Assignment and Assumption, have the rights and obligations of a Lender under this\nAgreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by\nsuch Assignment and Assumption, be released from its obligations under this Agreement (and, in the\ncase of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations\nunder this Agreement, such Lender shall cease to be a party hereto but shall continue to be\nentitled to the benefits of Sections 3.01, 3.04, 3.05, 11.04 and\n11.05 with respect to facts and circumstances occurring prior to the effective date of such\nassignment). Upon request, each Borrower (at its expense) shall execute and deliver a Note to the\nassignee Lender. Any assignment or transfer by a Lender of rights or obligations under this\nAgreement that does not comply with this subsection shall be treated for purposes of this Agreement\nas a sale by such Lender of a participation in such rights and obligations in accordance with\nsubsection (d) of this Section.\n
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     (c) The Administrative Agent, acting solely for this purpose as an agent of the Borrowers,\nshall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption\ndelivered to it and a register for the recordation of the names and addresses of the Lenders, and\nthe Commitments of, and principal amounts of the Loans and L/C Obligations owing to, each Lender\npursuant to the terms hereof from time to time (the “Register”). The entries in the\nRegister shall be conclusive, and the Borrowers, the Administrative Agent and the Lenders may treat\neach Person whose name is recorded in the Register pursuant to the terms hereof as a Lender\nhereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register\nshall be available for inspection by the Borrowers and any Lender at any reasonable time and from\ntime to time upon reasonable prior notice.\n
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     (d) Any Lender may at any time, without the consent of, or notice to, the Borrowers or the\nAdministrative Agent, sell participations to any Person (other than a natural person or the\nBorrowers or any of the Borrowers’ Affiliates or Subsidiaries) (each, a “Participant”) in\nall or a portion of such Lender’s rights and/or obligations under this Agreement (including all or\na portion of its Commitment and/or the Loans (including such Lender’s participations in L/C\nObligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s\nobligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely\nresponsible to the other parties hereto for the performance of such obligations and (iii) the\nBorrowers, the Administrative Agent and the other Lenders shall continue to deal solely and\ndirectly with such Lender in connection with such Lender’s rights and obligations under this\nAgreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall\nprovide that such Lender shall retain the sole right to enforce this Agreement and to approve any\namendment, modification or waiver of any provision of this Agreement; provided that such\nagreement or instrument may provide\n
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that such Lender will not, without the consent of the Participant, agree to any amendment, waiver\nor other modification described in clauses (a) through (g) of the first proviso to Section\n11.01 that directly affects such Participant. Subject to subsection (e) of this Section, the\nBorrowers agree that each Participant shall be entitled to the benefits of Sections 3.01,\n3.04 and 3.05 to the same extent as if it were a Lender and had acquired its\ninterest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law,\neach Participant also shall be entitled to the benefits of Section 11.09 as though it were\na Lender, provided such Participant agrees to be subject to Section 2.13 as though\nit were a Lender.\n
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     (e) A Participant shall not be entitled to receive any greater payment under Section\n3.01 or 3.04 than the applicable Lender would have been entitled to receive with\nrespect to the participation sold to such Participant, unless the sale of the participation to such\nParticipant is made with the Company’s prior written consent. A Participant that would be a\nForeign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01\nunless the Company is notified of the participation sold to such Participant and such Participant\nagrees, for the benefit of the Borrowers, to comply with Section 11.15 as though it were a\nLender.\n
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     (f) Any Lender may at any time pledge or assign a security interest in all or any portion of\nits rights under this Agreement (including under its Note, if any) to secure obligations of such\nLender, including any pledge or assignment to secure obligations to a Federal Reserve Bank;\nprovided that no such pledge or assignment shall release such Lender from any of its\nobligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.\n
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     (g) The words “execution,” “signed,” “signature,” and words of like import in any Assignment\nand Assumption shall be deemed to include electronic signatures or the keeping of records in\nelectronic form, each of which shall be of the same legal effect, validity or enforceability as a\nmanually executed signature or the use of a paper-based recordkeeping system, as the case may be,\nto the extent and as provided for in any applicable law, including the Federal Electronic\nSignatures in Global and National Commerce Act, the New York State Electronic Signatures and\nRecords Act, or any other similar state laws based on the Uniform Electronic Transactions Act.\n
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     (h) Notwithstanding anything to the contrary contained herein, if at any time Bank of America\nassigns all of its Commitment and Loans pursuant to subsection (b) above, Bank of America may, (i)\nupon thirty days’ notice to the Company and the Lenders, resign as L/C Issuer and/or (ii) upon\nthirty days’ notice to the Company, resign as Swing Line Lender. In the event of any such\nresignation as L/C Issuer or Swing Line Lender, the Company shall be entitled to appoint from among\nthe Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided,\nhowever, that no failure by the Company to appoint any such successor shall affect the\nresignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of\nAmerica resigns as L/C Issuer, it shall retain all the rights and obligations of the L/C Issuer\nhereunder with respect to all Letters of Credit outstanding as of the effective date of its\nresignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to\nrequire the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts\npursuant to Section 2.03(c)). If Bank of America resigns as Swing Line Lender, it shall\nretain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line\nLoans made by it and outstanding as of the effective date of such resignation, including the right\nto require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing\nLine Loans pursuant to Section 2.04(c). Upon the appointment of a successor L/C Issuer\nand/or Swing Line Lender, (1) such successor shall succeed to and become vested with all of the\nrights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case\nmay be, and (2) the successor L/C Issuer shall issue letters of credit in substitution for the\nLetters of Credit, if any, outstanding at the time of such succession or make other arrangements\nsatisfactory to Bank of America to effectively assume the obligations of Bank of America with\nrespect to such Letters of Credit.\n
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11.08 Confidentiality.\n
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     Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the\nconfidentiality of the Information (as defined below), except that Information may be disclosed (a)\nto its Affiliates and to its and its Affiliates’ respective partners, directors, officers,\nemployees, agents, advisors and representatives and to any direct or indirect contractual\ncounterparty (or such contractual counterparty’s professional advisor) under any Swap Contract\nrelating to Loans outstanding under this Agreement (it being understood that the Persons to whom\nsuch disclosure is made will be informed of the confidential nature of such Information and\ninstructed to keep such Information confidential), (b) to the extent requested by any regulatory\nauthority purporting to have jurisdiction over it (including any self-regulatory authority, such as\nthe National Association of Insurance Commissioners), (c) to the extent required by applicable laws\nor regulations or by any subpoena or similar legal process, provided that the\nAdministrative Agent or such Lender, as applicable, will, to the extent practical, use reasonable\nefforts to notify the Company prior to such disclosure, (d) to any other party hereto, (e) in\nconnection with the exercise of any remedies hereunder or under any other Loan Document or any\naction or proceeding relating to this Agreement or any other Loan Document or the enforcement of\nrights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the\nsame as those of this Section, to (i) any assignee of or Participant in, or any prospective\nassignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any\nactual or prospective counterparty (or its advisors) to any swap or derivative transaction relating\nto a Loan Party and its obligations, (g) with the consent of the Company or (h) to the extent such\nInformation (x) becomes publicly available other than as a result of a breach of this Section or\n(y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their\nrespective Affiliates on a nonconfidential basis from a source other than the Loan Parties. For\npurposes of this Section, “Information” means all information received from the Company or\nany Subsidiary relating to any of their respective businesses, other than any such information that\nis available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis\nprior to disclosure by the Company or any Subsidiary; provided that, in the case of\ninformation received from the Company or any Subsidiary after the date hereof, such information is\nclearly identified at the time of delivery as confidential. Any Person required to maintain the\nconfidentiality of Information as provided in this Section shall be considered to have complied\nwith its obligation to do so if such Person has exercised the same degree of care to maintain the\nconfidentiality of such Information as such Person would accord to its own confidential\ninformation.\n
