-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NABg/gg0xyw/zeNzuyQ0OsIyceMovGjNbQEQ7xvRiBGwolQRuYpKIZny8uqwBmV7 hopGV4V9GmoO5K0x9MZ8OQ== 0000950128-99-000823.txt : 19990625 0000950128-99-000823.hdr.sgml : 19990625 ACCESSION NUMBER: 0000950128-99-000823 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990624 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK BOX CORP CENTRAL INDEX KEY: 0000849547 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 953086563 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-18706 FILM NUMBER: 99651616 BUSINESS ADDRESS: STREET 1: 1000 PARK DR CITY: LAWRENCE STATE: PA ZIP: 15055 BUSINESS PHONE: 4128736788 FORMER COMPANY: FORMER CONFORMED NAME: BLACK BOX INCORPORATED DATE OF NAME CHANGE: 19910825 10-K405 1 BLACK BOX CORPORATION FORM 10-K405 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K |X| Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1999 | | Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the transition period from ________ to ________. Commission File Number: 0-18706 BLACK BOX CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 95-3086563 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1000 Park Drive Lawrence, Pennsylvania 15055 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 724-746-5500 Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.001 PAR VALUE. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __x__ No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / X / Aggregate market value of outstanding Common Stock, $.001 par value (the "Common Stock"), held by non-affiliates of the Registrant at June 18, 1999, was $866,415,323 based on the closing sale price reported on the Nasdaq National Market for June 18, 1999. For purposes of this calculation only, directors and executive officers of the Registrant and their affiliates are deemed to be affiliates of the Registrant. Number of outstanding shares of Common Stock at June 18, 1999, was 18,504,725. Document Incorporated by Reference Proxy Statement for 1999 Annual Meeting of Stockholders -- Part III 2 PART I ITEM 1 -- BUSINESS GENERAL. Until June 3, 1994, Black Box Corporation (the "Company" or "Black Box"), operated through two independent subsidiaries, Black Box Corporation of Pennsylvania ("Black Box-PA") and MICOM Communications Corp. ("MICOM"). The Company was incorporated in Delaware in 1987. On July 22, 1993, the Board of Directors of the Company approved in principle a plan to distribute all of the outstanding shares of MICOM Common Stock (the "Distribution") to all holders of the Company's outstanding Common Stock (the "MICOM Spin-off"). On May 10, 1994, the Company's Board of Directors formally approved the Distribution and declared a dividend payable to each holder of record at the close of business on May 20, 1994 (the "Record Date") of two shares of MICOM Common Stock for each three shares of the Company's Common Stock held by such holder on the Record Date. On June 3, 1994, the Distribution was effected. Accordingly the operating results of MICOM have been classified as discontinued operations for all periods presented. OVERVIEW. Black Box (NASDAQ: BBOX) is a leading worldwide technical service provider of computer communications and networking services and related products to businesses of all sizes. Black Box provides expert technical support worldwide 24 hours a day, seven days a week, and provides on-site installation services in select markets. Through its BLACK BOX (R) Catalog, available in eight languages, the Company offers more than 12,000 solutions - approximately 90% BLACK BOX (R) labeled - and designed and built more than 300,000 custom products last year. Black Box is currently represented in 77 countries, and operates 28 subsidiaries on five continents. The Company is headquartered near Pittsburgh in Lawrence, Pennsylvania. Black Box differentiates itself from its competitors through its private label brand, BLACK BOX (R), and through unparalleled levels of technical support. The Black Box brand has earned a reputation for high quality and reliability since the Company was founded in 1976. Through its more than 600 technical support professionals, the Company offers technical services on the phone free of charge 24 hours a day, seven days a week, and fee-based on-site cabling and installation services. Black Box technicians receive continuous training, averaging about 45 minutes per technician per day, and provide guidance in system design, product selection, installation, post-installation and maintenance. Their certifications include A+, Bay Networks (R), BiCSi LAN Specialist, Cisco, CNE, 3Com, IBM, Microsoft, MSCD, Novell, RCDD, and of course, Black Box. In Fiscal 1999, the Company significantly expanded its technical services offering to include on-site services. Black Box believes the on-site offering will, over time, increase its addressable share of the worldwide telecommunications market tenfold over its current 7 percent share, while enabling it to address its customers' growing demands to bring its technical services on-site. Black Box's MIS and inventory management systems enable it to ship 95 percent of orders for stock products on the day the orders are received. The successful combination of high quality technical support, superior customer service and cost-effective direct marketing has resulted in the Company's consistent growth in revenues and operating income and its high level of customer satisfaction. 2 3 Since its inception, the Company has experienced consistent growth in revenues and profitability due to continual (i) delivery of high quality technical services, both on the phone and at its customer's site, (ii) commitment to the highest quality products, (iii) expansion of its product offerings and (iv) its commitment to superior customer service. INDUSTRY BACKGROUND. The rapidly growing need to interconnect new and existing computer resources over local and geographically dispersed areas continues to create an increased demand for computer communications and networking products. The continual development of new and often incompatible technologies has also made the task of creating and maintaining such systems increasingly complex. Manufacturers often do not provide sufficient technical advice or devices to connect or integrate their products with products of different manufacturers. Even sophisticated MIS staffs often require third party technical advice and a wide range of specialized computer communications and networking products to install and maintain computer systems. Black Box addresses these needs by providing its customers with a convenient and technically proficient means to purchase computer communications and networking solutions and by offering on-site cabling and installation services. BUSINESS STRATEGY. Black Box's business strategy is to be a "one-stop shop" for organizations with simple to complex computer communications and networking needs who wish to benefit from high levels of technical support and customer service. The Company believes that its combination of technical support (on the phone and on-site), customer service and cost-effective direct marketing is the best method to sell into its markets. The Company's 23 years of experience in the industry have enabled it to compile an extensive database of loyal active accounts and establish the BLACK BOX(R) private label brand as the premier line of computer communications and networking solutions. The success of this strategy is evidenced by the Company's record of consistent growth in revenues and operating income and its high rate of repeat customers. Keys to the Company's success include the following: Unparalleled Technical Support. Black Box believes that its ability to provide in-depth technical support and prompt and efficient customer service is critical to its success. The Company's 600 technical experts-specialists in Conversion, Connectivity, Communications, Local Area Networks (LAN), and Installation Services - are available by telephone 24 hours a day, seven days a week, to provide solutions to any computer, cabling, or network communication challenge. Phone consultations are free of charge and multilingual representatives are available worldwide. On average, almost one million technical support calls were answered last year and, 97 percent of them were answered within 20 seconds - the fastest answer rate in the industry. On-site technical services are also provided in selected markets worldwide and the Company intends to continue expanding its on-site offerings. The Company also offers a dial-up automated fax-back service and web-based technical data for customers who need written comprehensive application and technical product details. Cost-Effective Direct Marketing. Because of the broad range of products sold, average order size of $701 in Fiscal 1999 and a geographically dispersed customer base, Black Box believes that its direct mail strategy is a cost-effective and efficient way to sell products to both existing and prospective customers. The high quality, 1,200 page BLACK BOX(R) Catalog, which is available in print, on the internet or on CD-ROM, provides customers around the world access to a comprehensive range of computer communications and networking products, including complete technical specifications and recommended uses, and allows them to make technical decisions and purchases without leaving their offices. The Company believes that, in conjunction with the 3 4 BLACK BOX(R) Catalog, its trained telephonic technical and customer support staffs coupled with its on-site support is an effective sales tool. Proprietary Customer List. Over the past 23 years, the Company has built a proprietary mailing list containing approximately 1.8 million names representing nearly 730,000 customers. This database includes information on the past purchases of its customers. The Company routinely analyzes this data in an effort to enhance customer response and purchasing rates, increase average order size and ensure that targeted mailings reach specific customer groups. The Company believes that its proprietary list is a valuable asset that represents a significant competitive advantage and does not rent the list to other parties. Broad and Responsive Product Mix. The Black Box Catalogs offer over 12,000 products in 12 categories, the vast majority of which are BLACK BOX(R) private labeled. Black Box continuously refines its product mix based on information compiled from customers through the thousands of calls received daily to place orders, request technical assistance or develop custom products. Black Box also actively monitors communications industry technology and product developments to identify new product areas to respond to evolving customer needs. The Company also offers custom capabilities and sources products outside of its standard product set to meet a customer's exact specifications and requirements. Revenue from custom products has grown rapidly during the past several years. Quality Products and Brand Name. BLACK BOX(R) is a widely recognized brand name associated with high quality products and knowledgeable customer support services. The Company believes that the Black Box(R) tradename is important to its business. As a result, manufacturers of computer communications and networking products have sought to distribute their products under the BLACK BOX(R) private label to take advantage of this broad and cost-effective distribution channel. In 1994, Black Box received ISO9000 certification, becoming the first U.S. technical direct marketer to be so certified. In addition, the Company's subsidiaries in Australia, Brazil, France, Japan, Mexico and the United Kingdom have also received the ISO certification. Rigorous quality control processes must be documented and practiced to earn and maintain ISO9000 certification, which is increasingly required of vendors (like Black Box) by the purchasing departments of many businesses around the world. Black Box guarantees all of its products by permitting customers to return or exchange them within the first 45 days after purchase. In addition, the Company provides warranties of at least one year, and lifetime warranties with many products. In Fiscal 1998, Black Box became the first in the industry to introduce a warranty program offering full protection regardless of cause of failure, including accidental, surge or water damage. Extended warranty protection is also available on nearly all products. In-Stock Availability and Rapid Order Fulfillment. The Company has developed an efficient inventory management and order fulfillment systems that allow more than 95 percent of orders for standard product received before midnight eastern time to be shipped that same day. GROWTH STRATEGY. The principal components of Black Box's growth strategy include (i) expanded technical support services, (ii) enhanced global direct marketing activities, (iii) expanded product offerings and (iv) continued expansion worldwide. Expanded Technical Support Services. In Fiscal 1998, Black Box expanded its technical support services to include on-site design, installation and maintenance of connectivity solutions. The Company believes there is a large growing and lucrative market for these services worldwide 4 5 and it expects the expansion to enable it, overtime, to increase its addressable share of the worldwide telecommunications market by tenfold. Through a series of acquisitions, occurring primarily in Fiscal 1999, Black Box has established on-site businesses in: Birmingham, AL.; St. Petersburg/Tampa, FL.; Sarasota, FL.; Atlanta, GA.; Detroit, MI.; Winston-Salem, NC.; Cleveland, OH.; Columbus, OH.; Pittsburgh, PA.; Columbia, SC.; Charleston, WV.; and Newbury, England. Annualized combined revenues from on-site services were $55 million in Fiscal 1999 and the Company expects to aggressively continue expanding its on-site capabilities in Fiscal 2000. Annualized combined revenues from on-site services in Fiscal 2000 are expected to be approximately $125 million. Enhanced Global Direct Marketing Activities. Black Box continues to make changes in its catalog design by improving product presentations, expanding technical information, and making better use of eye-catching icons. The Company is also currently making substantial enhancements to its internet-based catalog, which is expected to be operational early in Fiscal 2000. In addition to the BLACK BOX(R) Catalog, the Company also mails interim New Product Supplements and, on a regular basis, mini-catalogs featuring specific products and applications. These regular mailings enable the Company to introduce new products more quickly than its twice per year BLACK BOX(R) Catalog distributions, and serve as a more cost-effective method to prospect for new customers and maintain contact with existing customers. In addition to producing state-of-the-art color catalogs, the Company publishes a family of technical guides on topics such as local and remote communications, power and data protection, and internetworking, as well as a monthly subscription technical newsletter, Connectivity NEWS(sm), that includes technical tips and application notes and discusses technology trends. Expanded Product Offerings. The Company serves rapidly growing markets and offers new products, which are continuously developed as a result of technological advances. In response to this dynamic environment, Black Box continues to broaden its existing product lines by offering line extensions and new technologies. In Fiscal 1999, the Company introduced over 2,300 new products. Expansion Worldwide. In Fiscal 1999, Black Box's consolidated revenues outside the U.S. and Canada were $144.4 million, or 44% of total consolidated revenues. Black Box currently distributes products in 77 countries through 16 subsidiaries, one joint venture and a network of third-party distributors. In Fiscal 1999 the Company expanded its on-site technical services offerings into Great Britain through its combination with Ohmega Installations Limited. The Company expects to further expand its on-site offering outside of the United States in the future. CUSTOMERS. Black Box customers range from small organizations to many of the world's largest corporations and include educational institutions and federal, state and local governments. While the Company's customers include a majority of the Fortune 1,000 companies, Black Box estimates that the majority of its active customers were non-Fortune 1,000 businesses. Many small and mid-sized companies lack the in-house expertise to evaluate and maintain increasingly complex computer systems and thus rely on Black Box's technical expertise, both before and after making purchases. Larger customers find the BLACK BOX(R) Catalog to be a convenient and 5 6 comprehensive source for all of their computer communications and networking needs, in addition to the Company's extensive base of technical knowledge. Additionally, the Company's overall average order size has increased consistently and was $701 in Fiscal 1999 compared to $645 in the prior year. The Company believes the increased average order size reflects its ability to sell products in volume, the successful introduction of more sophisticated, higher priced products and effective cross-selling and up-selling at the time of customer order. Black Box also provides products, service and support to over 10,000 domestic resellers who integrate and sell products directly to end-users. In Fiscal 1999, the reseller program accounted for 19% of the Company's revenues in North America and 11% of its total revenues. This program enables resellers to provide quality Black Box products to their end user customers who rely on the reseller to provide them additional products and services. This program provides the reseller with access to over 12,000 products, 24-hour technical support and rapid fulfillment that would be costly to replicate, manage and implement in their own operations. The customers of this program range from large distributors to small single proprietors who offer very specialized local solutions. CATALOGS. Black Box was the first company to engage exclusively in the sale of a broad range of computer communications and networking products through direct marketing techniques. Black Box employs a distribution method based on the targeted mailing of comprehensive, fully-illustrated color catalogs and other promotional material directly to its customers who make systems design decisions. Black Box's catalogs present a wide choice of items using a combination of product features and benefits, photographs, product descriptions, product specifications, compatibility charts, potential applications and other helpful technical information. The catalogs have a distinctive look and are recognized by Black Box's customers. TECHNICAL SUPPORT. Black Box believes that its technical support is a critical component of its success. The Company's technical support personnel, both phone based and on-site, typically have technical or engineering backgrounds through education or relevant work experience. Technical support is available 24 hours per day, 7 days per week, in 11 languages, and the Company's staff handled nearly 1 million customer calls worldwide last year. Black Box also differentiates its phone based technical support by providing very short customer wait times. Frequent contact between the Company's technical staff and customers enables it to modify existing products and/or introduce new products to meet changing applications and to identify emerging product trends. CUSTOMER SERVICE. Black Box strives to make purchasing its products as convenient as possible. The Company's customer service group handled over 1 million calls worldwide last year, and is available 24 hours per day from Monday through Saturdays. Off-hours ordering requirements for customers are handled by the technical support personnel. The Company enters and fulfills orders at its Pittsburgh and subsidiary locations. Calls are received by well-trained inbound customer service representatives who utilize on-line terminals to enter customer orders into computerized order processing systems. Using proprietary applications, each member of the customer service group has immediate access to customer files, including usage and billing information and real-time inventory levels. Using this data, inbound customer service personnel are also prompted by their computer screen to cross-sell selected products and to update customer list information. The Company regularly reviews performance to monitor productivity. Black Box also employs an outbound customer sales and service force to increase the frequency and order size of customer purchases. Black Box's telesales force is focused on expanding its customer list and improving the accuracy of its customer database. In addition, telesales personnel are utilized to obtain specifications for potential orders and to follow-up on such quotes. 6 7 Black Box provides key account pricing to large corporate buyers and provides an assigned telesales representative who works with corporate buyers to ensure that their requirements are satisfied. When an order is entered into the Company's system, a credit check is performed and, when approved, the order is transmitted to the distribution center and a packing slip is printed for order fulfillment. All packages are inspected prior to shipment to ensure the accurate order fulfillment. Orders generally are shipped by Federal Express or United Parcel Service in the United States and by similar small package delivery services internationally. WORLDWIDE OPERATIONS. The Company's headquarters and domestic operating facilities are located in Lawrence, Pennsylvania (a suburb of Pittsburgh). This 200,000 square foot facility is on an 84-acre site that houses administrative, sales and marketing, manufacturing and service operations. In Fiscal 1998, Black Box also began construction of a new 132,000 square foot distribution center expansion. The facility became operational in May 1999 and is intended to ensure adequate distribution capacity for the Company's foreseeable future. PRODUCTS. Black Box believes that its ability to offer a broad, innovative product line with plenty of new products, has been an important factor in its consistent high growth rates and operating margins. Black Box currently offers more than 12,000 private label, well-known branded products and custom products. A majority of the 12,000 products carry the BLACK BOX(R) brand name. MANUFACTURERS AND SUPPLIERS. Black Box utilizes a network of over 200 manufacturers and suppliers throughout the world. Each supplier is monitored for quality, delivery performance and cost through a well established certification program. Manufacturers of computer communications and networking products distribute their products under the BLACK BOX(R) brand name because Black Box offers qualified technical support and provides a significant channel of distribution to end users. This network has manufacturing and engineering capabilities to customize products for specialized applications. Black Box believes that the loss of any single source of supply would not adversely affect its business. Black Box also operates its own manufacturing and assembly operation at its Lawrence, Pennsylvania location which currently supplies custom cable assemblies, switches and specialized active devices. The Company has chosen to manufacture certain products in-house when third-party sourcing is not economical or when lead times cannot be met by third-parties. Sourcing decisions of in-house versus out-of-house are based upon a balance of quality, delivery, performance and cost. MANAGEMENT INFORMATION SYSTEMS. The Company has committed significant resources to the development of sophisticated information systems which are used to manage all aspects of its business. The Company's systems support and integrate technical support and customer service, inventory management, purchasing, distribution activities and accounting. These systems provide the Company with real time, continuously updated information which allows the Company to monitor sales trends, make informed purchasing decisions, perform statistical analyses of its customer database and provide product availability and order status information. The Company's international operations utilize a remote customer access system to communicate with its Pittsburgh-based information systems to check stock availability, order status and pricing and to place orders. 7 8 The Company's changing product mix, multiple language requirements and design enhancements require efficient modification of product presentations for its various catalogs. Black Box has implemented a computerized publishing system that provides flexibility and speed for both text and graphic layout. Black Box believes that this system enables it to efficiently update product lines in subsequent catalog issues and introduce new products on a timely basis. BACKLOG. Due to rapid order fulfillment, Black Box's backlog of orders is not significant to its operations outside of its on-site services operation. At March 31, 1999, the worldwide backlog of unfilled orders believed to be firm for Black Box products was approximately $3.3 million. The worldwide backlog of unfilled orders believed to be firm on-site services was approximately $11.1 million. EMPLOYEES. As of March 31, 1999, the Company had approximately 1,600 employees worldwide. The Company's ATIMCO subsidiary is subject to a collective bargaining agreement with 25 employees. The agreement expires April 21, 2001. The Company believes that its relationship with its employees is good. FINANCIAL INFORMATION. Financial information regarding the Company, including geographic sales data, is set forth in Item 8 of this Form 10-K and is incorporated herein by reference. COMPETITION. The Company competes with a variety of manufacturers, direct marketers, computer resellers and manufacturers' sales organizations. The Company also competes with the manufacturers of products that the Company sells under its private labels. The Company believes the principal competitive factors in its markets are product quality and selection, technical support, customer base and customer service. The Company believes it competes favorably with respect to these factors. The Company believes there are no dominant competitors in the industry. There are several direct marketing catalog competitors such as Micro Warehouse, Inc., CDW Computer Centers, Inc., and Viking Office Products who market some comparable products in a similar manner. 8 9 ITEM 2 -- PROPERTIES The Company's headquarters and domestic operating facilities are located in Lawrence, Pennsylvania (a suburb of Pittsburgh). This 200,000 square foot facility on a sixteen-acre site houses administrative, sales and marketing, manufacturing and service operations. In Fiscal 1998, Black Box began construction of a new 132,000 square foot addition to its product distribution center. This building stands on 6 acres of previously undeveloped land adjacent to the existing facility and became operational in May 1999. Black Box also owns 62 undeveloped acres adjacent to such site. The Company also owns or leases the following facilities:
Location Own/Lease Square Footage -------- --------- -------------- Melbourne, Australia Lease 15,100 Zaventum, Belgium Lease 11,600 Sao Paulo, Brazil Lease 14,000 Ontario, Canada Lease 6,200 Santiago,Chile Lease 1,400 Rungis, France Lease 20,800 Hallbergmoos, Germany Lease 6,700 Vimodrone, Italy Lease 3,100 Tokyo, Japan Lease 15,100 Mexico City, Mexico Lease 6,500 Utrecht, Netherlands Lease 20,500 Hato Rey, Puerto Rico Lease 6,000 Altendorf, Switzerland Lease 10,500 Orlando, Florida, USA Lease 2,000 Sarasota, Florida, USA Lease 1,200 St. Petersburg, Florida, USA Lease 13,000 Atlanta, Georgia, USA Lease 16,000 Duluth, Georgia, USA Lease 21,000 Livonia, Michigan, USA Lease 2,000 Brunswick, Ohio, USA Lease 2,750 Worthington, Ohio, USA Lease 4,500 Pittsburgh, Pennsylvania, USA Lease 4,900 West Columbia, South Carolina, USA Lease 5,200 Charleston, West Virginia, USA Lease 2,000 Newbury, England Own 1,100 Reading, England Own 19,400 Winston-Salem, North Carolina, USA Own 7,200
The Company believes that its manufacturing facilities, located at its headquarters site, are adequate for its present level of production. The Company's other facilities, including the new distribution center, used primarily for sales and distribution, are also adequate given its present level of operations. 9 10 ITEM 3 -- LEGAL PROCEEDINGS The Company is involved in, or has pending, various legal proceedings, claims, suits and complaints arising out of the normal course of business. Based on the facts currently available to the Company, management believes all such matters are adequately provided for, covered by insurance, without merit, or of such amounts which upon resolution will not have a material adverse effect on the consolidated financial position or the results of operations of the Company. ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security-holders, through the solicitation of proxies or otherwise. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company and their respective ages and positions are as follows:
NAME AGE POSITION WITH THE COMPANY ---- --- ------------------------- Fred C. Young 43 Chairman of the Board, Chief Executive Officer, President and Secretary Anna M. Baird 42 Vice President, Chief Financial Officer, Treasurer, and Principal Accounting Officer Kathleen Bullions 44 Vice President of Operations
The following is a biographical summary of the experience of the executive officers of the Company: FRED C. YOUNG, 43, was elected Chairman of the Board and Chief Executive Officer of the Company on June 24, 1998. He also is currently President and Secretary of the Company and was first elected a director of the Company on December 18, 1995. He served as Vice President and Chief Financial Officer, Treasurer and Secretary of Black Box Corporation since joining the Company in 1991 and was promoted to Senior Vice President and Chief Operating Officer in May 1996 and President in May 1997. ANNA M. BAIRD, 42, was promoted to Vice President, Chief Financial Officer, and Treasurer on May 9, 1997. She was Director of Finance prior to May 9, 1997. KATHLEEN BULLIONS, 44, was promoted to Vice President of Operations on May 9, 1997. She was Director of Operations prior to May 9, 1997. 10 11 PART II ITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock is traded on the Nasdaq National Market (trading symbol "BBOX"). On June 18, 1999, the last reported sale price of the Common Stock was $46 15/16 per share. The following table sets forth the quarterly high and low sale prices of the Common Stock as reported by the Nasdaq Stock Market during each of the Company's fiscal quarters indicated. Such over the counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.
High Low ---- --- Fiscal 1997 1st Quarter 24-3/4 17 2nd Quarter 33-1/2 19 3rd Quarter 41-1/2 32 4th Quarter 43-1/4 24-3/4 Fiscal 1998 1st Quarter 39-1/2 20-3/4 2nd Quarter 41-1/2 33-3/4 3rd Quarter 46 25 4th Quarter 40-1/4 29-1/2 Fiscal 1999 1st Quarter 41 31 7/16 2nd Quarter 37 3/8 22 3/4 3rd Quarter 38 3/8 21 1/2 4th Quarter 38 3/8 26 3/8
At March 31, 1999, there were 166 holders of record. No cash dividends have been paid on the Common Stock. 11 12 ITEM 6 -- SELECTED FINANCIAL DATA The following table sets forth certain selected historical consolidated financial data for the Company for the periods indicated. All periods presented have been restated to reflect mergers accounted for as poolings-of-interests. Information should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto included elsewhere in this report. The historical data presented below for Fiscal Years 1995 through 1999 were derived from the Consolidated Financial Statements of the Company.
Fiscal Year Ended March 31, - --------------------------------------- ---------------- --------------- ---------------- --------------- ---------------- Income Statement Data: 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- Revenue (1) $174,769 $206,222 $246,413 $299,276 $329,974 Cost of Sales 79,463 95,733 117,698 151,441 167,672 -------- -------- -------- -------- -------- Gross Profit 95,306 110,489 128,715 147,835 162,302 Selling, general & administrative expenses 58,006 68,454 78,624 88,137 94,674 -------- -------- -------- -------- -------- Operating income before amortization 37,300 42,035 50,091 59,698 67,628 Intangibles amortization 4,206 3,620 3,854 3,801 4,263 -------- -------- -------- -------- -------- Operating income 33,094 38,415 46,237 55,897 63,365 Interest expense, net 6,399 5,763 3,654 2,636 553 Income from continuing operations 14,751 18,697 24,792 32,404 38,145 Income from discontinued operations 50 -- -- -- -- -------- -------- -------- -------- -------- Net income $14,801 $18,697 $24,792 $32,404 $38,145 ======== ======== ======== ======== ======== Basic earnings per share: Income from continuing operations $0.90 $1.13 $1.47 $1.89 $2.19 Income from discontinued operations 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- -------- Net income $0.90 $1.13 $1.47 $1.89 $2.19 ======== ======== ======== ======== ======== Diluted earnings per share: Income from continuing operations $0.88 $1.10 $1.40 $1.79 $2.09 Income from discontinued operations 0.00 0.00 0.00 0.00 0.00 -------- -------- -------- -------- -------- Net income $0.88 $1.10 $1.40 $1.79 $2.09 ======== ======== ======== ======== ======== Balance Sheet Data (at end of Period): Working Capital $23,718 $30,636 $39,364 $63,345 $73,262 Total assets 155,375 158,750 176,826 190,283 246,275 Total long-term debt 57,076 41,274 21,280 8,189 204 Stockholders' equity 48,227 68,486 95,959 130,248 192,652
(1) Revenues are net of sales returns and allowances. 12 13 ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS) GENERAL: The table below should be read in conjunction with the following discussion (percentages are based on total revenues.)