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     Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the\nInformation may include material non-public information concerning the Company or a Subsidiary, as\nthe case may be, (b) it has developed compliance procedures regarding the use of material\nnon-public information and (c) it will handle such material non-public information in accordance\nwith applicable Law, including Federal and state securities Laws.\n
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11.09 Set-off.\n
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     In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and\nduring the continuance of any Event of Default, each Lender and any Affiliate of any Lender is\nauthorized at any time and from time to time, without prior notice to the Company or any other Loan\nParty, any such notice being waived by the Company (on its own behalf and on behalf of each Loan\nParty) to the fullest extent permitted by law, to set off and apply any and all deposits (general\nor special, time or demand, provisional or final) at any time held by, and other indebtedness at\nany time owing by, such Lender to or for the credit or the account of the respective Loan Parties\nagainst any and all Obligations owing to such Lender hereunder or under any other Loan Document,\nnow or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender\nshall have made demand under this Agreement or any\n
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other Loan Document and although such Obligations may be contingent or unmatured or\ndenominated in a currency different from that of the applicable deposit or indebtedness. Each\nLender agrees promptly to notify the Company and the Administrative Agent after any such set-off\nand application made by such Lender; provided, however, that the failure to give\nsuch notice shall not affect the validity of such set-off and application.\n
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11.10 Interest Rate Limitation.\n
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     Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or\nagreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious\ninterest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or\nany Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest\nshall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to\nthe Borrowers. In determining whether the interest contracted for, charged, or received by the\nAdministrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted\nby applicable Law, (a) characterize any payment that is not principal as an expense, fee, or\npremium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c)\namortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest\nthroughout the contemplated term of the Obligations hereunder.\n
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11.11 Counterparts.\n
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     This Agreement may be executed in one or more counterparts, each of which shall be deemed an\noriginal, but all of which together shall constitute one and the same instrument.\n
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11.12 Integration.\n
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     This Agreement, together with the other Loan Documents, comprises the complete and integrated\nagreement of the parties on the subject matter hereof and thereof and supersedes all prior\nagreements, written or oral, on such subject matter. In the event of any conflict between the\nprovisions of this Agreement and those of any other Loan Document, the provisions of this Agreement\nshall control; provided that the inclusion of supplemental rights or remedies in favor of\nthe Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict\nwith this Agreement. Each Loan Document was drafted with the joint participation of the respective\nparties thereto and shall be construed neither against nor in favor of any party, but rather in\naccordance with the fair meaning thereof.\n
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11.13 Survival of Representations and Warranties.\n
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     All representations and warranties made hereunder and in any other Loan Document or other\ndocument delivered pursuant hereto or thereto or in connection herewith or therewith shall survive\nthe execution and delivery hereof and thereof. Such representations and warranties have been or\nwill be relied upon by the Administrative Agent and each Lender, regardless of any investigation\nmade by the Administrative Agent or any Lender or on their behalf and notwithstanding that the\nAdministrative Agent or any Lender may have had notice or knowledge of any Default at the time of\nany Credit Extension, and shall continue in full force and effect as long as any Loan or any other\nObligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain\noutstanding.\n
\n\n
11.14 Severability.\n
\n\n\n
     If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid\nor unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this\nAgreement and the other Loan Documents shall not be affected or impaired thereby and (b) the\nparties shall endeavor\n
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in good faith negotiations to replace the illegal, invalid or unenforceable provisions with\nvalid provisions the economic effect of which comes as close as possible to that of the illegal,\ninvalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction\nshall not invalidate or render unenforceable such provision in any other jurisdiction.\n
\n\n\n
11.15 Tax Forms.\n
\n\n\n\n
     (a) (i) Each Lender that is not a “United States person” within the meaning of Section\n7701(a)(30) of the Internal Revenue Code (a “Foreign Lender”) shall deliver to the\nAdministrative Agent, prior to receipt of any payment subject to withholding under the\nInternal Revenue Code (or upon accepting an assignment of an interest herein), two duly\nsigned completed copies of either IRS Form W-8BEN or any successor thereto (relating to such\nForeign Lender and entitling it to an exemption from, or reduction of, withholding tax on\nall payments to be made to such Foreign Lender by the Borrowers pursuant to this Agreement)\nor IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such\nForeign Lender by the Borrowers pursuant to this Agreement) or such other evidence\nsatisfactory to the Company and the Administrative Agent that such Foreign Lender is\nentitled to an exemption from, or reduction of, U.S. withholding tax, including any\nexemption pursuant to Section 881(c) of the Internal Revenue Code. Thereafter and from time\nto time, each such Foreign Lender shall (A) promptly submit to the Administrative Agent such\nadditional duly completed and signed copies of one of such forms (or such successor forms as\nshall be adopted from time to time by the relevant United States taxing authorities) as may\nthen be available under then current United States laws and regulations to avoid, or such\nevidence as is satisfactory to the Company and the Administrative Agent of any available\nexemption from or reduction of, United States withholding taxes in respect of all payments\nto be made to such Foreign Lender by the Borrowers pursuant to this Agreement, (B) promptly\nnotify the Administrative Agent of any change in circumstances which would modify or render\ninvalid any claimed exemption or reduction, and (C) take such steps as shall not be\nmaterially disadvantageous to it, in the reasonable judgment of such Lender, and as may be\nreasonably necessary (including the re-designation of its Lending Office) to avoid any\nrequirement of applicable Laws that the Borrowers make any deduction or withholding for\ntaxes from amounts payable to such Foreign Lender.\n
\n\n\n
     (ii) Each Foreign Lender, to the extent it does not act or ceases to act for its own\naccount with respect to any portion of any sums paid or payable to such Lender under any of\nthe Loan Documents (for example, in the case of a typical participation by such Lender),\nshall deliver to the Administrative Agent on the date when such Foreign Lender ceases to act\nfor its own account with respect to any portion of any such sums paid or payable, and at\nsuch other times as may be necessary in the determination of the Administrative Agent (in\nthe reasonable exercise of its discretion), (A) two duly signed completed copies of the\nforms or statements required to be provided by such Lender as set forth above, to establish\nthe portion of any such sums paid or payable with respect to which such Lender acts for its\nown account that is not subject to U.S. withholding tax, and (B) two duly signed completed\ncopies of IRS Form W-8IMY (or any successor thereto), together with any information such\nLender chooses to transmit with such form, and any other certificate or statement of\nexemption required under the Internal Revenue Code, to establish that such Lender is not\nacting for its own account with respect to a portion of any such sums payable to such\nLender.\n
\n\n\n
     (iii) The Borrowers shall not be required to pay any additional amount to any Foreign\nLender under Section 3.01 (A) with respect to any Taxes required to be deducted or\nwithheld on the basis of the information, certificates or statements of exemption such\nLender transmits with an IRS Form W-8IMY pursuant to this Section 11.15(a) or (B) if\nsuch Lender shall have failed to\n
\n\n