Fiscal Year Ended March 31, - -------------------------------------------------------------------------------- 1997 1998 1999 ================================================================================ Revenues $246,413 $299,276 $329,974 North America 55.3% 55.0% 56.3% International 44.7 45.0 43.7 Total 100.0 100.0 100.0 - --------------------------------------------------------------------------------
FISCAL 1999 COMPARED TO FISCAL 1998: Revenues for Fiscal 1999 were $329,974, an increase of 10.3% over Fiscal 1998 restated revenues of $299,276, reflecting strong growth in North America and Europe. North American revenues increased to $185,606 from $164,628 or 12.7% over the prior year. The growth was driven by success of the Company's new on-site technical services, increases in new product sales and new customers related, in part, to the merger with South Hills Datacomm in September 1998. Reported revenues from international operations increased to $144,368 from $134,648 or 7.2% over the prior year. If exchange rates had remained constant from the prior year, international revenues would have increased 7.4% from Fiscal 1998. Reported revenue dollar and percentage changes for the Company's largest subsidiaries were as follows: Japan decreased $1,953 or 6.3% due to poor overall economic conditions in the region and due to the relative strength of the U.S. dollar. If the Yen's exchange rate relative to the U.S. dollar had remained unchanged from Fiscal 1998, Japan's revenues would have decreased 4.3%. United Kingdom reported revenues increased $4,535 or 16.2% primarily due to increased penetration of existing customers. Reported revenues from France increased $2,592 or 13.6% primarily due to growth in new customer revenues. Brazil revenues decreased $5,586 or 42.7%, which was consistent with management's plan to eliminate unprofitable revenue categories to improve the overall profitability of the Company. Without the impact of currency, revenues for the United Kingdom, France and Brazil would have increased by 15.4%, increased by 10.9% and decreased by 42.7%, respectively. Excluding Japan, United Kingdom, France and Brazil, the remaining international business units' revenues grew $10,132 or 23.2% from Fiscal 1998. Overall growth in international revenues were due primarily to strong customer demand for switches and cables, success in attracting new customers and deeper penetration of existing customers. Total Fiscal 1999 revenues resulting from acquisitions accounted for using the purchase method was $17,476. Gross profit in Fiscal 1999 increased to $162,302, or 49.2% of revenues, from $147,835, or 49.4% of revenues, in Fiscal 1998. The slight decrease in gross profit margin was due primarily to the impact of strong revenue growth of the Company's on-site technical services product line which provides slightly lower gross margins. The revaluation of foreign denominated 13 14 intercompany receivables had little impact on gross profit margin. Excluding the impact of revaluing the intercompany receivables, the gross profit margin was 49.0% in Fiscal 1999 compared to 49.6% in Fiscal 1998. Selling, general and administrative ("SG&A") expenses for Fiscal 1999 were $94,674, or 28.7% of revenues, an increase of $6,537 over SG&A expenses of $88,137, or 29.5% of revenues in Fiscal 1998. SG&A expense as a percentage of revenues decreased from last year as the Company was able to leverage its existing cost structure and because of the revenue growth of the Company's on-site technical services product line which provides slightly less operating expense relative to revenues. The dollar increase over the prior year related primarily to additional marketing and personnel costs worldwide and additional costs related to the addition of the Company's on-site technical services product line. Operating income before amortization in Fiscal 1999 was $67,628, or 20.5% of revenues, compared to $59,698, or 19.9% of revenues, in Fiscal 1998. Intangibles amortization for the year was $4,263, which is comparable to the prior year amount of $3,801. Net interest expense for Fiscal 1999 declined to $553 from $2,636 in Fiscal 1998 due to lower average borrowings and a reduction in the Company's effective cost of borrowing. The tax provision in Fiscal 1999 was $24,905, or an effective tax rate of 39.5%, which is comparable to $21,272, or an effective tax rate of 39.6%, in Fiscal 1998. The annual effective tax rate of 39.5% for Fiscal 1999 was higher than the U.S. statutory rate of 35.0% primarily due to state income taxes, foreign income taxes higher than the U.S. rate, and the unfavorable impact of non-deductible intangibles amortization. Net income for Fiscal 1999 was $38,145 compared to $32,404 in Fiscal 1998, an increase of 17.7%. This growth was primarily due to strong revenue growth in North America and Europe and the Company's ability to leverage its existing cost structure and the success of the Company's operational changes in Brazil and Mexico. FISCAL 1998 COMPARED TO FISCAL 1997: Restated revenues for Fiscal 1998 were $299,276, an increase of $52,863 or 21.5% over Fiscal 1997 restated revenues of $246,413, reflecting strong growth worldwide. North American revenues increased to $164,628 from $136,390 or 20.7% over the prior year. The growth was driven by both the success of new product sales and an increase in the number of medium and large orders. Reported revenues from international operations increased to $134,648 from $110,023 or 22.4% over the prior year. If exchange rates had remained constant from the prior year, international revenues would have increased 29.4% from Fiscal 1997. Reported revenue dollar and percentage growth for the Company's largest subsidiaries were as follows: Japan increased $4,245 or 16.0%; United Kingdom increased $6,882 or 32.7%; France increased $907 or 5.0% and Brazil increased $4,834 or 58.6%. Reported revenue growth in France was reduced due to a stronger U.S. dollar in Fiscal 1998, and without the currency effect, operating revenues increased 19.2% from the prior year. Excluding Japan, United Kingdom, France, and Brazil, the remaining international business units grew $7,757 or 21.6%, from Fiscal 1997. The overall growth in international revenues was due to an increase in the number of orders as well as the success of new product sales. 14 15 Gross profit in Fiscal 1998 increased to $147,835, or 49.4% of revenues, from $128,715, or 52.2% of revenues, in Fiscal 1997. The decrease in gross profit margin was due to the combined effects of an increase in medium and large orders, which receive larger discounts and carry slightly lower profit margins than small orders, and the impact of strong sales growth of the Company's local area networking product line which provides slightly lower gross margins. The revaluation of foreign denominated intercompany receivables had little impact on gross profit margin. Excluding the impact of revaluing the intercompany receivables, the gross profit margin was 49.6% in Fiscal 1998 compared to 52.5% in Fiscal 1997. SG&A expenses for Fiscal 1998 were $88,137, or 29.5% of revenues, an increase of $9,513 over SG&A expenses of $78,624, or 31.9% of revenues in Fiscal 1997. SG&A expense as a percentage of revenues decreased from last year as the Company was able to leverage its existing cost structure. The dollar increase over the prior year related to additional marketing and personnel costs, primarily at the international locations. Operating income before amortization in Fiscal 1998 was $59,698, or 19.9% of revenues, compared to $50,091, or 20.3% of revenues, in Fiscal 1997. Intangibles amortization for the year was $3,801, comparable to the prior year amount of $3,854. Net interest expense for Fiscal 1998 declined to $2,636 from $3,654 in Fiscal 1997 due to lower average borrowings. The tax provision in Fiscal 1998 was $21,272, or an effective tax rate of 39.6%, compared to $17,627, or an effective tax rate of 41.6%, in Fiscal 1997. The decrease in the effective tax rate was due to foreign tax planning. The annual effective tax rate of 39.6% for Fiscal 1998 was higher than the U.S. statutory rate of 35.0% primarily due to state income taxes, foreign income taxes higher than the U.S. rate, and the unfavorable impact of non-deductible intangibles amortization. Net income for Fiscal 1998 was $32,404 compared to $24,792 in Fiscal 1997, an increase of 30.7%. This growth was primarily due to strong revenue growth in North America and Europe and the Company's ability to leverage its existing cost structure. LIQUIDITY AND CAPITAL RESOURCES: The Company continues to meet all of its cash requirements through cash flow from operations. During Fiscal 1999, cash flow before debt reduction and the impact of acquisitions was $40,413, the total impact of acquisitions was $25,428, and the Company reduced debt by $20,205. The Company also made capital expenditures of $9,354 during Fiscal 1999. As of March 31, 1999, the Company had cash and cash equivalents of $5,946, working capital of $73,262 and long-term debt of $204. The Company's total debt at March 31, 1999 of $1,715 was comprised of various loans and commitments. The weighted average interest rate on all indebtedness of the Company as of March 31, 1999 was approximately 6.7% compared to 8.8% as of March 31, 1998. In addition, at March 31, 1999, the Company had $48,021 of additional funds available under its Omnibus Credit Facility with Mellon Bank. The Mellon Credit Facility provides for a maximum borrowing of $49,000 through September 30, 2002. Interest on borrowings is variable based on the Company's option of selecting the bank's prime rate (7-3/4 percent at March 31, 1999), the Euro-dollar rate plus an applicable 15 16 margin, as defined in the agreement, or Mellon's ABS rate plus an applicable margin, as defined in the agreement. The applicable margin added to the Euro-dollar rate and Mellon's ABS rate is adjusted each quarter based on the cash flow ratio, as defined in the agreement and can vary from 1 percent to 1/2 percent (1/2 percent at March 31, 1999). On March 31, 1999, the Company announced its intention to repurchase up to 1 million shares of its Common Stock. As of June 1999, the Company had repurchased 1 million shares at prevailing market prices. Funding for the stock repurchase came from existing cash flow and borrowings from the Mellon Credit Facility. The Company has operations, customers and suppliers worldwide, thereby exposing the Company's financial results to foreign currency fluctuations. In an effort to reduce this risk, the Company generally sells and purchases inventory based on prices denominated in U.S. dollars. Intercompany sales to subsidiaries are generally denominated in the subsidiaries' local currency, although intercompany sales to the Company's subsidiaries in Brazil and Mexico are denominated in U.S. dollars. The gains and losses resulting from the revaluation of the intercompany balances denominated in foreign currencies are recorded to gross profit to the extent the intercompany transaction resulted from an intercompany sale of inventory. The Company has entered into and will continue in the future, on a selective basis, to enter into forward exchange contracts to reduce its foreign currency exposure related to these intercompany transactions. On a monthly basis, the open contracts are revalued to the current exchange rates and the resulting gains and losses are recorded in other income. These gains and losses offset the revaluation of the related foreign currency denominated receivables. At March 31, 1999, the Company did not have any open forward contracts. During Fiscal 1999, the net impact from revaluing forward contracts was not material. The Company believes that its cash flow from operations and existing credit facilities will be sufficient to satisfy its liquidity needs for the foreseeable future. YEAR 2000 COSTS: The Company has conducted a review of its information technology systems and non-information technology systems to evaluate the potential impact and disruption to its business arising from the year 2000. Those systems that were determined to not be year 2000 compliant have been corrected or are currently in the process of being modified. The Company's mainframe Distribution Control System, which processes customer orders, controls inventory, and updates accounts receivable, became compliant in early 1998. The hardware supporting this application is year 2000 compliant and the system software will be year 2000 compliant in July 1999 as part of regular maintenance upgrades. The Company completed the process of upgrading the functionality of the hardware and system software that supports both the financial general ledger and the manufacturing control system. This upgrade resulted in a year 2000 compliant system in March 1999. The application software for the financial general ledger and the manufacturing system has been assessed and became compliant in March 1999. The Company has determined that a minimal amount of updates and replacements are also required for the hardware and software on the workstations and servers and should be completed by September 1999. The Company is in the process of evaluating its subsidiaries to determine their state of readiness for the year 2000 and does not anticipate any major issues. Total costs for modifications/upgrades to the information technology systems is estimated at $400 of which about $300 was incurred during Fiscal 1998. All costs that directly relate to the year 2000 are being expensed as incurred. 16 17 The Company has surveyed significant vendors in order to evaluate the risks of year 2000 threats related to their interaction with the Company's systems and the supply of products. About 90% of the responses have been received and evaluated with no major complications or disruptions anticipated. The Company is currently evaluating the year 2000 readiness of its significant service providers and does not anticipate any related problems. The Company has the ability to communicate to customers information about year 2000 compliance for all products. Other significant non-information technology systems have been evaluated and the estimated cost for replacement is not material. The Company has fully tested its mainframe Distribution Control System and does not expect any processing failures as a result of the year 2000. However, in the event of a year 2000 failure of this system, the Company has a contingency plan to fulfill customer orders using a manual process. CONVERSION TO THE EURO CURRENCY: On January 1, 1999, certain members of the European Union established fixed conversion rates between their existing currencies and the European Union's common currency, the Euro. The Company conducts business in member countries. The transition period for the introduction of the Euro will be between January 1, 1999 and June 30, 2002. The Company is assessing the issues involved with the introduction of the Euro, and it does not expect Euro conversion to have a material impact on its operations or financial results. ACCOUNTING STANDARDS: In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value. As required by SFAS No. 133, the Company expects to adopt the new statement in the first quarter of Fiscal 2001. The effect of this statement on the Company's financial statements has not been determined. INFLATION. The overall effects of inflation on the Company have been nominal. Although long-term inflation rates are difficult to predict, the Company continues to strive to minimize the effect of inflation through improved productivity and cost reduction programs as well as price increases within the constraints of market competition. FORWARD-LOOKING STATEMENTS: When included in this Annual Report on Form 10-K or in documents incorporated herein by reference, the words "expects," "intends," "anticipates," "believes," "estimates," and analogous expressions are intended to identify forward-looking statements. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, the ability of the Company to identify, acquire and operate additional on-site technical service companies, general economic and business conditions, competition, changes in foreign, political and economic conditions, fluctuating foreign currencies compared to the U.S. dollar, rapid changes in technologies, customer preferences and various other matters, many of which are beyond the Company's control. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of the date of this Annual Report on Form 10-K. The Company expressly disclaims any obligation or undertaking to release publicly any updates or any changes in the Company's expectations with regard thereto or any change in events, conditions, or circumstances on which any statement is based. 17 18 ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risks in the ordinary course of business that include foreign currency exchange rates. In an effort to mitigate the risk, the Company, on a selective basis, will enter into forward exchange contracts. A discussion of accounting policies for financial derivatives is included in Note 1 to the consolidated financial statements. At March 31, 1999, the Company did not have any open forward exchange contracts. 18 19 ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA BLACK BOX CORPORATION AND SUBSIDIARIES Report of Independent Public Accountants Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Changes in Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 19 20 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Black Box Corporation: We have audited the accompanying consolidated balance sheets of Black Box Corporation (a Delaware corporation and the "Company") and subsidiaries as of March 31, 1999 and 1998, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended March 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Black Box Corporation and subsidiaries as of March 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1999, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania April 30, 1999 20 21 BLACK BOX CORPORATION CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED MARCH 31, -------------------- 1997 1998 1999 - -------------------------------------------------------------------------------------------- Revenues $246,413 $299,276 $329,974 Cost of sales 117,698 151,441 167,672 - -------------------------------------------------------------------------------------------- Gross profit 128,715 147,835 162,302 SG&A expense 78,624 88,137 94,674 Intangibles amortization 3,854 3,801 4,263 - -------------------------------------------------------------------------------------------- Operating income 46,237 55,897 63,365 Interest expense, net 3,654 2,636 553 Other expense (income), net 164 (415) (238) - -------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 42,419 53,676 63,050 Provision for income taxes 17,627 21,272 24,905 - -------------------------------------------------------------------------------------------- Net income $24,792 $32,404 $38,145 - -------------------------------------------------------------------------------------------- Basic earnings per common share $1.47 $1.89 $2.19 Diluted earnings per common share $1.40 $1.79 $2.09 - -------------------------------------------------------------------------------------------- Weighted average common shares 16,883 17,168 17,435 Weighted average common and common equivalent shares 17,760 18,084 18,268 - --------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21 22 BLACK BOX CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, -------------------------------- 1998 1999 - ------------------------------------------------------------------------------------------------------------------------ ASSETS Current assets Cash and cash equivalents $ 11,166 $ 5,946 Accounts receivable, net of allowance for doubtful accounts of $2,655 and $4,023, respectively 50,419 62,841 Inventories, net 32,283 32,258 Prepaid catalog expenses 5,845 4,967 Other current assets 4,418 11,205 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 104,131 117,217 Property, plant and equipment, net 13,548 24,190 Intangibles, net 72,164 104,208 Other assets 440 660 - ------------------------------------------------------------------------------------------------------------------------ Total assets $190,283 $246,275 ======================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current debt $ 8,705 $ 1,511 Accounts payable 15,815 18,210 Accrued compensation and benefits 6,214 6,820 Other accrued expenses 6,665 12,729 Accrued income taxes 3,387 4,685 - ------------------------------------------------------------------------------------------------------------------------ Total current liabilities 40,786 43,955 Long-term debt 8,189 204 Deferred taxes 10,768 9,051 Other liabilities 292 413 Stockholders' equity Preferred stock authorized 5,000,000; par value $1.00; none issued and outstanding Common stock authorized 40,000,000; par value $.001; issued and outstanding 17,233,021 and 18,147,358, respectively 17 18 Additional paid-in capital 34,117 59,272 Retaining earnings 101,533 139,678 Cumulative foreign currency translation (3,619) (3,842) Dividends declared to former shareholders prior to mergers (1,800) (2,474) - ------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 130,248 192,652 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $ 190,283 $246,275 ========================================================================================================================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22 23 BLACK BOX CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Cumulative Common Stock Additional Foreign ------------ Paid-in Retained Currency Dividend Shares Amount Capital Earnings Translation Declared Total - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1996 16,770,165 $17 $26,016 $43,759 $(988) $(318) $68,486 Comprehensive income Net income 24,792 24,792 Foreign currency translation adjustment (1,166) (1,166) ------- Comprehensive income 23,626 Exercise of options 216,428 2,474 2,474 Tax benefit from exercised options 1,520 1,520 Dividends declared to former shareholders prior to mergers (147) (147) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1997 16,986,593 17 30,010 68,551 (2,154) (465) 95,959 Comprehensive income Net income 32,404 32,404 Foreign currency translation adjustment (1,465) (1,465) ------- Comprehensive income 30,939 Contribution from merger 261 578 839 Issuance of common stock 68,115 Exercise of options 178,313 2,038 2,038 Tax benefit from exercised options 1,808 1,808 Dividends declared to former shareholders prior to mergers (1,335) (1,335) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1998 17,233,021 17 34,117 101,533 (3,619) (1,800) 130,248 Comprehensive income Net income 38,145 38,145 Foreign currency translation adjustment (223) (223) ----- Comprehensive income 37,922 Issuance of common stock 567,592 1 18,317 18,318 Exercise of options 346,745 3,732 3,732 Tax benefit from exercised options 3,106 3,106 Dividends declared to former shareholders prior to mergers (674) (674) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MARCH 31, 1999 18,147,358 $18 $59,272 $139,678 $(3,842) $(2,474) $192,652 - ----------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23 24 BLACK BOX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED MARCH 31, ------------------------------------------------- 1997 1998 1999 - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 24,792 $ 32,404 $ 38,145 Adjustments to reconcile net income to cash provided by operating activities Depreciation and amortization 6,356 6,446 7,591 All other 99 151 139 Changes in working capital items Accounts receivable, net (8,925) (4,023) (3,438) Inventories, net (11,047) (1,576) 2,575 Other assets (504) (1,772) (245) Accounts payable 7,332 (5,176) (1,982) Accrued compensation and benefits 1,233 286 196 Accrued expenses 83 376 (1,147) Accrued income taxes 2,906 (1,722) 4,459 - ----------------------------------------------------------- ---------------- --------------- ---------------- Cash provided by operating activities 22,325 25,394 46,293 - ----------------------------------------------------------- ---------------- --------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (2,993) (2,495) (9,354) Cash acquired from merger -- 160 -- Mergers, net of $1,183 cash acquired -- -- (24,754) Acquisition of joint venture (934) -- -- - ----------------------------------------------------------- ---------------- --------------- ---------------- Cash used in investing activities (3,927) (2,335) (34,108) - ----------------------------------------------------------- ---------------- --------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings (68,410) (94,196) (36,971) Proceeds from borrowings 48,384 81,340 16,766 Proceeds from the exercise of options 2,474 2,038 3,732 Dividends paid to former shareholders prior to merger (147) (1,335) (674) - ----------------------------------------------------------- ---------------- --------------- ---------------- Cash used in financing activities (17,699) (12,153) (17,147) - ----------------------------------------------------------- ---------------- --------------- ---------------- Foreign currency exchange impact on cash (1,244) (1,465) (258) - ----------------------------------------------------------- ---------------- --------------- ---------------- (Decrease) increase in cash and cash equivalents (545) 9,441 (5,220) Cash and cash equivalents at beginning of year 2,270 1,725 11,166 - ----------------------------------------------------------- ---------------- --------------- ---------------- Cash and cash equivalents at end of year $ 1,725 $ 11,166 $ 5,946 - ----------------------------------------------------------- ---------------- --------------- ---------------- Interest paid $ 3,671 $ 2,758 $ 1,278 - ----------------------------------------------------------- ---------------- --------------- ---------------- Income taxes paid $13,315 $ 16,181 $15,318 - ----------------------------------------------------------- ---------------- --------------- ---------------- YEAR ENDED MARCH 31, ------------------------------------------------- 1997 1998 1999 - ------------------------------------------------------------------------------------------------------------- Mergers Fair Value of: Assets acquired $ -- $ -- $30,860 Liabilities assumed -- -- (4,923) --------------- ---------------- ---------------- Cash paid -- -- 25,937 Less cash acquired -- -- (1,183) --------------- ---------------- ---------------- Net cash paid for mergers $ -- $ -- $24,754 - ----------------------------------------------------------- --------------- ---------------- ----------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 24 25 BLACK BOX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS: Black Box Corporation is a leading worldwide technical service provider of computer communications and networking equipment and services and related products to businesses of all sizes, operating in 77 countries throughout the world. FISCAL YEARS AND INTERIM PERIODS: Prior to the fiscal year ended March 31, 1998, the Company followed a 52 or 53 week fiscal year that ended on the Sunday nearest March 31. Each fiscal quarter consisted of 13 weeks, and the last quarter was adjusted for those years having 53 weeks. For fiscal years ended March 31, 1998 and after, the Company changed the fiscal year end to March 31. The first three quarters consisted of 13 weeks, and the fourth quarter was adjusted to end on March 31. The ending date for the year ended March 31, 1997 was actually March 30, 1997. For simplicity, March 31 is used for all year end references. PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of Black Box Corporation and its wholly owned and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. CASH EQUIVALENTS: The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of those instruments. INVENTORIES: Inventories are stated at the lower of cost (first-in, first-out method) or market. The net inventory balances at March 31 are as follows:
--------------------------------------------------------------------- 1998 1999 --------------------------------------------------------------------- Raw materials $ 1,654 $ 2,231 Work-in-process 41 31 Finished goods 33,442 33,552 Inventory reserve (2,854) (3,556) --------------------------------------------------------------------- Inventory, net $ 32,283 $ 32,258 ---------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets. The useful life for buildings and improvements is 30 years and for machinery and equipment is three to seven years. Maintenance and minor repair costs are charged to expense as incurred. Major replacements or betterments are capitalized. When items are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and, if applicable, a gain or loss is recorded. 25 26 Property, plant and equipment balances, net of accumulated depreciation, at March 31 are as follows:
1998 1999 - ------------------------------------------------------------------------------------------------------- Land $ 1,962 $ 2,841 Building and improvements 10,143 17,294 Machinery 16,250 24,796 - ------------------------------------------------------------------------------------------------------- 28,355 44,931 Accumulated depreciation (14,807) (20,741) - ------------------------------------------------------------------------------------------------------- Property, plant and equipment, net $ 13,548 $ 24,190 - -------------------------------------------------------------------------------------------------------
INTANGIBLES: Intangibles include the reorganization value in excess of amounts allocable to identifiable assets (the portion of the reorganization value which could not be attributed to specific, tangible or identifiable intangible assets), Goodwill (the excess of the purchase cost over the fair value of the assets acquired) and Tradename and Trademarks. These intangibles are amortized over 20, 25 to 40, and 40 years, respectively. The intangible assets and associated accumulated amortization at March 31 are as follows:
1998 1999 - ------------------------------------------------------------------------------------------------------- Reorganization value in excess of amounts allocable to identifiable assets, less accumulated amortization of $18,880 and $21,664, respectively $ 38,194 $ 35,410 Goodwill, less accumulated amortization of $527 and $1,104, respectively 3,577 39,307 Tradename and trademarks, less accumulated amortization of $5,549 and $6,451, respectively 30,393 29,491 - ------------------------------------------------------------------------------------------------------- Intangibles, net $ 72,164 $ 104,208 - -------------------------------------------------------------------------------------------------------
The Company evaluates the recoverability of intangible assets, including goodwill, at each balance sheet date based on forecasted future operations, undiscounted cash flows and other significant criteria. Based upon the available data, management believes that the carrying amount of these intangible assets will be realized over their respective remaining amortization periods. INCOME TAXES: Deferred income taxes are recognized for all temporary differences between the tax and financial bases of the Company's assets and liabilities, using the enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. FOREIGN CURRENCY TRANSLATION: The financial statements of the Company's foreign subsidiaries, except for the subsidiaries located in Brazil and Mexico, are recorded in the local currency which is the functional currency. Accordingly, assets and liabilities of these subsidiaries are translated using prevailing exchange rates at the appropriate balance sheet date and revenues and expenses are translated using an average monthly exchange rate. Translation adjustments resulting from this 26 27 process are recorded as a separate component of "Stockholders' Equity" and will be included in income upon sale or liquidation of the foreign investment. Gains and losses from transactions denominated in a currency other than the functional currency are included in net earnings. For the subsidiaries located in Brazil and Mexico, the U.S. dollar is the functional currency, hence a combination of current and historical rates is used in translating assets and liabilities and the related exchange adjustments are included in net earnings. RISK MANAGEMENT AND FINANCIAL DERIVATIVES: The Company has operations, customers and suppliers worldwide, thereby exposing the Company's financial results to foreign currency fluctuations. In an effort to reduce this risk, the Company generally sells and purchases inventory based on prices denominated in U.S. dollars. Intercompany sales to all subsidiaries except Brazil and Mexico are denominated in the subsidiaries local currency. Intercompany sales to the subsidiaries in Brazil and Mexico are denominated in U.S. dollars. The gains and losses resulting from the revaluation of the intercompany balances denominated in foreign currencies is recorded to gross profit to the extent the intercompany transaction resulted from an intercompany sale of inventory. The Company has entered and will continue in the future, on a selective basis, to enter into forward exchange contracts to reduce the foreign currency exposure related to these intercompany transactions. These contracts have a term of 12 months or less and are with a major commercial bank. Accordingly, the Company expects the counterparty to the contracts to meet its obligations. On a monthly basis, the open contracts are revalued to the current exchange rates, and the resulting gains and losses are recorded in other income. These gains and losses offset the revaluation of the related foreign currency denominated receivables. At March 31, 1999, the Company did not have any open forward exchange contracts. During Fiscal 1999, the net impact from revaluing forward contracts was not material. The Company does not hold or issue any other financial derivative instruments nor does it engage in speculative trading of financial derivatives. EARNINGS PER SHARE: Basic earnings per common share were computed based on the weighted average number of common shares issued and outstanding, during the relevant periods. Diluted earnings per common share were computed under the treasury stock method based on the weighted average number of common shares issued and outstanding, plus additional shares assumed to be outstanding to reflect the dilutive effect of common stock equivalents, less the number of shares assumed to be repurchased with the tax savings resulting from compensation expense of exercisable options. USE OF ESTIMATES: The preparation of financial statements in accordance with generally accepted accounting standards requires management to make estimates and assumptions. These estimates and assumptions affect the amounts reported in the accompanying financial statements. Actual results could differ from those amounts. ACCOUNTING STANDARDS: In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value. As required by SFAS No. 133, the Company expects to adopt the new statement in the first quarter of Fiscal 2001. The effect of this statement on the Company's financial statements has not been determined. 27 28 NOTE 2: CHANGES IN BUSINESS MERGERS AND NEW SUBSIDIARIES: During Fiscal 1999, the Company successfully completed four business combinations accounted for as poolings of interests (collectively the "Merged Companies"): Associated Network Solutions, Inc. ("ANSI"), American Telephone Wiring Company ("ATW"), CCI Direct Connect, Inc. ("CCI") and Midwest Communications Technologies, Inc. ("MCT"). Accordingly, all prior period amounts of the Merged Companies have been restated to reflect the combined results of operations and financial position. The Company issued an aggregate of 467.911 shares of its common stock in exchange for all of the outstanding shares of the Merged Companies. The following table reports aggregated revenue and aggregated net income of the Merged Companies for the periods preceding the acquisition dates:
Year Ended March 31, ------------------- -------------------- ------------------- Full Year Full Year Partial Year 1997 1998 1999 * - ------------------------------ ------------------- -------------------- ------------------- Revenue $14,255 $19,455 $6,496 Net income 497 1,489 415 - ------------------------------ ------------------- -------------------- -------------------