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\n\n

\n\n\n
satisfy the foregoing provisions of this Section 11.15(a); provided\nthat if such Lender shall have satisfied the requirement of this Section 11.15(a) on\nthe date such Lender became a Lender or ceased to act for its own account with respect to\nany payment under any of the Loan Documents, nothing in this Section 11.15(a) shall\nrelieve any Borrower of its obligation to pay any amounts pursuant to Section 3.01\nin the event that, as a result of any change in any applicable law, treaty or governmental\nrule, regulation or order, or any change in the interpretation, administration or\napplication thereof, such Lender is no longer properly entitled to deliver forms,\ncertificates or other evidence at a subsequent date establishing the fact that such Lender\nor other Person for the account of which such Lender receives any sums payable under any of\nthe Loan Documents is not subject to withholding or is subject to withholding at a reduced\nrate; and provided further that if the L/C Issuer shall issue, amend or\nextend any Letter of Credit from a branch or other office in any jurisdiction at the request\nof (or with the consent of ) a Borrower and the L/C Issuer shall not be lawfully able or\nentitled to satisfy the requirements of this Section 11.15(a) at the time of\nissuance, amendment or extension of any Letter of Credit by reason of the selection of such\nbranch or office in such jurisdiction, nothing in this Section 11.15(a) shall\nrelieve such Borrower of its obligation to pay any amounts pursuant to Section 3.01\nowing to the L/C Issuer.\n
\n\n\n
     (iv) The Administrative Agent may, without reduction, withhold any Taxes required to be\ndeducted and withheld from any payment under any of the Loan Documents with respect to which\nthe Borrowers are not required to pay additional amounts under this Section\n11.15(a).\n
\n\n\n
     (b) Upon the request of the Administrative Agent, each Lender that is a “United States\nperson” within the meaning of Section 7701(a)(30) of the Internal Revenue Code shall deliver\nto the Administrative Agent two duly signed completed copies of IRS Form W-9. If such\nLender fails to deliver such forms, then the Administrative Agent may withhold from any\ninterest payment to such Lender an amount equivalent to the applicable back-up withholding\ntax imposed by the Internal Revenue Code, without reduction.\n
\n\n\n
     (c) If any Governmental Authority asserts that the Administrative Agent did not\nproperly withhold or backup withhold, as the case may be, any tax or other amount from\npayments made to or for the account of any Lender, such Lender shall indemnify the\nAdministrative Agent therefor, including all penalties and interest, any taxes imposed by\nany jurisdiction on the amounts payable to the Administrative Agent under this Section, and\ncosts and expenses (including Attorney Costs) of the Administrative Agent. The obligation\nof the Lenders under this Section shall survive the termination of the Aggregate Revolving\nCommitments and the repayment of all other Obligations hereunder and the resignation of the\nAdministrative Agent.\n
\n\n
11.16 Replacement of Lenders.\n
\n\n\n
     If (a) any Lender requests compensation under Section 3.04, (b) any Borrower is\nrequired to pay any additional amount to any Lender or any Governmental Authority for the account\nof any Lender pursuant to Section 3.01, (c) a Lender (a “Non-Consenting Lender”)\ndoes not consent to a proposed change, waiver, discharge or termination with respect to any Loan\nDocument that has been approved by the Required Lenders as provided in Section 11.01 but\nrequires unanimous consent of all Lenders or all Lenders directly affected thereby (as applicable)\nand, or (d) any Lender is a Defaulting Lender, then the Company may, at its sole expense and\neffort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and\ndelegate, without recourse (in accordance with and subject to the restrictions contained in, and\nconsents required by, Section 11.07), all of its interests, rights and obligations under\nthis Agreement and the related Loan Documents to an assignee that shall assume such obligations\n(which assignee may be another Lender, if a Lender accepts such assignment), provided that:\n
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\n\n\n
     (i) the Company shall have paid to the Administrative Agent the assignment fee\nspecified in Section 11.07(b);\n
\n\n\n
     (ii) such Lender shall have received payment of an amount equal to the outstanding\nprincipal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all\nother amounts payable to it hereunder and under the other Loan Documents (including any\namounts under Section 3.05) from the assignee (to the extent of such outstanding\nprincipal and accrued interest and fees) or the applicable Borrower(s) (in the case of all\nother amounts);\n
\n\n\n
     (iii) in the case of any such assignment resulting from a claim for compensation under\nSection 3.04 or payments required to be made pursuant to Section 3.01, such\nassignment will result in a reduction in such compensation or payments thereafter;\n
\n\n\n
     (iv) such assignment does not conflict with applicable Laws; and\n
\n\n\n
     (v) in the case of any such assignment resulting from a Non-Consenting Lender’s failure\nto consent to a proposed change, waiver, discharge or termination with respect to any Loan\nDocument, the applicable replacement bank, financial institution or Fund consents to the\nproposed change, waiver, discharge or termination; provided that the failure by such\nNon-Consenting Lender to execute and deliver an Assignment and Assumption shall not impair\nthe validity of the removal of such Non-Consenting Lender and the mandatory assignment of\nsuch Non-Consenting Lender’s Commitments and outstanding Loans and participations in L/C\nObligations and Swing Line Loans pursuant to this Section 11.16 shall nevertheless\nbe effective without the execution by such Non-Consenting Lender of an Assignment and\nAssumption.\n
\n\n
     A Lender shall not be required to make any such assignment or delegation if, prior thereto, as\na result of a waiver by such Lender or otherwise, the circumstances entitling the Company to\nrequire such assignment and delegation cease to apply.\n
\n\n
11.17 Governing Law.\n
\n\n\n
     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE\nSTATE OF ILLINOIS APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE;\nPROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING\nUNDER FEDERAL LAW.\n
\n\n
     (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT\nMAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITTING IN CHICAGO, ILLINOIS OR OF THE UNITED\nSTATES FOR THE NORTHERN DISTRICT OF ILLINOIS (EASTERN DIVISION), AND BY EXECUTION AND DELIVERY OF\nTHIS AGREEMENT, EACH PARTY HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE\nNON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH PARTY HERETO IRREVOCABLY WAIVES ANY OBJECTION,\nINCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,\nWHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION\nIN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. EACH PARTY HERETO WAIVES\nPERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS\nPERMITTED BY THE LAW OF SUCH STATE.\n
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\n\n\n
11.18 Waiver of Right to Trial by Jury.\n
\n\n\n
          EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE\nLAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY\nARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS\nCONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY\nHERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,\nEXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO\nENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN\nINDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE\nMUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.\n
\n\n\n
11.19 USA PATRIOT Act Notice.\n
\n\n\n
          Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent\n(for itself and not on behalf of any Lender) hereby notifies the Borrowers that pursuant to the\nrequirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26,\n2001)) (the “Act”), it is required to obtain, verify and record information that identifies the\nBorrowers, which information includes the name and address of each Borrower and other information\nthat will allow such Lender or the Administrative Agent, as applicable, to identify such Borrower\nin accordance with the Act.\n
\n\n\n
11.20 Judgment Currency.\n
\n\n
          If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due\nhereunder or any other Loan Document in one currency into another currency, the rate of exchange\nused shall be that at which in accordance with normal banking procedures the Administrative Agent\ncould purchase the first currency with such other currency on the Business Day preceding that on\nwhich final judgment is given. The obligation of the Borrowers in respect of any such sum due from\nthem to the Administrative Agent or the Lenders hereunder or under the other Loan Documents shall,\nnotwithstanding any judgment in a currency (the “Judgment Currency”) other than that in\nwhich such sum is denominated in accordance with the applicable provisions of this Agreement (the\n“Agreement Currency”), be discharged only to the extent that on the Business Day following\nreceipt by the Administrative Agent of any sum adjudged to be so due in the Judgment Currency, the\nAdministrative Agent may in accordance with normal banking procedures purchase the Agreement\nCurrency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less\nthan the sum originally due to the Administrative Agent from the Borrowers in the Agreement\nCurrency, the Borrowers agree, as a separate obligation and notwithstanding any such judgment, to\nindemnify the Administrative Agent or the Person to whom such obligation was owing against such\nloss. If the amount of the Agreement Currency so purchased is greater than the sum originally due\nto the Administrative Agent in such currency, the Administrative Agent agrees to return the amount\nof any excess to the Borrowers (or to any other Person who may be entitled thereto under applicable\nlaw).\n
\n\n\n
11.21 Concerning Joint and Several Liability of the Borrowers.\n
\n\n