* Fiscal 1999 data includes only activity for each of the Merged Companies from April 1, 1998 to its respective merger date. (Fiscal 1997 and 1998 data includes twelve full months of activity.) Three of the four Merged Companies were Subchapter S corporations. As such, the earnings of these three companies were not subject to United States corporate income tax. Proforma tax information is not presented because it is not material. In addition, during Fiscal 1999, the Company completed eight business combinations which have been accounted for using the purchase method of accounting. Todd Communications, Inc. ("Todd"), Cable Consultants, Incorporated. ("Cable Con"), Key-Four, Inc. ("Key-Four"), Advanced Communications Corporation ("ACC"), Wakefield Electronics Group Inc., doing business as South Hills Datacomm ("South Hills"), Ohmega Installations Limited ("Ohmega"), Aicon Telemarketing Tecnologico Ltda. ("Aicon") and The Austin Connection, Inc. ("Austin"). In March 1999, the Company merged Todd, a privately held company based in Winston-Salem, North Carolina, into a wholly owned subsidiary. Todd specializes in technical design, installation and maintenance of premise cabling systems to customers throughout North Carolina. The purchase price was $1,900 and resulted in goodwill of approximately $1,300, which will be amortized over twenty five years. The Company has consolidated the results of operations for Todd as of the merger date. The operations and financial position of Todd are not material to either the consolidated financial position or results of operations of the Company and therefore, no pro forma information has been provided. In March 1999, the Company merged Cable Con, a privately held company based in Atlanta, Georgia, into a wholly owned subsidiary. Cable Con specializes in technical design, installation and maintenance of premise and outside cabling systems to customers throughout the Southeast. The purchase price was $12,100 and resulted in goodwill after assumed liabilities of approximately $9,400, which will be amortized over twenty five years. In addition, the merger agreement provides 28 29 for contingent payment of up to $3,000 depending on Cable Con's future performance. The Company has consolidated the results of operations for Cable Con as of the merger date. The operations and financial position of Cable Con are not material to either the consolidated financial position or results of operations of the Company and therefore, no pro forma information has been provided. In January 1999, the Company merged Key-Four, a privately held company based in Atlanta, Georgia, into a wholly owned subsidiary. Key-Four provides installation and maintenance for structured premise cabling systems, telephone systems installation and service, dedicated on-site telecommunications support personnel, plus related products to customers throughout the Southeast. The purchase price was $1,900 and resulted in goodwill after assumed liabilities of approximately $2,300, which will be amortized over twenty five years. In addition, the merger agreement provides for contingent payment of up to $600 depending on Key-Four's future performance. The Company has consolidated the results of operations for Key-Four as of the merger date. The operations and financial position of Key-Four are not material to either the consolidated financial position or results of operations of the Company and therefore, no pro forma information has been provided. In December 1998, the Company merged ACC into a wholly owned subsidiary. ACC was a privately held company based in Columbia, South Carolina that provides on-site services for premise cabling and related products to customers throughout South Carolina. The purchase price was $1,500 and resulted in goodwill of approximately $1,200, which will be amortized over twenty five years. The Company has consolidated the results of operations for ACC as of the merger date. The operations and financial position of ACC are not material to either the consolidated financial position or results of operations of the Company and therefore, no pro forma information has been provided. In September 1998, the Company merged with the parent corporation of Wakefield Electronics Group Inc., doing business as South Hills Datacomm (South Hills). South Hills is a direct marketer of computer communications and networking products with subsidiary operations in the United States, Puerto Rico and Chile. The purchase price was $25,300 and resulted in goodwill of approximately $20,500, which will be amortized over thirty years. In connection with the merger, the Company established a reserve of $2,200 for the purpose of covering the costs related to consolidation of the facilities and workforce. The Company has consolidated the results of operations for South Hills as of the merger date. The operations and financial position of South Hills are not material to either the consolidated financial position or results of operations of the Company and therefore, no pro forma information has been provided. In addition, the Company completed three minor mergers, Ohmega, Aicon and Austin, for a total purchase price of $1,754 and resulting in goodwill of approximately $1,600. Total revenues in Fiscal 1999 from mergers accounted for using the purchase method was $17,476. During Fiscal 1998, the Company merged with ATIMCO, a privately held company that provides network design and installation services, premise cabling and related products. The Company issued 68.115 shares of common stock in the transaction, which was accounted for by a pooling of interests. ATIMCO's revenues in Fiscal 1998 were $3,200. ATIMCO's results of operations are not considered material to the Company, and as such, prior periods have not been restated. 29 30 NOTE 3: INDEBTEDNESS Long-term debt at March 31 is as follows:
1998 1999 - ------------------------------------------------------------------ Notes $ 16,000 $ -- Other debt 894 1,715 - ------------------------------------------------------------------ 16,894 1,715 Less current portion (8,705) (1,511) - ------------------------------------------------------------------ Long-term debt $ 8,189 $ 204 - ------------------------------------------------------------------
In May 1994, Black Box Corporation of Pennsylvania ("Black Box PA"), a domestic operating subsidiary of the Company entered into a Revolving Credit Agreement with Mellon Bank, N.A. ("Mellon") for the purpose of refinancing the then existing revolving credit agreement and to provide additional working capital. On February 12, 1999, Black Box PA entered into a new credit agreement with Mellon. This agreement refinanced the existing debt under the previous revolving agreement, extended the term and modified the interest rate options, among other things. The current agreement provides for a maximum borrowing of $49,000 through September 30, 2002. Interest on borrowings is variable based on the Company's option of selecting the bank's prime rate (7-3/4 percent at March 31, 1999), the Euro-dollar rate plus an applicable margin, as defined in the agreement or Mellon's Automated Borrowing Services ("ABS") rate plus an applicable margin, as defined in the agreement. The applicable margin added to the Euro-dollar rate and Mellon's ABS rate is adjusted each quarter based on the cash flow ratio, as defined in the agreement and can vary from 1 percent to 1/2 percent (1/2 percent at March 31, 1999). The agreement requires the Company to pay a quarterly commitment fee, based on a rate determined by the cash flow ratio, as defined in the agreement and can vary from 3/8 percent to 1/5 percent (1/5 percent at March 31, 1999), of the daily unborrowed portion of the total commitment. The agreement is unsecured; however, all borrowings are guaranteed by the Company, as the ultimate parent. The agreement contains restrictive covenants that relate to capital expenditures and various financial ratios. In May 1994, the domestic subsidiary of the Company entered into a $40,000, five year Senior Note Agreement with certain financial institution parties for the purpose of refinancing a portion of the existing notes outstanding. The Senior Notes were payable in five equal installments of $8,000 per year starting in May 1995 and ending in May 1999. Interest on the notes was fixed at 8.81 percent and prepayments are permitted subject to the payment of a yield-maintenance amount, as defined in the agreement. On September 1, 1998 the Senior Notes were paid in full. Other debt is composed of various bank, industrial revenue and third party loans secured by specific pieces of equipment and real property. Interest on these loans are fixed and range from 3 to 5 percent. At March 31, 1999, the Company had $979 of letters of credit outstanding. The aggregated amount of the minimum principal payments for each of the five fiscal years subsequent to March 31, 1999 for all long-term indebtedness is as follows: 2000-$1,511; 2001-$109; 2002-$16; 2003-$14, 2004-$14; and thereafter-$51. The fair value of the Company's debt at March 31, 1999 approximates the carrying value. The fair 30 31 value is based on management's estimate of current rates available to the Company for similar debt with the same remaining maturity. NOTE 4: INCOME TAXES The domestic and foreign components of pretax income from continuing operations for the years ended March 31 are as follows:
1997 1998 1999 - ----------------------------------------------------------------------- Domestic $31,334 $40,280 $46,007 Foreign 11,085 13,396 17,043 - ----------------------------------------------------------------------- Consolidated $42,419 $53,676 $63,050 - -----------------------------------------------------------------------
The provision for income tax charged to continuing operations for the years ended March 31 consists of the following:
1997 1998 1999 - -------------------------------------------------------------------------------------- Current: Federal $ 9,507 $9,706 $ 9,980 State 1,158 856 1,031 Foreign 7,078 7,612 7,799 - -------------------------------------------------------------------------------------- Total current 17,743 18,174 18,810 - -------------------------------------------------------------------------------------- Deferred (116) 3,098 6,095 - -------------------------------------------------------------------------------------- Provision for income taxes $17,627 $21,272 $24,905 - --------------------------------------------------------------------------------------
Reconciliations between income taxes from continuing operations computed using the federal statutory income tax rate and the Company's effective tax rate for the years ended March 31 are as follows:
1997 1998 1999 - ------------------------------------------------------------------------------------------------ Federal statutory tax rate 35.0% 35.0% 35.0% Foreign taxes, net of foreign tax credits 0.6 2.8 1.1 Amortization of intangibles 2.3 1.9 1.8 State income taxes, net of federal benefit 2.0 1.6 1.6 Other, net 1.7 (1.7) 0.0 - ------------------------------------------------------------------------------------------------ Effective tax rate 41.6% 39.6% 39.5% - ------------------------------------------------------------------------------------------------
The components of deferred tax (liabilities) assets at March 31 are as follows:
1998 1999 ---- ---- Tradename and trademarks $ (10,627) $(10,312) State taxes (1,283) (1,041) Unremitted earnings of Japanese subsidiary (3,551) (3,528) Basis of fixed assets (961) (1,026) Other (4,790) (3,646) ----------------------------------------------------------------------- -------------- --------------- Gross deferred tax liabilities (21,212) (19,553) Net operating losses and foreign tax credit carryforwards 7,430 6,593 Other 3,014 3,909 ----------------------------------------------------------------------- -------------- --------------- Gross deferred tax assets 10,444 10,502 ----------------------------------------------------------------------- -------------- --------------- Net deferred tax liabilities $ (10,768) $(9,051) ----------------------------------------------------------------------- -------------- ---------------
31 32 At March 31, 1999, the Company had $44,507 of net operating loss carryforwards and $39,410 of alternative minimum tax loss carryforwards. As a result of the Company's reorganization in 1992 and concurrent ownership change, Section 382 of the Internal Revenue Code limits the amount of net operating losses available to the Company to approximately $600 per year. The carryforwards expire in the fiscal years 2004 through 2007; however, due to the limitation stated above, the Company expects to utilize only the unrestricted portion of the operating loss carryforwards, prior to expiration. In general, except for certain earnings in Japan, it is management's intention to reinvest undistributed earnings of foreign subsidiaries, which aggregate approximately $17,000 based on exchange rates at March 31, 1999. However, from time to time, the foreign subsidiaries declare dividends to the U.S. parent, at which time the appropriate amount of tax is determined. Also, additional taxes could be necessary if foreign earnings were lent to the parent or if the Company should sell its stock in the subsidiaries. It is not practicable to estimate the amount of additional tax that might be payable on undistributed foreign earnings. NOTE 5: COMMITMENTS AND CONTINGENCIES The Company leases certain equipment and facilities under noncancelable operating lease agreements, which contain provisions for certain rental adjustments as well as renewal options. Rent expense under these operating leases for the years ended March 31, 1997, 1998 and 1999 was $913, $916, and $2,882, respectively. At March 31, 1999, the minimum lease commitments under all noncancelable operating leases for the next five years are as follows: 2000-$2,249; 2001-$1,543; 2002-$1,060; 2003-$845, 2004-$339 and thereafter-$332. The Company is involved in, or has pending, various legal proceedings, claims, suits and complaints arising out of the normal course of business. Based on the facts currently available to the Company, management believes all such matters are adequately provided for, covered by insurance, are without merit, or are of such amounts which upon resolution will not have a material adverse effect on the consolidated financial position or the results of operations of the Company. NOTE 6: INCENTIVE COMPENSATION PLANS PERFORMANCE BONUS: The Company has a variable compensation plan covering substantially all employees. This plan provides for the payment of a bonus based on certain annual performance targets. All payments are subject to approval by the Board of Directors upon the completion of the annual audit. In addition, the Company has an incentive compensation plan that covers certain key employees. Amounts to be paid under this plan are based on the attainment of certain operating targets over a three-year period ending March 31, 2001. The amount expensed under the variable and incentive compensation plans for the years ended March 31, 1997, 1998 and 1999 were $2,954, $2,084, and $2,871, respectively. PROFIT SHARING AND SAVINGS PLAN: The Company has a Profit Sharing and Savings Plan ("Plan") which qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code covering only U.S. employees. Under the Plan, participants are permitted to make contributions of up to 12 percent of their compensation, as defined. The Company matches 25 percent of the participant's contributions and increases its matching contribution percentage if the Company achieves specific revenue and profit targets established at the beginning of each fiscal year. The 32 33 total Company contribution for the years ended March 31, 1997, 1998 and 1999 was $505, $523 and $748, respectively. STOCK OPTION PLANS: The Company has two stock option plans, the 1992 Stock Option Plan, as amended (the "Employee Plan"), and the 1992 Directors Stock Option Plan, as amended (the "Directors Plan"). The Employee Plan authorizes the issuance of options and stock appreciation rights ("SARs") for up to 3,900 shares of Common Stock. Options are issued by the Board of Directors or a Board committee to key employees of the Company and generally become exercisable in equal amounts over a three-year period. Option prices are equal to the fair market value of the stock on the date of the grant and have been adjusted to reflect the effect of the MICOM distribution on June 3, 1994. No SARs have been issued. The Directors Plan authorizes the issuance of options and SARs for up to 100 shares of Common Stock. Options are issued by the Board of Directors or a Board committee and generally become exercisable in equal amounts over a three-year period. Option prices are equal to the fair market value of the stock on the date of the grant and have been adjusted to reflect the effect of the MICOM distribution on June 3, 1994. No SARs have been issued. The following is a summary of the Company's stock option plans for years ended March 31:
1997 1998 1999 ---- ---- ---- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------------- --------------- --------------- --------------- -------------- --------------- Outstanding, beginning of the year 1,754 $ 11.96 1,750 $ 14.11 2,518 $20.14 Granted 400 23.38 1,042 28.71 723 22.08 Exercised (214) 11.47 (178) 11.43 (348) 10.82 Forfeited (190) 16.70 (96) 19.43 (91) 28.77 - ------------------------------ --------------- --------------- --------------- --------------- -------------- --------------- Outstanding, end of the year 1,750 $ 14.11 2,518 $ 20.14 2,802 $21.51 Exercisable, end of year 822 $ 10.54 1,119 $ 12.32 1,355 $17.70 Weighted average fair value of options granted during the year $ 11.89 $ 17.26 $11.87 - ------------------------------ --------------- --------------- --------------- --------------- -------------- ---------------
33 34 The following table summarizes information about the stock options outstanding at March 31, 1999:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------- ------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED RANGE OF REMAINING AVERAGE AVERAGE EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE - --------------------------- ------------------- -------------------- --------------- -------------------- ------------- $7.77 73 3.7 years $ 7.77 73 $ 7.77 $8.92 - $9.35 50 4.5 years 9.35 50 9.35 $9.78 - $13.06 275 5.3 years 10.07 275 10.07 $13.65 - $15.75 474 6.2 years 15.01 474 15.01 $20.50 - $21.94 938 9.1 years 21.75 91 21.05 $24.75 - $27.38 219 7.5 years 24.91 135 24.75 $30.25 - $33.25 749 8.7 years 30.26 250 30.26 $33.50 - $35.19 24 8.5 years 35.01 7 35.19 - --------------------------- ------------------- -------------------- --------------- ------------------- -------------- $7.77 - $35.19 2,802 7.8 years $ 21.51 1,355 $ 17.70 - --------------------------- ------------------- -------------------- --------------- ------------------- --------------
The Company continues to apply APB Opinion No. 25 in accounting for stock-based compensation. To date, all stock options have been issued at market value; accordingly, no compensation cost has been recognized. Had the Company elected to recognize compensation cost based on the fair value basis under SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts for the years ended March 31:
1997 1998 1999 - ------------------------------------------------------------------------------------------------- Net income As reported $ 24,792 $ 32,404 $ 38,145 Pro forma 23,521 30,103 34,071 Earnings per share As reported $ 1.40 $ 1.79 $ 2.09 Pro forma 1.32 1.66 1.86 - -------------------------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using the Black-Scholes options pricing model with the following assumptions for the years ending March 31:
1997 1998 1999 - ---------------------------------------------------------------------------------------- Expected life (in years) 7.0 7.3 6.1 Risk free interest rate 6.6% 5.7% 4.6% Volatility 35% 50% 50% Dividend yield -- -- -- - ----------------------------------------------------------------------------------------
NOTE 7: EARNINGS PER SHARE Basic earnings per common share were computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share were computed under the treasury stock method based on the weighted average number of common shares issued and outstanding, plus additional shares assumed to be outstanding to reflect the dilutive effect of common stock equivalents, less the number of shares assumed to be repurchased with the tax savings resulting from compensation expense of exercisable options. The following table details this calculation: 34 35
YEAR ENDED MARCH 31, -------------------- 1997 1998 1999 - -------------------------------------------------------- ---------------- ------------ ----------- Net income for earnings per share computation $24,792 $32,404 $38,145 Basic earnings per common share: Weighted average common shares 16,883 17,168 17,435 Basic earnings per common share $1.47 $1.89 $2.19 - -------------------------------------------------------- ---------------- ------------ ----------- Diluted earnings per common share: Weighted average common shares 16,883 17,168 17,435 Shares issuable from assumed conversion of common stock equivalents 998 1,049 989 Shares assumed repurchased with tax savings from compensation expense of exercised options (121) (133) (156) - -------------------------------------------------------- ---------------- ------------ ----------- Weighted average common and common equivalent shares 17,760 18,084 18,268 Diluted earnings per common share $1.40 $1.79 $2.09 - -------------------------------------------------------- ---------------- ------------ -----------
NOTE 8: SEGMENT REPORTING The Company manages its business segments primarily on a geographic basis. Its reportable segments are comprised of North America, Europe and the Pacific Rim. Other operating segments include Latin America and corporate expenses. Corporate expenses include costs related to tradename and trademark protection and various administrative items. The Company reports its segments separately because of differences in geographic market characteristics. Each reportable segment is directed by a regional vice president and may provide revenue from direct marketing and on-site services. The accounting policies of the various segments are the same as those described in "Summary of Significant Accounting Policies" in Note 1. The company evaluates the performance of each segment based on "Worldwide EBITA." A segment's Worldwide EBITA is its earnings before interest, taxes and amortization with all profit on intercompany sales allocated to the segment providing the third party revenues. Intersegment sales are not reviewed by management and are not included in the total revenues reported below. Certain costs included in the North America segment are incurred for the benefit of other segments but are not allocated for internal management reporting and are, therefore, not allocated herein. These unallocated costs include certain order fulfillment, shipping, and various overhead items. Segment interest income, interest expense and expenditures for segment assets are not presented to or reviewed by management, and are, therefore, not presented. Summary information by reportable segment is as follows: NORTH AMERICA
- ---------------------------- -------------- -------------- --------------- 1997 1998 1999 - ---------------------------- -------------- -------------- --------------- Revenues $ 136,390 $ 164,628 $ 185,606 Worldwide EBITA 25,136 29,180 31,413 Depreciation 1,271 1,569 1,983 Amortization 2,953 2,900 3,357 Segment assets 163,446 172,158 231,212 - ---------------------------- -------------- -------------- ---------------
35 36 EUROPE
- --------------------------- ------------- -------------- -------------- 1997 1998 1999 - --------------------------- ------------- -------------- -------------- Revenues $ 64,278 $ 77,167 $ 92,118 Worldwide EBITA 13,341 15,805 22,052 Depreciation 720 708 865 Amortization -- -- 5 Segment assets 28,432 33,335 37,947 - --------------------------- ------------- -------------- --------------
PACIFIC RIM
- --------------------------- ------------- -------------- -------------- 1997 1998 1999 - --------------------------- ------------- -------------- -------------- Revenues $ 34,097 $ 39,395 $ 36,171 Worldwide EBITA 12,483 14,612 13,195 Depreciation 50 151 128 Amortization -- -- -- Segment assets 13,138 12,243 12,887 - --------------------------- ------------- -------------- --------------
OTHER
- --------------------------- ------------- ------------- --------------- 1997 1998 1999 - --------------------------- ------------- ------------- --------------- Revenues $11,648 $ 18,086 $ 16,079 Worldwide EBITA (869) 101 968 Depreciation 304 112 119 Amortization 901 901 901 Segment assets 174,764 181,570 220,284 - --------------------------- ------------- ------------- ---------------
The following are reconciliations between certain reportable segment data and the corresponding consolidated amounts: REVENUES
- ----------------------------------------------------- --------------- ------------- ------------- 1997 1998 1999 - ----------------------------------------------------- --------------- ------------- ------------- Total revenues from reportable segments $234,765 $281,190 $313,895 Other revenues 11,648 18,086 16,079 Total consolidated revenues 246,413 299,276 329,974 - ----------------------------------------------------- --------------- ------------- -------------
EBITA
- ------------------------------------------------------ -------------- ------------- ------------- 1997 1998 1999 - ------------------------------------------------------ -------------- ------------- ------------- Total Worldwide EBITA for reportable segments $50,960 $59,597 $66,660 Other EBITA (869) 101 968 Total consolidated EBITA 50,091 59,698 67,628 - ------------------------------------------------------ -------------- ------------- -------------
36 37 ASSETS
- ------------------------------------------------------ -------------- ------------- ------------- 1997 1998 1999 - ------------------------------------------------------ -------------- ------------- ------------- Total assets for reportable segments $205,016 $217,736 $282,046 Other assets 174,764 181,570 220,284 Corporate eliminations (202,954) (209,023) (256,055) Total consolidated assets 176,826 190,283 246,275 - ------------------------------------------------------ -------------- ------------- -------------
NOTE 9: QUARTERLY DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER YEAR - ------------------------------- --------------------- --------------------- ------------------- -------------- --------------- FISCAL 1998 Revenues $69,269 $74,596 $74,206 $81,205 $299,276 Gross profit 34,820 36,834 37,026 39,155 147,835 Net income 7,193 7,951 8,107 9,153 32,404 Basic earnings per common share 0.42 0.46 0.47 0.53 1.89(1) Diluted earnings per common share 0.40 0.44 0.45 0.51 1.79(1) - ------------------------------- --------------------- --------------------- ------------------- -------------- --------------- FISCAL 1999 Revenues $73,096 $79,130 $84,789 $92,959 $329,974 Gross Profit 36,185 38,596 42,073 45,448 162,302 Net income 8,284 8,764 9,605 11,492 38,145 Basic earnings per common share 0.48 0.51 0.55 0.65 2.19 Diluted earnings per common share 0.46 0.49 0.53 0.62 2.09(1) - ------------------------------- --------------------- --------------------- ------------------- -------------- ---------------
(1) Earnings per share for the year is different than the sum of the quarterly earnings per share due to the change in shares each quarter. NOTE 10: SUBSEQUENT EVENTS (UNAUDITED) In April 1999, the Company merged Con-Optic, Inc. into Key-Four, a wholly owned subsidiary. Based in Atlanta, Georgia, privately held Con-Optic provides services complementary to Key-Four, including technical design, installation and maintenance services for premise cabling and related products to customers throughout Georgia. The results of operations and financial position of Con-Optic are not material to the consolidated results of operations or financial position. During May 1999, the Company merged with C-Tel Corporation. Established in 1987 in Columbus, Ohio, privately held C-Tel provides technical design, installation and maintenance services for premise cabling and related products to customers primarily in Ohio. The results of operations and financial position of C-Tel are not material to the consolidated results of operations or financial position. 37 38 On March 31, 1999, the Company announced its intention to repurchase up to 1 million shares of its Common Stock. As of June 1999, the Company had repurchased 1 million shares at prevailing market prices. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL DISCLOSURE Not applicable. 38 39 PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated herein by reference to the information set forth under the caption "Executive Officers of the Registrant" included under Part I of this Form 10-K. The other information required by this item is incorporated herein by reference to the information set forth under the captions "Election of Directors" and "Board of Directors and Certain Board Committees" in the Company's definitive proxy statement for the 1999 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the "Proxy Statement"). ITEM 11 -- EXECUTIVE COMPENSATION The information required by this item is incorporated herein by reference to the information set forth under the captions "Board of Directors and Certain Board Committees", "Executive Compensation and Other Information", and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement; provided, however, that the compensation committee report and performance graph in the Proxy Statement are not incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated herein by reference to the information set forth under the captions "Security Ownership of Certain Beneficial Owners", "Compensation Committee Interlocks and Insider Participation -- Change of Control Agreement", "Compensation Committee Interlocks and Insider Participation -- Separation Agreement", and "Security Ownership of Management" in the Proxy Statement. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated herein by reference to the information set forth under the captions "Election of Directors" and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement. 39 40 PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Financial statements, financial statement schedules and exhibits not listed here have been omitted where the required information is included in the consolidated financial statements or notes thereto, or is not applicable or required. (a) Documents filed as part of this report (1) Financial Statements - no financial statements have been filed in this Form 10-K other than those in Item 8. (2) Financial Statement Schedules Report of Independent Public Accountants on Supplemental Schedules Schedule II - Valuation and Qualifying Accounts (3) Exhibits
Exhibit Number Description ------ ----------- 3(i) Second Restated Certificate of Incorporation of the Company, as amended (8) 3(ii) Restated Bylaws, as amended (2) 10.1 1992 Stock Option Plan, as amended (9) 10.2 1992 Director Stock Option Plan, as amended (9) 10.3 Omnibus Credit Facility Agreement, dated as of February 12, 1999, among Black Box Corporation of Pennsylvania, Black Box Corporation and Mellon Bank, N.A. (1) 10.4 Agreement and Plan of Distribution, dated as of May 10, 1994, among the Company, Black Box - PA and MICOM (3) 10.5 Indemnification and Liability Assumption Agreement, dated as of June 3, 1994, among the Company, Black Box - PA and MICOM (3)
40 41 10.6(i) Tax Sharing Agreement, dated as of January 28, 1992, among the Company (previously known as MB Holdings, Inc.), Black Box and MICOM (3) 10.6(ii) Amendment to Tax Sharing Agreement, dated as of June 3, 1994 (3) 10.7 Separation Agreement, dated as of October 17, 1991, between the Company (previously known as MB Holdings, Inc.), and MICOM (3) 10.8 Black Box do Brasil Industria E. Comercio LTDA. Quotaholder Agreement (5) 10.9 Private Instrument of Amendment to the Articles of Association of Black Box do Brasil Industria E. Comercio LTDA. (5) 10.10 Change of Control Agreement with Frederick C. Young, dated as of December 20, 1994 (6) 10.12 Subscription Agreement and Plan of Acquisition of BBOX Holding Company by Black Box Corporation dated November 21, 1996 (7) 10.13 Executive Incentive Program Summary (1999-2001) (10) 10.14 Separation Agreement, dated as of June 23, 1998, between the Company and Jeffrey M. Boetticher (10) 21.1 Subsidiaries of the Company (1) 23.1 Consent and Report of Arthur Andersen LLP, independent public accountants (1) 27.1 Financial Data Schedule (1) 27.2 Restated Financial Data Schedule for Form 10-Q for the Fiscal 1999 Third Quarter (1) 27.3 Restated Financial Data Schedule for Form 10-Q for the Fiscal 1999 Second Quarter (1)
41 42 27.4 Restated Financial Data Schedule for Form 10-Q for the Fiscal 1999 First Quarter (1) 27.5 Restated Financial Data Schedule for Form 10-K for Fiscal 1998 (1) 27.6 Restated Financial Data Schedule for Form 10-Q for Fiscal 1998 Third Quarter (1) 27.7 Restated Financial Data Schedule for Form 10-Q for Fiscal 1998 Second Quarter (1) 27.8 Restated Financial Data Schedule for Form 10-Q for Fiscal 1998 First Quarter (1) 27.9 Restated Financial Data Schedule for Form 10-K for Fiscal 1997 (1)
(1) Filed herewith. (2) Filed as an exhibit to the 1993 Annual Report on Form 10-K of the Company, file number 0-18706, filed with the Commission on June 26, 1993, and incorporated herein by reference. (3) Filed as an exhibit to the Report on Form 8-K, file number 0-18706, filed with the Commission on June 20, 1994, and incorporated herein by reference. (5) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on February 15, 1994, and incorporated herein by reference. 42 43 (6) Filed as an exhibit to the 1995 Form 10-K of the Company, file number 0-18706, filed with the Commission on June 19, 1995 and incorporated herein by reference. (7) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on February 12, 1997, and incorporated herein by reference. (8) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on November 10, 1997, and incorporated herein by reference. (9) Filed as an exhibit to the Quarterly Report on Form 10-Q of the Company, file number 0-18706, filed with the Commission on November 13, 1998. (10) Filed as an exhibit to the Annual Report on Form 10-K of the Company, file number 0-18706, filed with the Commission on June 29, 1998. (b) Reports on Form 8-K. None. (c) The Company hereby files as exhibits to the Form 10-K the exhibits set forth in Item 14(a)(3) hereof which are not incorporated by reference. (d) The Company hereby files as financial statement schedules to this Form 10-K the financial statement schedules which are set forth in Item 14(a)(2) hereof. 43 44 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1943, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BLACK BOX CORPORATION Dated: June 25, 1999 /s/ Anna M. Baird ------------------------------------ Anna M. Baird, Vice President, Chief Financial Officer, Treasurer, and Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934 as amended, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURES CAPACITY DATE /s/ WILLIAM F. ANDREWS Director June 25, 1999 ---------------------- William F. Andrews /s/ WILLIAM R. NEWLIN Director June 25, 1999 --------------------- William R. Newlin /s/ BRIAN D. YOUNG Director June 25, 1999 ------------------ Brian D. Young /s/ FRED C. YOUNG Director, President, June 25, 1999 ----------------- Chief Operating Officer, Fred C. Young and Secretary /s/ ANNA M. BAIRD Vice President, June 25, 1999 ----------------- Chief Financial Officer, Anna M. Baird Treasurer and Principal Accounting Officer 44 45 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Black Box Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Black Box Corporation and Subsidiaries included in this Form 10-K, and have issued our report thereon dated April 30, 1999. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the accompanying index is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania April 30, 1999 45 46 SCHEDULE II BLACK BOX CORPORATION VALUATIONS AND QUALIFYING ACCOUNTS (DOLLARS IN THOUSANDS)
ADDITIONS BALANCE AT CHARGED TO REDUCTIONS BALANCE DESCRIPTION BEGINNING OF COSTS AND FROM AT END OF ----------- PERIOD EXPENSES RESERVES PERIOD ------ -------- -------- ------ YEAR ENDED MARCH 31, 1997 Inventory reserves $1,648 $1,398 $1,436 $1,610 Allowance for unrealizable accounts/sales returns $2,407 $ 664 $ 572 $2,499 YEAR ENDED MARCH 31, 1998 Inventory reserves $1,610 $3,653 $2,409 $2,854 Allowance for unrealizable accounts/sales returns $2,499 $1,333 $1,177 $2,655 YEAR ENDED MARCH 31, 1999 Inventory reserves $2,854 $3,396 $2,694 $3,556 Allowance for unrealizable accounts/sales returns $2,655 $2,923 $1,555 $4,023 Restructuring reserve $ -- $2,200 $ 902 $1,298
46 EX-10.3 2 OMNIBUS CREDIT FACILITY AGREEMENT 1 Exhibit 10.3 ================================================================================ OMNIBUS CREDIT FACILITY AGREEMENT dated as of February 12, 1999 among BLACK BOX CORPORATION OF PENNSYLVANIA, BLACK BOX CORPORATION and MELLON BANK, N.A. ================================================================================ 2 Table of Contents
Section Title Page - ------- ----- ---- ARTICLE I DEFINITIONS; CONSTRUCTION...........................................................................1 1.01 Certain Definitions.............................................................................1 1.02 Construction...................................................................................17 1.03 Accounting Principles..........................................................................18 ARTICLE II REVOLVING CREDIT..................................................................................20 2.01 Revolving Credit Loans.........................................................................20 2.02 Revolving Credit Commitment Fee................................................................21 2.03 Making of Revolving Credit Loans...............................................................21 2.04 Interest Rates.................................................................................22 2.05 Conversion or Renewal of Interest Rate Options.................................................25 2.06 Prepayments Generally..........................................................................26 2.07 Optional Prepayments...........................................................................27 2.08 Interest Payment Dates.........................................................................27 2.09 Payments Generally; Interest on Overdue Amounts................................................28 2.10 Additional Compensation in Certain Circumstances...............................................28 2.11 Taxes..........................................................................................31 2.12 Funding by Branch, Subsidiary or Affiliate.....................................................32 ARTICLE III LETTERS OF CREDIT................................................................................33 3.01 Letters of Credit..............................................................................33 3.02 Letter of Credit Fees..........................................................................33 3.03 Procedure for Issuance of Letters of Credit....................................................35 3.04 Payments.......................................................................................35 3.05 Increased Costs................................................................................35 3.06 Further Assurances.............................................................................36 3.07 Obligations Absolute...........................................................................36 3.08 Additional Provisions Regarding Letters of Credit..............................................37 ARTICLE IV REPRESENTATIONS AND WARRANTIES....................................................................38 4.01 Corporate Status...............................................................................38 4.02 Corporate Power and Authorization..............................................................38 4.03 Execution and Binding Effect...................................................................39 4.04 Governmental Approvals and Filings.............................................................39