          (a) Each of the Borrowers is accepting joint and several liability hereunder in consideration\nof the financial accommodation to be provided by the Lenders under this Agreement, for the mutual\nbenefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings\nof each of the Borrowers to accept joint and several liability for the obligations of each of them.\n
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\n\n\n\n\n
          (b) Each of the Borrowers jointly and severally hereby irrevocably and unconditionally\naccepts, not merely as a surety but also as a co-debtor, joint and several liability with the other\nBorrowers with respect to the payment and performance of all of the Obligations arising under this\nAgreement and the other Loan Documents, it being the intention of the parties hereto that all the\nObligations shall be the joint and several obligations of each of the Borrowers without preferences\nor distinction among them.\n
\n\n\n
          (c) If and to the extent that a Borrower shall fail to make any payment with respect to any of\nthe obligations hereunder as and when due or to perform any of such obligations in accordance with\nthe terms thereof, then in each such event, the other Borrowers will make such payment with respect\nto, or perform, such obligation.\n
\n\n\n
          (d) The obligations of each Borrower under the provisions of this Section 11.21\nconstitute full recourse obligations of such Borrower, enforceable against it to the full extent of\nits properties and assets, irrespective of the validity, regularity or enforceability of this\nAgreement or any other circumstances whatsoever.\n
\n\n\n
          (e) Except as otherwise expressly provided herein, each Borrower hereby waives notice of\nacceptance of its joint and several liability, notice of occurrence of any Default or Event of\nDefault (except to the extent notice is expressly required to be given pursuant to the terms of\nthis Agreement), or of any demand for any payment under this Agreement, notice of any action at any\ntime taken or omitted by the Administrative Agent or the Lenders under or in respect of any of the\nObligations hereunder, any requirement of diligence and, generally, all demands, notices and other\nformalities of every kind in connection with this Agreement. Each Borrower hereby assents to, and\nwaives notice of, any extension or postponement of the time for the payment of any of the\nObligations hereunder, the acceptance of any partial payment thereon, any waiver, consent or other\naction or acquiescence by the Lenders at any time or times in respect of any default by any\nBorrower in the performance or satisfaction of any term, covenant, condition or provision of this\nAgreement, any and all other indulgences whatsoever by the Lenders in respect of any of the\nObligations hereunder, and the taking, addition, substitution or release, in whole or in part, at\nany time or times, of any security for any of such Obligations or the addition, substitution or\nrelease, in whole or in part, of any Borrower. Without limiting the generality of the foregoing,\neach Borrower assents to any other action or delay in acting or any failure to act on the part of\nthe Administrative Agent or the Lenders, including, without limitation, any failure strictly or\ndiligently to assert any right or to pursue any remedy or to comply fully with applicable laws or\nregulations thereunder which might, but for the provisions of this Section 11.21, afford\ngrounds for terminating, discharging or relieving such Borrower, in whole or in part, from any of\nits obligations under this Section 11.21, it being the intention of each Borrower that, so\nlong as any of the Obligations hereunder remain unsatisfied, the obligations of such Borrower under\nthis Section 11.21 shall not be discharged except by performance and then only to the\nextent of such performance. The obligations of each Borrower under this Section 11.21\nshall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement,\nliquidation, reconstruction or similar proceeding with respect to any reconstruction or similar\nproceeding with respect to any Borrower or the Lenders. The joint and several liability of the\nBorrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger,\namalgamation or any other change whatsoever in the name, membership, constitution or place of\nformation of any Borrower or the Lenders.\n
\n\n\n
          (f) The provisions of this Section 11.21 are made for the benefit of the\nAdministrative Agent and the Lenders and their respective successors and assigns, and may be\nenforced by any such Person from time to time against any of the Borrowers as often as occasion\ntherefore may arise and without requirement on the part of any Lender first to marshal any of its\nclaims or to exercise any of its rights against any other Borrower or to exhaust any remedies\navailable to it against any other Borrower or to\n
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\n\n
resort to any other source or means of obtaining payment of any of the Obligations or to elect\nany other remedy. The provisions of this Section 11.21 shall remain in effect until all\nthe Obligations hereunder shall have been paid in full or otherwise fully satisfied. If at any\ntime, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or\nmust otherwise be restored or returned by the Lenders upon the insolvency, bankruptcy or\nreorganization of any of the Borrowers, or otherwise, the provisions of this Section 11.21\nwill forthwith be reinstated and in effect as though such payment had not been made.\n
\n\n\n
          (g) Notwithstanding any provision to the contrary contained herein or in any other of the Loan\nDocuments or Swap Contracts or Treasury Management Agreements, the obligations of each Borrower\nhereunder shall be limited to an aggregate amount equal to the largest amount that would not render\nits obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code of the\nUnited States or any comparable provisions of any applicable Debtor Relief Law.\n
\n\n\n
11.22 Subordination of Intercompany Debt.\n
\n\n
          Each Loan Party agrees that all intercompany Indebtedness among Loan Parties (the\n“Intercompany Debt”) is subordinated in right of payment, to the prior payment in full of\nall Obligations. Notwithstanding any provision of this Agreement to the contrary, provided that no\nEvent of Default has occurred and is continuing, Loan Parties may make and receive payments with\nrespect to the Intercompany Debt to the extent otherwise permitted by this Agreement; provided,\nthat in the event of and during the continuation of any Event of Default, no payment shall be made\nby or on behalf of any Loan Party on account of any Intercompany Debt. In the event that any Loan\nParty receives any payment of any Intercompany Debt at a time when such payment is prohibited by\nthis Section 11.22 hereof, such payment shall be held by such Loan Party, in trust for the\nbenefit of, and shall be paid forthwith over and delivered, upon written request, to, the\nAdministrative Agent\n
\n\n\n
11.23 No Advisory or Fiduciary Responsibility.\n
\n\n
          In connection with all aspects of each transaction contemplated hereby, the Loan Parties each\nacknowledge and agree that: (i) the credit facilities provided for hereunder and any related\narranging or other services in connection therewith (including in connection with any amendment,\nwaiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial\ntransaction between the Loan Parties and their respective Affiliates, on the one hand, and the\nAdministrative Agent and BAS, on the other hand, and each of the Loan Parties is capable of\nevaluating and understanding and understands and accepts the terms, risks and conditions of the\ntransactions contemplated hereby and by the other Loan Documents (including any amendment, waiver\nor other modification hereof or thereof); (ii) in connection with the process leading to such\ntransaction, the Administrative Agent and BAS each is and has been acting solely as a principal and\nis not the financial advisor, agent or fiduciary, for the Loan Parties or any of their respective\nAffiliates, stockholders, creditors or employees or any other Person; (iii) neither the\nAdministrative Agent nor BAS has assumed or will assume an advisory, agency or fiduciary\nresponsibility in favor of any Loan Party with respect to any of the transactions contemplated\nhereby or the process leading thereto, including with respect to any amendment, waiver or other\nmodification hereof or of any other Loan Document (irrespective of whether the Administrative Agent\nor BAS has advised or is currently advising any of the Loan Parties or any of their respective\nAffiliates on other matters) and neither the Administrative Agent nor BAS has any obligation to any\nof the Loan Parties or any of their respective Affiliates with respect to the transactions\ncontemplated hereby except those obligations expressly set forth herein and in the other Loan\nDocuments; (iv) the Administrative Agent and BAS and their respective Affiliates may be engaged in\na broad range of transactions that involve interests that differ from those of the Loan Parties and\ntheir respective Affiliates, and neither the Administrative Agent nor BAS has any obligation to\ndisclose any of such interests by virtue of any advisory, agency or fiduciary\n
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\n\n
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relationship; and (v) the Administrative Agent and BAS have not provided and will not provide\nany legal, accounting, regulatory or tax advice with respect to any of the transactions\ncontemplated hereby (including any amendment, waiver or other modification hereof or of any other\nLoan Document) and each Loan Party has consulted its own legal, accounting, regulatory and tax\nadvisors to the extent it has deemed appropriate. Each Loan Party hereby waives and releases, to\nthe fullest extent permitted by law, any claims that it may have against the Administrative Agent\nand BAS with respect to any breach or alleged breach of agency or fiduciary duty.\n
\n\n
[SIGNATURE PAGES FOLLOW]\n
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\n\n
          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of\nthe date first above written.\n
\n\n
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BORROWERS: BRADY CORPORATION,
\na Wisconsin corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: VP &\nTreasure  
 