i 3 4.05 Absence of Conflicts...........................................................................39 4.06 Audited Financial Statements...................................................................40 4.07 Absence of Undisclosed Liabilities.............................................................41 4.08 Absence of Material Adverse Changes............................................................41 4.09 Accurate and Complete Disclosure...............................................................41 4.10 Margin Regulations.............................................................................41 4.11 Subsidiaries...................................................................................41 4.12 Partnerships, etc..............................................................................42 4.13 Ownership and Control..........................................................................42 4.14 Litigation.....................................................................................42 4.15 Absence of Events of Default...................................................................43 4.16 Absence of Other Conflicts.....................................................................43 4.17 Insurance......................................................................................43 4.18 Title to Property..............................................................................43 4.19 Intellectual Property..........................................................................43 4.20 Taxes..........................................................................................44 4.21 Employee Benefits..............................................................................44 4.22 Environmental Matters..........................................................................45 4.23 Solvency.......................................................................................45 4.24 Regulatory Status..............................................................................46 4.25 Permits and Other Operating Rights.............................................................46 4.26 Year 2000 Compliance...........................................................................46 ARTICLE V CONDITIONS OF LENDING..............................................................................47 5.01 Conditions to Initial Revolving Credit Loans...................................................47 5.02 Conditions to All Revolving Credit Loans.......................................................48 ARTICLE VI AFFIRMATIVE COVENANTS.............................................................................49 6.01 Basic Reporting Requirements...................................................................49 6.02 Insurance......................................................................................54 6.03 Payment of Taxes and Other Potential Charges and Priority Claims...............................54 6.04 Preservation of Corporate Status...............................................................55 6.05 Governmental Approvals and Filings.............................................................55 6.06 Maintenance of Properties......................................................................55 6.07 Avoidance of Other Conflicts...................................................................55 6.08 Financial Accounting Practices.................................................................56
-ii- 4 6.09 Use of Proceeds................................................................................57 6.10 Continuation of or Change in Business..........................................................57 6.11 Consolidated Tax Return........................................................................57 6.12 Fiscal Year....................................................................................57 6.13 Covenant to Secure Note Equally................................................................57 ARTICLE VII NEGATIVE COVENANTS...............................................................................57 7.01 Consolidated Net Worth.........................................................................58 7.02 Leverage.......................................................................................58 7.03 Cash Flow......................................................................................58 7.04 Liens..........................................................................................58 7.05 Indebtedness...................................................................................59 7.06 Guarantees, Indemnities of the Borrower, etc...................................................60 7.07 Loans, Advances and Investments................................................................61 7.08 Dividends and Related Distributions............................................................62 7.09 Sale-Leasebacks................................................................................62 7.10 Mergers, Acquisitions, etc.....................................................................62 7.11 Dispositions of Properties.....................................................................63 7.12 Dealings with Affiliates.......................................................................63 7.13 Capital Expenditures...........................................................................63 7.14 Limitation on Other Restrictions on Liens......................................................63 7.15 License Agreement..............................................................................63 ARTICLE VIII DEFAULTS........................................................................................64 8.01 Events of Default..............................................................................64 8.02 Consequences of an Event of Default............................................................66 ARTICLE IX GUARANTY AND SURETYSHIP...........................................................................67 9.01 Guaranty and Suretyship........................................................................67 9.02 Obligations Absolute...........................................................................67 9.03 Waivers, etc...................................................................................69 9.04 Reinstatement..................................................................................70 9.05 No Stay........................................................................................71 9.06 Payments.......................................................................................71 9.07 Subrogation, etc...............................................................................71 9.08 Continuing Guaranty............................................................................71 9.09 Subordination..................................................................................72
-iii- 5 ARTICLE X MISCELLANEOUS......................................................................................72 10.01 Holidays......................................................................................72 10.02 Records.......................................................................................72 10.03 Amendments and Waivers........................................................................72 10.04 No Implied Waiver; Cumulative Remedies........................................................73 10.05 Notices.......................................................................................73 10.06 Expenses; Taxes; Indemnity....................................................................73 10.07 Severability..................................................................................75 10.08 Prior Understandings..........................................................................75 10.09 Duration; Survival............................................................................75 10.10 Counterparts..................................................................................76 10.11 Limitation on Payments........................................................................76 10.12 Set-Off.......................................................................................76 10.13 Successors and Assigns; Participations........................................................77 10.14 Governing Law; Submission to Jurisdiction: Waiver of Jury Trial; Limitation of Liability.....78 10.15 Termination of Existing Revolving Credit Facilities...........................................79 10.16 Confidentiality...............................................................................80 Exhibit A - Form of Revolving Credit Note Exhibit B - Form of Continuing Letter of Credit Agreement Exhibit C - Form of Documentary Letter of Credit Application Exhibit D - Form of Note (Stock Payments) Exhibit E - Subordination Terms Schedule 4.01 - Jurisdictions of Incorporation Schedule 4.11 - Capitalization of Subsidiaries Schedule 4.12 - Joint Ventures Schedule 4.13 - Capitalization of Borrower and Guarantor Schedule 4.14 - Litigation Schedule 4.21 - Plans and Multiemployer Plans Schedule 7.04 - Existing Liens Schedule 7.05 - Existing Indebtedness Annex A - Pricing Grid
-iv- 6 THIS OMNIBUS CREDIT FACILITY AGREEMENT (this "Agreement"), dated as of February 12, 1999, by and among BLACK BOX CORPORATION OF PENNSYLVANIA, a Delaware corporation (the "Borrower"), BLACK BOX CORPORATION, a Delaware corporation (the "Guarantor"), and MELLON BANK, N.A., a national banking association (the "Lender"). W I T N E S S E T H: WHEREAS, the Borrower is proposing to refinance certain obligations of the Borrower and the Guarantor to the Lender under the Credit Agreement, dated as of May 6, 1994, between the Lender and the Borrower, as amended (the "Existing Revolving Credit Facility"); WHEREAS, the Borrower has requested the Lender (a) to provide the funds necessary to refinance such obligations and (b) to provide a revolving credit facility to provide funds for the working capital requirements and general corporate purposes of the Borrower and to provide for the issuance of Letters of Credit for the account of the Borrower; and WHEREAS, the Lender has agreed to extend credit to the Borrower on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION 1.01. Certain Definitions. In addition to other words and terms defined elsewhere in this Agreement, as used herein the following words and terms shall have the following meanings, respectively, unless the context hereof otherwise clearly requires: "ABS Rate" shall mean a per annum rate of interest equal to the rate of interest determined by the Lender, in its sole discretion from time to time, to be its ABS Rate. Such ABS Rate shall change from time to time as of the effective date of each change in the ABS Rate as determined in the sole discretion of the Lender. The ABS Rate may be greater or less than other interest rates charged by the Lender to other borrowers and is not solely based or dependent upon the interest rate which the Lender may charge any particular borrower or class of borrowers. - 1 - 7 "ABS Rate Option" shall have the meaning set forth in Section 2.04(a)(iii) hereof. "ABS Rate Portion" of any Revolving Credit Loan or Loans shall mean at any time the portion, including the whole, of such Revolving Credit Loan or Loans bearing interest at such time under the ABS Rate Option. If no Revolving Credit Loan or Loans is specified, "ABS Rate Portion" shall refer to the ABS Rate Portion of all Revolving Credit Loans outstanding at such time. "Acquisition" of a Person shall mean the acquisition of all or substantially all of the assets of such Person, whether by acquisition of the assets of such Person or of the ownership interests of such Person, or otherwise. "Affiliate" of a Person (the "Specified Person") shall mean any Person which directly or indirectly controls, or is controlled by, or is under common control with, the Specified Person. For purposes of the preceding sentence, "control" of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Applicable Margin" shall have the meaning set forth in Section 2.04(b). "Applicable Tier" shall have the meaning set forth in Annex A hereof. "Assured Obligation" shall have the meaning set forth in the definition of Guaranty Equivalent. "Base Rate" shall have the meaning set forth in Section 2.04(a)(i) hereof. "Base Rate Option" shall have the meaning set forth in Section 2.04(a)(i) hereof. "Base Rate Portion" of any Revolving Credit Loan or Loans shall mean at any time the portion, including the whole, of such Revolving Credit Loan or Loans bearing interest at such time (a) under the Base Rate Option or (b) in accordance with Section 2.09(b)(ii) hereof. If no Revolving Credit Loan or Loans is specified, "Base Rate Portion" shall refer to the Base Rate Portion of all Revolving Credit Loans outstanding at such time. - 2 - 8 "Business Day" shall mean any day other than a Saturday, Sunday, public holiday under the laws of the Commonwealth of Pennsylvania or other day on which banking institutions are authorized or obligated to close in Pittsburgh, Pennsylvania. "Capital Expenditures" of any Person shall mean, for any period, all expenditures (whether paid in cash or accrued as liabilities during such period) of such Person during such period which would be classified as capital expenditures in accordance with GAAP (including, without limitation, expenditures for maintenance and repairs which are capitalized, and Capitalized Leases to the extent an asset is recorded in connection therewith in accordance with GAAP). "Capitalized Lease" shall mean at any time any lease which is, or is required under GAAP to be, capitalized on the balance sheet of the lessee at such time, and "Capitalized Lease Obligation" of any Person at any time shall mean the aggregate amount which is, or is required under GAAP to be, reported as a liability on the balance sheet of such Person at such time as lessee under a Capitalized Lease. "Cash Equivalent Investments" shall mean any of the following, to the extent acquired for investment and not with a view to achieving trading profits: (a) obligations fully backed by the full faith and credit of the United States of America maturing not in excess of nine (9) months from the date of acquisition, (b) commercial paper maturing not in excess of nine (9) months from the date of acquisition and rated "P-1" by Moody's Investors Service or "A-1" by Standard & Poor's Corporation on the date of acquisition, and (c) the following obligations of any domestic commercial bank having capital and surplus in excess of $500,000,000, which has, or the holding company of which has, a commercial paper rating meeting the requirements specified in clause (b) above: (i) time deposits, certificates of deposit and acceptances maturing not in excess of nine (9) months from the date of acquisition, or (ii) repurchase obligations with a term of not more than seven (7) days for underlying securities of the type referred to in clause (a) above. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. "CERCLIS" shall mean the Comprehensive Environmental Response, Compensation and Liability Information System List, as the same may be amended from time to time. - 3 - 9 "Change of Control Event" shall mean the beneficial ownership or acquisition by any Person or group of affiliated Persons (in any transaction or series of transactions) of (a) shares of the Guarantor representing more than fifty percent (50%) of the voting control of the Guarantor or (b) the power to elect, appoint or cause the election or appointment of at least a majority of the members of the board of directors of the Guarantor. "Closing Date" shall mean the date of this Agreement. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Commitment Fee Rate" shall have the meaning set forth in Section 2.02. "Consolidated Cash Flow Coverage Ratio", as of the last day of any fiscal quarter, shall mean the ratio of (a) Consolidated EBITDA minus Capital Expenditures of the Guarantor minus charges against income for foreign, federal, state and local income Taxes to (b) the current maturities of long term Indebtedness of the Guarantor plus Consolidated Interest Expense, in each case for the 4 most recently completed fiscal quarters ending on such day, considered as a single accounting period. If an Acquisition occurs during such period, each element of the Consolidated Cash Flow Coverage Ratio shall be calculated on a pro forma basis as if the Acquisition had been made, and any Indebtedness or other obligations issued or incurred in connection therewith had been issued or incurred, as of the first day of such period. In making such pro forma calculation of the Consolidated Interest Expense with respect to Indebtedness or other obligations issued or incurred in connection with the Acquisition, interest expense thereon shall be calculated on the basis of an interest rate per annum not less than the one-month Euro-Rate as of the last day of such period plus an Applicable Margin determined on the basis of the Consolidated Leverage Ratio as of the last day of such period. "Consolidated EBIT" for any period, with respect to the Guarantor and its consolidated Subsidiaries, shall mean the sum of (a) Consolidated Net Income of the Guarantor for such period, (b) Consolidated Interest Expense for such period and (c) charges against income for foreign, federal, state and local income taxes for such period, all as determined on a consolidated basis in accordance with GAAP. - 4 - 10 "Consolidated EBITDA" for any period, with respect to the Guarantor and its consolidated Subsidiaries, shall mean the sum of (a) Consolidated EBIT for such period, (b) depreciation expense for such period, and (c) amortization expense for such period, all as determined on a consolidated basis in accordance with GAAP plus noncash charges to the extent included in determining Consolidated Net Income for which no future cash expenditure is reasonably anticipated. "Consolidated Interest Expense" for any period shall mean the total interest expense of the Loan Parties and their consolidated Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Leverage Ratio", as of the last day of each fiscal quarter, shall mean the ratio of (a) the aggregate Indebtedness of the Guarantor and its consolidated Subsidiaries as of such day to (b) Consolidated EBITDA of the Guarantor and its consolidated Subsidiaries for the 4 most recently completed fiscal quarters ending on such day, considered as a single accounting period. If an Acquisition occurs during such period, (i) Consolidated EBITDA of the Guarantor and its consolidated Subsidiaries shall be calculated on a pro forma basis as if the Acquisition had been made as of the first day of such period and (ii) the aggregate Indebtedness of the Guarantor and its consolidated Subsidiaries as of the date of determination of the Consolidated Leverage Ratio shall include Indebtedness incurred in connection with and after giving effect to the Acquisition (and including, on a pro forma basis, all Indebtedness to be incurred in connection with the Acquisition, to the extent not incurred on such date). "Consolidated Net Income" of any Person (the "Statement Person") for any period shall mean the net earnings (or loss) after taxes of the Statement Person and its consolidated Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided, that there shall be deducted therefrom (a) income or loss accounted for by the Statement Person on the equity method because of the income (or deficit) during such period of any Person (other than a consolidated Subsidiary of the Statement Person) in which the Statement Person or any consolidated Subsidiary of the Statement Person has an ownership interest, but the deduction for such equity income shall be reversed to the extent that during such period an amount not in excess of such income has been actually received by the Statement Person or such consolidated Subsidiary of the Statement Person in the form of cash or property dividends