      
  BRADY WORLDWIDE, INC.,
\na Wisconsin corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  TRICOR DIRECT, INC.,
\na Delaware corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
GUARANTORS: BRADY INTERNATIONAL CO.,
\na Wisconsin corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  BRADY INVESTMENT CO.,
\na Nevada corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Treasurer  
 
      
  WORLDMARK OF WISCONSIN, INC.,
\na Delaware corporation		  
 
      
  By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
\n
\n\n\n

 \n

\n\n\n

\n

 

\n\n

\n\n
\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n
       
  EMED CO, INC.,
\na New York corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  TRUMED TECHNOLOGIES, INC.,
\na Minnesota corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  PERMAR SYSTEMS, INC.
\n(d/b/a/ Electromark),
\na New York corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  J. A. M. PLASTICS, INC.,
\na California corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  AIO HOLDING, INC,
\n(d/b/a Personnel Concepts),
\na Delaware corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  STOPWARE, INC.
\na California corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
\n
\n\n\n

 \n

\n\n\n

\n

 

\n\n

\n\n
\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n
       
  IDENTICARD SYSTEMS WORLDWIDE, INC.
\na Pennsylvania corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  BRADY PEOPLE IDENTIFICATION LLC
\na Wisconsin limited liability company		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  COMPREHENSIVE IDENTIFICATION PRODUCTS, INC.
\na Massachusetts corporation		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  PV ACQUISITIONS LLC
\na Delaware limited liability company		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
 
      
  BRADY MEXICO HOLDING LLC
\na Delaware limited liability company		  
 
      
 \n
 By: /s/ BARBARA BOLENS  
 \n
      
  Name: Barbara Bolens  
  Title: Vice President  
\n
\n\n\n

 \n

\n\n\n

\n

 

\n\n

\n\n
\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n \n \n\n\n \n \n \n \n \n\n\n \n \n \n \n \n\n\n
       
ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A.,
\nas Administrative Agent		  
 
      
 \n
 By: /s/ DAVID A. JOHANSON  
 \n
      
  Name: David A. Johanson  
  Title:   Vice President  
 
      
LENDERS: BANK OF AMERICA, N.A.,
\nas a Lender, L/C Issuer and Swing Line Lender		  
 
      
 \n
 By: /s/ MARK R. MOTUELLE  
 \n
      
  Name: Mark R. Motuelle  
  Title:   Senior Vice President  
 
      
  HARRIS N.A.,
\n\nas a Lender		  
 
      
 \n
 By: /s/ CHRISTOPHER C. CAVAIANI  
 \n
      
  Name: Christopher C. Cavaiani  
  Title:   Vice President  
 
      
  M &I MARSHALL & ILSLEY BANK,
\nas a Lender		  
 
      
 \n
 By: /s/ JAMES R. MILLER  
 \n
      
  Name: James R. Miller  
  Title:   Senior Vice President  
 
      
 \n
 By: /s/ KATHLEEN T. COLEMAN  
 \n
      
  Name: Kathleen T. Coleman  
  Title:   Vice President  
 
      
  PNC BANK, N.A.,
\nas a Lender		  
 
      
 \n
 By: /s/ HANA M. DEITER  
 \n
      
  Name: Hana M. Deiter  
  Title:   Managing Director  
 
      
  WELLS FARGO BANK, N.A.,
\nas a Lender		  
 
      
 \n
 By: /s/ ROBERT A. GREHN  
 \n
      
  Name: Robert A. Grehn  
  Title:   Vice President  
\n
\n\n\n\n

 \n

\n\n\n\n
\n\nexv21\n\n\n\n
 

\n\n

\n\n
\n\n Exhibit 21\n
\n\n
 
\n\n
\n\n SCHEDULE OF\n SUBSIDIARIES OF BRADY CORPORATION\n
\n\n
 
\n\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n \n\n \n\n Percentage
\n \n		\n \n
\n \n\n \n\n \n\n \n\n of Voting
\n \n		\n \n
\n \n\n \n\n State (Country)
\n \n		\n \n\n Securities
\n \n		\n \n
\n
\n Name of Company\n
\n		\n \n\n of Incorporation\n\n \n\n Owned\n\n \n
 \n
\n
\n Brady Corporation\n \n
\n		\n \n\n Wisconsin\n \n\n \n\n \n\n Parent\n\n \n
\n
\n Tricor Direct Inc. —\n \n
\n		\n \n\n Delaware\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Doing Business As:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Seton\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Seton Name Plate Company\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n D&G Sign and Label Co. \n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Seton Identification Products\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n The Hirol Company\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Worldmark of Wisconsin Inc. \n \n
\n		\n \n\n Delaware\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Investment Co. \n \n
\n		\n \n\n Nevada\n \n\n \n\n \n\n 100\n\n %\n
\n
\n EMED Co., Inc. \n \n
\n		\n \n\n New York\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Stopware, Inc. \n \n
\n		\n \n\n California\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Permar Sytems, Inc. —\n \n
\n		\n \n\n New York\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Doing Business As Electromark\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Henryc, Inc. (U.S.)\n \n
\n		\n \n\n New York\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Oliver of New York (U.S.)\n \n
\n		\n \n\n New York\n \n\n \n\n \n\n 100\n\n %\n
\n
\n AIO Holding Inc. \n \n
\n		\n \n\n Delaware\n \n\n \n\n \n\n 100\n\n %\n
\n
\n AIO Acquisition Inc. \n \n
\n		\n \n\n Delaware\n \n\n \n\n \n\n 100\n\n %\n
\n
\n TruMed Technologies, Inc. \n \n
\n		\n \n\n Minnesota\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Identicard Systems Worldwide,\n Inc. \n \n
\n		\n \n\n Pennsylvania\n \n\n \n\n \n\n 100\n\n %\n
\n
\n J.A.M. Plastics, Inc. \n \n
\n		\n \n\n California\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Ave One, Inc. \n \n
\n		\n \n\n California\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Mexico Holding LLC\n \n
\n		\n \n\n Delaware\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Luxembourg SARL LLC\n \n
\n		\n \n\n Wisconsin\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Tradex Converting Inc. \n \n
\n		\n \n\n Illinois\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady People Identification LLC\n \n
\n		\n \n\n Wisconsin\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Comprehensive Identification\n Products, Inc. \n \n
\n		\n \n\n Massachusetts\n \n\n \n\n \n\n 100\n\n %\n
\n
\n PV Acquisitions, LLC\n \n
\n		\n \n\n Delaware\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady International Sales,\n Inc. \n \n
\n		\n \n\n U.S. Virgin Islands\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady International Co. \n \n
\n		\n \n\n Wisconsin\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Worldwide, Inc. \n \n
\n		\n \n\n Wisconsin\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Also Doing Business As:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Varitronic Systems\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Teklynx International\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Barcodes West\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Temtec\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Brady Australia Pty. Ltd. \n \n
\n		\n \n\n Australia\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Seton Australia Pty. Ltd. \n \n
\n		\n \n\n Australia\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Accidental Health &\n Safety Pty. Ltd. \n \n
\n		\n \n\n Australia\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Trafalgar First Aid Pty. Ltd. \n \n
\n		\n \n\n Australia\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Carroll Australasia Pty. Ltd. \n \n
\n		\n \n\n Australia\n \n\n \n\n \n\n 100\n\n %\n
\n\n

\n\n

\n\n

\n

 

\n\n

\n\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n \n\n \n\n Percentage
\n \n		\n \n
\n \n\n \n\n \n\n \n\n of Voting
\n \n		\n \n
\n \n\n \n\n State (Country)
\n \n		\n \n\n Securities
\n \n		\n \n
\n
\n Name of Company\n
\n		\n \n\n of Incorporation\n\n \n\n Owned\n\n \n
 \n
\n
\n W.H. Brady, N.V. \n \n
\n		\n \n\n Belgium\n \n\n \n\n \n\n 100\n\n %\n
\n
\n W.H.B. do Brasil Ltda. \n \n
\n		\n \n\n Brazil\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Tradex do Brasil Ltda. \n \n
\n		\n \n\n Brazil\n \n\n \n\n \n\n 100\n\n %\n
\n
\n W.H.B. Identification Solutions,\n Inc. —\n \n
\n		\n \n\n Canada\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Doing Business As:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Brady\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n GrafTek\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Revere-Seton\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Seton\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Brady Canada Acquisition Co. \n \n
\n		\n \n\n Canada\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Identicam Co. \n \n
\n		\n \n\n Canada\n \n\n \n\n \n\n 100\n\n %\n
\n
\n BRC Financial\n \n
\n		\n \n\n Canada\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Shanghai International\n Trading Co., Ltd. \n \n
\n		\n \n\n China\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Technology (Wuxi) Co.\n Ltd. \n \n
\n		\n \n\n China\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady (Beijing) Co. Ltd. \n \n
\n		\n \n\n China\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Suzhou Dicel EMC Co., Ltd. \n \n
\n		\n \n\n China\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Tradex Converting (Langfang) Co.,\n Ltd. \n \n
\n		\n \n\n China\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Tradex Converting (Suzhou) Co.,\n Ltd. \n \n
\n		\n \n\n China\n \n\n \n\n \n\n 100\n\n %\n
\n
\n CIPI Xiamen, Ltd. \n \n
\n		\n \n\n China\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Panyu Meixin Metal Company\n Ltd. \n \n
\n		\n \n\n China\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Holdings Danmark ApS\n \n
\n		\n \n\n Denmark\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Texit A.S\n \n
\n		\n \n\n Denmark\n \n\n \n\n \n\n 100\n\n %\n
\n
\n B.I. U.K. Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n B.I. Financial Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Seton Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n W.H. Brady Co. Ltd. \n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Corporation Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady European Finance Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady European Holdings Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Cleere Advantage Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Focal Display Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Focal Signs Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n S & L Signmaker Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Safety Shop Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Safety Shop Co. U.K. Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Signs & Labels Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Southern Signs Systems Limited\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Braton Europe S.A.R.L\n \n
\n		\n \n\n France\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Braton Groupe S.A.R.L\n \n
\n		\n \n\n France\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Doing Business As:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Brady\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Techniques Avancees\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Holman\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Periprint\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n\n

\n\n

\n\n

\n

 

\n\n

\n\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n \n\n \n\n Percentage
\n \n		\n \n
\n \n\n \n\n \n\n \n\n of Voting
\n \n		\n \n
\n \n\n \n\n State (Country)
\n \n		\n \n\n Securities
\n \n		\n \n
\n
\n Name of Company\n
\n		\n \n\n of Incorporation\n\n \n\n Owned\n\n \n
 \n
\n
\n Brady Group S.A.S\n \n
\n		\n \n\n France\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Doing Business As:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Seton\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Signals & Lettrasoft\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Brady Holding GmbH\n \n
\n		\n \n\n Germany\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady GmbH\n \n
\n		\n \n\n Germany\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Doing Business As:\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Seton\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Balkhausen\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Brady ISST\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Soft & Etimark\n \n
\n		\n \n\n \n\n \n\n \n\n \n\n \n
\n
\n Quo-Luck Company Limited\n \n
\n		\n \n\n Hong Kong\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Bakee Metal Manufacturing Company\n Limited\n \n
\n		\n \n\n Hong Kong\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Company India Pte. Ltd. \n \n
\n		\n \n\n India\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Italia, SRL\n \n
\n		\n \n\n Italy\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Nippon Brady K.K. \n \n
\n		\n \n\n Japan\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Daewon Industry Co. \n \n
\n		\n \n\n Korea\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Tradex (Korea) Co., Ltd. \n \n
\n		\n \n\n Korea\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Luxembourg SARL\n \n
\n		\n \n\n Luxembourg\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Technology SDN, BHD\n \n
\n		\n \n\n Malaysia\n \n\n \n\n \n\n 100\n\n %\n
\n
\n W. H. Brady S. de R.L. de\n C.V. \n \n
\n		\n \n\n Mexico\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady B.V\n \n
\n		\n \n\n Netherlands\n \n\n \n\n \n\n 100\n\n %\n
\n
\n CIPI Europe, B.V. \n \n
\n		\n \n\n Netherlands\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Texit A.S. \n \n
\n		\n \n\n Norway\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady NV\n \n
\n		\n \n\n Poland\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Corporation S.E.A. Pte.\n Ltd. \n \n
\n		\n \n\n Singapore\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Corporation Asia Pte.\n Ltd. \n \n
\n		\n \n\n Singapore\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Identification S.L. \n \n
\n		\n \n\n Spain\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady AB\n \n
\n		\n \n\n Sweden\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Seton Scandinavia AB\n \n
\n		\n \n\n Sweden\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Sweden Holdings AB\n \n
\n		\n \n\n Sweden\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Tradex Holding AB\n \n
\n		\n \n\n Sweden\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Tradex Converting AB\n \n
\n		\n \n\n Sweden\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Tradex AB\n \n
\n		\n \n\n Sweden\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady (Shenzhen) Co. Ltd. \n \n
\n		\n \n\n China\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Pure Vantage\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Rapid Update\n \n
\n		\n \n\n England\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Servicios, S. de R.L. de\n C.V. \n \n
\n		\n \n\n Mexico\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brandon Converting Mexico S. de\n R.L. de C.V. \n \n
\n		\n \n\n Mexico\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brandon Precision Pte. Ltd. \n \n
\n		\n \n\n Singapore\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Technologies Asia Pte.\n Ltd. \n \n
\n		\n \n\n Singapore\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Asia Holding Pte. Ltd. \n \n
\n		\n \n\n Singapore\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Singapore Holdings Pte.\n Ltd. \n \n
\n		\n \n\n Singapore\n \n\n \n\n \n\n 100\n\n %\n
\n
\n ID Technologies Pte. Ltd. \n \n
\n		\n \n\n Singapore\n \n\n \n\n \n\n 100\n\n %\n
\n\n

\n\n

\n\n

\n

 

\n\n

\n\n\n\n\n \n \n \n \n \n \n \n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
             
\n \n\n \n\n \n\n \n\n Percentage
\n \n		\n \n
\n \n\n \n\n \n\n \n\n of Voting
\n \n		\n \n
\n \n\n \n\n State (Country)
\n \n		\n \n\n Securities
\n \n		\n \n
\n
\n Name of Company\n
\n		\n \n\n of Incorporation\n\n \n\n Owned\n\n \n
 \n
\n
\n ID Technologies (China) Pte.\n Ltd. \n \n
\n		\n \n\n Singapore\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady S.R.O. \n \n
\n		\n \n\n Slovakia\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady Holding Co. Ltd. \n \n
\n		\n \n\n Thailand\n \n\n \n\n \n\n 49\n\n %(1)\n
\n
\n Brady (Thailand) Co. Ltd. \n \n
\n		\n \n\n Thailand\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Q.D.P.T\n \n
\n		\n \n\n Thailand\n \n\n \n\n \n\n 100\n\n %\n
\n
\n Brady (Turkey) Ltd. \n \n
\n		\n \n\n Turkey\n \n\n \n\n \n\n 100\n\n %\n
\n\n
\n\n
\n\n
 
\n\n
\n\n
 
\n\n\n\n\n\n\n \n \n \n\n\n\n \n \n \n\n\n
\n (1) \n Brady Corporation owns 49% of the outstanding shares of Brady\n Holding Co. Ltd., but Brady Corporation maintains controlling\n voting rights. The 51% owner holds preferred shares, which\n entitle it to one vote for every 20 shares. Brady\n Corporation holds common shares, which entitle it to one vote\n for every one share. The preferred shareholder’s share of\n the net income in Brady Holding Co. Ltd is limited to recovery\n of its initial investment.
\n\n

\n\n

\n\n\n
\n\nexv23\n\n\n\n
 

\n\n

\n\n
\n\n Exhibit 23\n
\n\n
 
\n\n
\n\n CONSENT\n OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n
\n\n
 
\n\n
\n We consent to the incorporation by reference in Registration\n Statement\n No. 333-110949,\n 333-99615,\n 333-38857,\n 333-38859,\n 333-44505,\n 333-92417,\n 333-134503\n and\n 333-137686\n on\n Form S-8\n and\n 333-128023\n on\n Form S-3\n of our reports dated September 28, 2006, relating to the\n financial statements and financial statement schedules of Brady\n Corporation and management’s report on the effectiveness of\n internal control over financial reporting, appearing in this\n Annual Report on\n Form 10-K\n of Brady Corporation for the year ended July 31, 2006.\n
\n\n
 
\n\n
\n /s/  DELOITTE & TOUCHE LLP\n
\n\n
 
\n\n
\n Milwaukee, WI\n
\n\n
\n October 6, 2006\n
\n\n

\n\n

\n\n\n
\n\nexv31w1\n\n\n\n
 

\n\n

\n\n
\n\n EXHIBIT 31.1\n
\n\n
 
\n\n
\n\n RULE 13a-14(a)/15d-14(a)\n CERTIFICATION\n
\n\n
 
\n\n
\n I, Frank M. Jaehnert, certify that:\n
\n\n
 
\n\n
\n (1) I have reviewed this annual report on\n Form 10-K\n of Brady Corporation;\n
\n\n
 
\n\n
\n (2) Based on my knowledge, this report does not contain any\n untrue statement of a material fact or omit to state a material\n fact necessary to make the statements made, in light of the\n circumstances under which such statements were made, not\n misleading with respect to the period covered by this report;\n
\n\n
 
\n\n
\n (3) Based on my knowledge, the financial statements, and\n other financial information included in this report, fairly\n present in all material respects the financial condition,\n results of operations and cash flows of the registrant as of,\n and for, the periods presented in this report;\n
\n\n
 
\n\n
\n (4) The registrant’s other certifying officer and I\n are responsible for establishing and maintaining disclosure\n controls and procedures (as defined in Exchange Act\n Rules 13a-15(e)\n and\n 15d-15(e))\n and internal control over financial reporting (as defined in\n Exchange Act\n Rules 13a-15(f)\n and\n 15d-15(f))\n for the registrant and have:\n
\n\n
 
\n\n
\n a) Designed such disclosure controls and procedures, or\n caused such disclosure controls and procedures to be designed\n under our supervision, to ensure that material information\n relating to the registrant, including its consolidated\n subsidiaries, is made known to us by others within those\n entities, particularly during the period in which this report is\n being prepared;\n
\n\n
 
\n\n
\n b) Designed such internal control over financial reporting,\n or caused such internal control over financial reporting to be\n designed under our supervision, to provide reasonable assurance\n regarding the reliability of financial reporting and the\n preparation of financial statements for external purposes in\n accordance with generally accepted accounting principles;\n
\n\n
 
\n\n
\n c) Evaluated the effectiveness of the registrant’s\n disclosure controls and procedures and presented in this report\n our conclusions about the effectiveness of the disclosure\n controls and procedures, as of the end of the period covered by\n this report based on such evaluation; and\n
\n\n
 
\n\n
\n d) Disclosed in this report any change in the\n registrant’s internal control over financial reporting that\n occurred during the registrant’s most recent fiscal quarter\n (the registrant’s fourth fiscal quarter in the case of an\n annual report) that has materially affected, or is reasonably\n likely to materially affect, the registrant’s internal\n control over financial reporting; and\n
\n\n
 
\n\n
\n (5) The registrant’s other certifying officer and I\n have disclosed, based on our most recent evaluation of internal\n control over financial reporting, to the registrant’s\n auditors and the audit committee of the registrant’s board\n of directors (or persons performing the equivalent functions):\n
\n\n
 
\n\n
\n a) All significant deficiencies and material weaknesses in\n the design or operation of internal control over financial\n reporting which are reasonably likely to adversely affect the\n registrant’s ability to record, process, summarize and\n report financial information; and\n
\n\n
 
\n\n
\n b) Any fraud, whether or not material, that involves\n management or other employees who have a significant role in the\n registrant’s internal control over financial reporting.\n
\n\n
 
\n\n
\n
/s/  FRANK\n M. JAEHNERT
\n
\n\n
\n\n
\n (Frank M. Jaehnert)\n
\n\n
\n\n
\n\n
\n President and Chief Executive Officer\n
\n\n
 
\n\n
\n Date: October 6, 2006\n
\n\n

\n\n

\n\n\n
\n\nexv31w2\n\n\n\n
 

\n\n

\n\n
\n\n EXHIBIT 31.2\n
\n\n
 
\n\n
\n\n RULE 13a-14(a)/15d-14(a)\n CERTIFICATION\n
\n\n
 
\n\n
\n I, David Mathieson, certify that:\n
\n\n
 
\n\n
\n (1) I have reviewed this annual report on\n Form 10-K\n of Brady Corporation;\n
\n\n
 
\n\n
\n (2) Based on my knowledge, this report does not contain any\n untrue statement of a material fact or omit to state a material\n fact necessary to make the statements made, in light of the\n circumstances under which such statements were made, not\n misleading with respect to the period covered by this report;\n
\n\n
 
\n\n
\n (3) Based on my knowledge, the financial statements, and\n other financial information included in this report, fairly\n present in all material respects the financial condition,\n results of operations and cash flows of the registrant as of,\n and for, the periods presented in this report;\n
\n\n
 
\n\n
\n (4) The registrant’s other certifying officer and I\n are responsible for establishing and maintaining disclosure\n controls and procedures (as defined in Exchange Act\n Rules 13a-15(e)\n and\n 15d-15(e))\n and internal control over financial reporting (as defined in\n Exchange Act\n Rules 13a-15(f)\n and\n 15d-15(f))\n for the registrant and have:\n
\n\n
 
\n\n
\n a) Designed such disclosure controls and procedures, or\n caused such disclosure controls and procedures to be designed\n under our supervision, to ensure that material information\n relating to the registrant, including its consolidated\n subsidiaries, is made known to us by others within those\n entities, particularly during the period in which this report is\n being prepared;\n
\n\n
 
\n\n
\n b) Designed such internal control over financial reporting,\n or caused such internal control over financial reporting to be\n designed under our supervision, to provide reasonable assurance\n regarding the reliability of financial reporting and the\n preparation of financial statements for external purposes in\n accordance with generally accepted accounting principles;\n
\n\n
 
\n\n
\n c) Evaluated the effectiveness of the registrant’s\n disclosure controls and procedures and presented in this report\n our conclusions about the effectiveness of the disclosure\n controls and procedures, as of the end of the period covered by\n this report based on such evaluation; and\n
\n\n
 
\n\n
\n d) Disclosed in this report any change in the\n registrant’s internal control over financial reporting that\n occurred during the registrant’s most recent fiscal quarter\n (the registrant’s fourth fiscal quarter in the case of an\n annual report) that has materially affected, or is reasonably\n likely to materially affect, the registrant’s internal\n control over financial reporting; and\n
\n\n
 
\n\n
\n (5) The registrant’s other certifying officer and I\n have disclosed, based on our most recent evaluation of internal\n control over financial reporting, to the registrant’s\n auditors and the audit committee of the registrant’s board\n of directors (or persons performing the equivalent functions):\n
\n\n
 
\n\n
\n a) All significant deficiencies and material weaknesses in\n the design or operation of internal control over financial\n reporting which are reasonably likely to adversely affect the\n registrant’s ability to record, process, summarize and\n report financial information; and\n
\n\n
 
\n\n
\n b) Any fraud, whether or not material, that involves\n management or other employees who have a significant role in the\n registrant’s internal control over financial reporting.\n
\n\n
 
\n\n
\n
/s/  DAVID\n MATHIESON
\n
\n\n
\n\n
\n (David Mathieson)\n
\n\n
\n\n
\n\n
\n Vice President and Chief Financial Officer\n
\n\n
 
\n\n
\n Date: October 6, 2006\n
\n\n

\n\n

\n\n\n
\n\nexv32w1\n\n\n\n
 

\n\n

\n\n
\n\n EXHIBIT 32.1\n
\n\n
 
\n\n
\n\n SECTION 1350\n CERTIFICATION\n
\n\n
 
\n\n
\n Pursuant to 18 U.S.C. Section 1350, as adopted\n pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,\n the undersigned officer of Brady Corporation (the\n “Company”) certifies to his knowledge that:\n
\n\n
 
\n\n
\n (1) The Annual Report on\n Form 10-K\n of the Company for the year ended July 31, 2006 fully\n complies with the requirements of Section 13(a) or 15(d) of\n the Securities Exchange Act of 1934; and\n
\n\n
 
\n\n
\n (2) The information contained in that\n Form 10-K\n fairly presents, in all material respects, the financial\n conditions and results of operations of the Company.\n
\n\n
 
\n\n
\n
/s/  FRANK\n M. JAEHNERT
\n
\n\n
\n\n
\n (Frank M. Jaehnert)\n
\n\n
\n\n
\n\n
\n President and Chief Executive Officer\n
\n\n
 
\n\n
\n Date: October 6, 2006\n
\n\n
 
\n\n
\n A signed original of this written statement required by\n Section 906, or other document authenticating,\n acknowledging, or otherwise adopting the signature that appears\n in typed form within the electronic version of this written\n statement required by Section 906, has been provided to the\n Company and will be retained by the Company and furnished to the\n Securities and Exchange Commission or its staff upon request.\n
\n\n

\n\n

\n\n\n
\n\nexv32w2\n\n\n\n
 

\n\n

\n\n
\n\n EXHIBIT 32.2\n
\n\n
 
\n\n
\n\n SECTION 1350\n CERTIFICATION\n
\n\n
 
\n\n
\n Pursuant to 18 U.S.C. Section 1350, as adopted\n pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,\n the undersigned officer of Brady Corporation (the\n “Company”) certifies to his knowledge that:\n
\n\n
 
\n\n
\n (1) The Annual Report on\n Form 10-K\n of the Company for the year ended July 31, 2006 fully\n complies with the requirements of Section 13(a) or 15(d) of\n the Securities Exchange Act of 1934; and\n
\n\n
 
\n\n
\n (2) The information contained in that\n Form 10-K\n fairly presents, in all material respects, the financial\n conditions and results of operations of the Company.\n
\n\n
 
\n\n
\n
/s/  DAVID\n MATHIESON
\n
\n\n
\n\n
\n (David Mathieson)\n
\n\n
\n\n
\n\n
\n Vice President and Chief Financial Officer\n
\n\n
 
\n\n
\n Date: October 6, 2006\n
\n\n
 
\n\n
\n A signed original of this written statement required by\n Section 906, or other document authenticating,\n acknowledging, or otherwise adopting the signature that appears\n in typed form within the electronic version of this written\n statement required by Section 906, has been provided to the\n Company and will be retained by the Company and furnished to the\n Securities and Exchange Commission or its staff upon request.\n
\n\n

\n\n

\n\n\n","error":null}