or similar distributions, (b) the undistributed earnings of any consolidated Subsidiary of - 5 - 11 the Statement Person to the extent that the declaration or payment of dividends or similar distributions by such consolidated Subsidiary of the Statement Person is restricted (whether such restriction arises by operation of Law (including Law applicable to a foreign Subsidiary), by agreement, by its articles of incorporation or by-laws (or other constituent documents), or otherwise), (c) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made against income during such period, and (d) any gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of the Statement Person or any consolidated Subsidiary of the Statement Person. "Consolidated Net Worth" of any Person at any time shall mean the total amount of stockholders' equity of such Person and its consolidated Subsidiaries at such time determined on a consolidated basis in accordance with GAAP (exclusive of the effects of foreign currency translations and the accrual of interest on any note receivable from an Affiliate of such Person unless paid in cash). "Controlled Group Member" shall mean each trade or business (whether or not incorporated) which together with any Loan Party is treated as a single employer under Sections 4001(a)(14) or 4001(b)(1) of ERISA or Sections 414(b), (c), (m) or (o) of the Code. "Corresponding Source of Funds" shall mean, with respect to any Funding Segment of the Euro-Rate Portion, the proceeds of hypothetical receipts by a Notional Euro-Rate Funding Office or by the Lender through a Notional Euro-Rate Funding Office of one or more Dollar deposits in the interbank eurodollar market at the beginning of the Euro-Rate Funding Period corresponding to such Funding Segment having maturities approximately equal to such Euro-Rate Funding Period and in an amount approximately equal to the principal amount of such Funding Segment. "Dollar," "Dollars" and the symbol "$" shall mean lawful money of the United States of America. "Environmental Affiliate" shall mean, with respect to any Person, any other Person whose liability (contingent or otherwise) for any Environmental Claim such Person has retained, assumed or otherwise is liable for (by Law, agreement or otherwise). "Environmental Approvals" shall mean any Governmental Action pursuant to or required under any Environmental Law. - 6 - 12 "Environmental Claim" shall mean, with respect to any Person, any action, suit, proceeding, investigation, notice, claim, complaint, demand, request for information or other written communication by any other Person (including but not limited to any Governmental Authority, citizens' group or present or former employee of such Person) alleging, asserting or claiming any actual or potential (a) violation of any Environmental Law, (b) liability under any Environmental Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Environmental Concern Materials at any location, whether or not owned by such Person, in violation of any Environmental Law. "Environmental Cleanup Site" shall mean any location which is listed or proposed for listing on the National Priorities List, on CERCLIS or on any similar state list of sites requiring investigation or cleanup, or which is the subject of any pending or threatened action, suit, proceeding or investigation related to or arising from any alleged violation of any Environmental Law. "Environmental Concern Materials" shall mean (a) any flammable substance, explosive, radioactive material, hazardous material, hazardous waste, toxic substance, solid waste, pollutant, contaminant or any related material, raw material, substance, product or by-product of any substance specified in or regulated by any Environmental Law (including but not limited to any "hazardous substance" as defined in CERCLA or any similar state Law), (b) any toxic chemical or other substance from or related to industrial, commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and other petroleum products or compounds, polychlorinated biphenyls, radon and urea formaldehyde. "Environmental Law" shall mean any Law, whether now existing or subsequently enacted or amended, relating to (a) pollution or protection of the environment, including natural resources, (b) exposure of Persons, including but not limited to employees, to Environmental Concern Materials, (c) protection of the public health or welfare from the effects of products, by-products, wastes, emissions, discharges or releases of Environmental Concern Materials or (d) regulation of the manufacture, use or introduction into commerce of Environmental Concern Materials including their manufacture, formulation, packaging, labeling, distribution, transportation, handling, storage or disposal. Without limitation, "Environmental Law" shall also include any Environmental Approval and the terms and conditions thereof. - 7 - 13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "Euro-Rate" shall have the meaning set forth in Section 2.04(a)(ii) hereof. "Euro-Rate Funding Period" shall have the meaning set forth in Section 2.04(c) hereof. "Euro-Rate Option" shall have the meaning set forth in Section 2.04(a)(ii) hereof. "Euro-Rate Portion" of any Revolving Credit Loan or Loans shall mean at any time the portion, including the whole, of such Revolving Credit Loan or Loans bearing interest at any time under the Euro-Rate Option or at a rate calculated by reference to the Euro-Rate under Section 2.09(b)(i) hereof. If no Revolving Credit Loan or Loans is specified, "Euro-Rate Portion" shall refer to the Euro-Rate Portion of all Revolving Credit Loans outstanding at such time. "Euro-Rate Reserve Percentage" shall have the meaning set forth in Section 2.04(a)(ii) hereof. "Event of Default" shall mean any of the Events of Default described in Section 8.01 hereof. "Funding Breakage Date" shall have the meaning set forth in Section 2.10(b) hereof. "Funding Breakage Indemnity" shall have the meaning set forth in Section 2.10(b) hereof. "Funding Segment" of the Euro-Rate Portion of the Revolving Credit Loans at any time shall mean the entire principal amount of the Euro-Rate Portion to which at the time in question there is applicable a particular Euro-Rate Funding Period beginning on a particular day and ending on a particular day. (By definition, the Euro-Rate Portion is at all times composed of an integral number of discrete Funding Segments and the sum of the principal amounts of all Funding Segments of the Euro-Rate Portion at any time equals the principal amount of the Euro-Rate Portion at such time.) - 8 - 14 "GAAP" shall have the meaning set forth in Section 1.03 hereof. "Governmental Action" shall have the meaning set forth in Section 4.04 hereof. "Governmental Authority" shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Guaranteed Obligations" shall mean all obligations from time to time of the Borrower to the Lender under or in connection with any Loan Document, whether for principal, interest, fees, indemnities, expenses or otherwise, and all refinancings or refundings thereof, whether such obligations are direct or indirect, otherwise secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising (specifically including but not limited to obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Borrower or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if the claim for such obligation is not enforceable or allowable in such proceeding). Without limitation of the foregoing, such obligations include all obligations arising from any extensions of credit under or in connection with the Loan Documents from time to time, regardless of whether any such extensions of credit are in excess of the amount committed under or contemplated by the Loan Documents or are made in circumstances in which any condition to extension of credit is not satisfied. Without limitation of the foregoing, the Lender (or any successive assignee or transferee) from time to time may assign or otherwise transfer all or any portion of its rights or obligations under the Loan Documents (including, without limitation, all or any portion of any commitment to extend credit), or any other Guaranteed Obligations, to any other Person, and such Guaranteed Obligations (including, without limitation, any Guaranteed Obligations resulting from extension of credit by such other Person under or in connection with the Loan Documents) shall be and remain Guaranteed Obligations entitled to the benefit of the Agreement. "Guaranty Equivalent": A Person (the "Deemed Guarantor") shall be deemed to be subject to a Guaranty Equivalent in respect of any indebtedness, obligation or liability (the "Assured Obligation") of another Person (the "Deemed Obligor") if the Deemed Guarantor directly or indirectly guarantees, becomes - 9 - 15 surety for, endorses, assumes, agrees to indemnify the Deemed Obligor against, or otherwise agrees, becomes or remains liable (contingently or otherwise) for, such Assured Obligation. Without limitation, a Guaranty Equivalent shall be deemed to exist if a Deemed Guarantor agrees, becomes or remains liable (contingently or otherwise), directly or indirectly: (a) to purchase or assume, or to supply funds for the payment, purchase or satisfaction of, an Assured Obligation, (b) to make any loan, advance, capital contribution or other investment in, or to purchase or lease any property or services from, a Deemed Obligor (i) to maintain the solvency of the Deemed Obligor, (ii) to enable the Deemed Obligor to meet any other financial condition, (iii) to enable the Deemed Obligor to satisfy any Assured Obligation or to make any Stock Payment or any other payment, or (iv) to assure the holder of such Assured Obligation against loss, (c) to purchase or lease property or services from the Deemed Obligor regardless of the non-delivery of or failure to furnish of such property or services, (d) in a transaction having the characteristics of a take-or-pay or throughput contract or as described in paragraph 6 of FASB Statement of Financial Accounting Standards No. 47, or (e) in respect of any other transaction the effect of which is to assure the payment or performance (or payment of damages or other remedy in the event of nonpayment or nonperformance) of any Assured Obligation. "Indebtedness" of a Person shall mean (without duplication): (a) All obligations on account of money borrowed by, or credit extended to or on behalf of, or for or on account of deposits with or advances to, such Person; (b) All obligations of such Person evidenced by bonds, debentures, notes or similar instruments (except trade accounts payable arising in the ordinary course of business); (c) All obligations of such Person for the deferred purchase price of property or services; (d) All obligations secured by a Lien on property owned by such Person (whether or not assumed); and all obligations of such Person under Capitalized Leases (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such Capitalized Lease to repossession or sale of such property); (e) The unreimbursed amount of all drawings under any letter of credit issued for the account of such Person; - 10 - 16 (f) All obligations of such Person in respect of acceptances or similar obligations issued for the account of such Person; (g) All obligations of such Person under a product financing or similar arrangement described in paragraph 8 of FASB Statement of Accounting Standards No. 49 or any similar requirement of GAAP; (h) All obligations of such Persons under any Swaps; and (i) All indebtedness of others as to which such Person is a Deemed Guarantor under a Guaranty Equivalent. "Indemnified Parties" shall mean the Lender and its affiliates, and their respective directors, officers, employees, attorneys and agents. "Law" shall mean any law (including common law), constitution, statute, treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "Letter of Credit" shall have the meaning set forth in Section 3.01 hereof. "LIBID Rate" as of any Funding Breakage Date shall mean the rate of interest determined in good faith by the Lender in accordance with its usual procedures (which determination shall be conclusive) to be the average of rates per annum for deposits in Dollars bid for by major money center banks in the euro-dollar interbank market for delivery on the Funding Breakage Date, which deposits are of an amount comparable to the Funding Segment that is paid, prepaid or converted to the Base Rate Option and which deposits mature on the last day of the corresponding Euro-Rate Funding Period (or if no such deposits mature on such date, the rate determined by standard securities interpolation methods as applied to deposits maturing as close as possible to, but earlier than, such date, and to deposits maturing as close as possible to, but later than, such date). "License Agreement" shall mean that certain Trademark/Service Mark License Agreement, dated as of October 1, 1992, between BB Technologies, Inc. and the Borrower, as amended by Amendment No. 1 to the Trademark/Service Mark License Agreement, dated as of December 21, 1993, Amendment No. 2 to the Trademark/Service Mark License Agreement, dated as of May 6, 1994, and Amendment No. 3 to the Trademark/Service Mark License - 11 - 17 Agreement, dated as of July 1, 1995, and, subject to Section 7.15, as amended, modified or supplemented from time to time. "Lien" shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Loan Documents" shall mean this Agreement, the Revolving Credit Note and all other agreements and instruments extending, renewing, refinancing or refunding any indebtedness, obligation or liability arising under any of the foregoing, in each case as the same may be amended, modified or supplemented from time to time hereafter. "Loan Party" shall mean the Borrower and the Guarantor. "London Business Day" shall mean a day for dealing in deposits in Dollars by and among banks in the London interbank market and which is a Business Day. "Material Adverse Effect" shall mean: (a) a material adverse effect on the business, operations, condition (financial or otherwise) or prospects of a Loan Party and its Subsidiaries taken as a whole, (b) a material adverse effect on the ability of any Loan Party to perform or comply with any of the terms and conditions of any Loan Document, or (c) an adverse effect on the legality, validity, binding effect, enforceability or admissibility into evidence of any Loan Document, or the ability of the Lender to enforce any rights or remedies under or in connection with any Loan Document. "Multiemployer Plan" shall mean any employee benefit plan which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to which the Borrower or any Controlled Group Member has or had an obligation to contribute. "Net Income" of any Person for any period shall mean the net earnings (or loss) after taxes of such Person for such period determined in accordance with GAAP (exclusive of principles of consolidation). "Notional Euro-Rate Funding Office" shall have the meaning given to that term in Section 2.12(a) hereof. "Obligations" shall mean all indebtedness, obligations and liabilities of the Borrower to the Lender from time to time - 12 - 18 arising under or in connection with or related to or evidenced by or secured by or under color of this Agreement or any other Loan Document, and all extensions, renewals or refinancings thereof, whether such indebtedness, obligations or liabilities are direct or indirect, otherwise secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising. Without limitation of the foregoing, such indebtedness, obligations and liabilities include the principal amount of the Revolving Credit Loans, Reimbursement Obligations, interest, fees, indemnities or expenses under or in connection with this Agreement or any other Loan Document, and all extensions, renewals and refinancings thereof, whether or not such Revolving Credit Loans were made or the Letters of Credit were issued in compliance with the terms and conditions of this Agreement or in excess of the obligation of the Lender to lend and to issue Letters of Credit. Obligations shall remain Obligations notwithstanding any assignment or transfer or any subsequent assignment or transfer of any of the Obligations or any interest therein. "Office," when used in connection with the Lender, shall mean its office located at Three Mellon Bank Center, Pittsburgh, Pennsylvania 15259, or at such other office or offices of the Lender or any branch, subsidiary or affiliate thereof as may be designated in writing from time to time by the Lender to the Borrower. "Option" shall mean the Base Rate Option or the Euro-Rate Option or the ABS Rate Option, as the case may be. "Participant" shall have the meaning set forth in Section 10.13(b) hereof. "PBGC" means the Pension Benefit Guaranty Corporation established under Title IV of ERISA or any other governmental agency, department or instrumentality succeeding to the functions of said corporation. "Pension-Related Event" shall mean any of the following events or conditions: (a) Any action is taken by any Person (i) to terminate, or which would result in the termination of, a Plan, either pursuant to its terms or by operation of law (including, without limitation, any amendment of a Plan which would result in a termination under Section 4041(e) of ERISA), or (ii) to have a trustee appointed for a Plan pursuant to Section 4042 of ERISA; - 13 - 19 (b) PBGC notifies any Person of its determination that an event described in Section 4042 of ERISA has occurred with respect to a Plan, that a Plan should be terminated, or that a trustee should be appointed for a Plan; (c) Any Reportable Event occurs with respect to a Plan; (d) Any action occurs or is taken which could result in any Loan Party becoming subject to liability for a complete or partial withdrawal by any Person from a Multiemployer Plan (including, without limitation, seller liability incurred under Section 4204(a)(2) of ERISA), or any Loan Party or any Controlled Group Member receives from any Person a notice or demand for payment on account of any such alleged or asserted liability; or (e) (i) There occurs any failure to meet the minimum funding standard under Section 302 of ERISA or Section 412 of the Code with respect to a Plan, or any tax return is filed showing any tax payable under Section 4971(a) of the Code with respect to any such failure, or any Loan Party or any Controlled Group Member receives a notice of deficiency from the Internal Revenue Service with respect to any alleged or asserted such failure, or (ii) any request is made by any Person for a variance from the minimum funding standard, or an extension of the period for amortizing unfunded liabilities, with respect to a Plan. "Person" shall mean an individual or a corporation, partnership, trust, unincorporated association, joint venture, joint-stock company, Governmental Authority or any other entity. "Plan" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA (other than a Multiemployer Plan) covered by Title IV of ERISA by reason of Section 4021 of ERISA, of which any Loan Party or any Controlled Group Member is or has been within the preceding five (5) years a "contributing sponsor" within the meaning of Section 4001(a)(13) of ERISA, or which is or has been within the preceding five (5) years maintained for employees of any Loan Party or any Controlled Group Member. "Portion" shall mean the Base Rate Portion, the Euro-Rate Portion or the ABS Rate Portion, as the case may be. "Postretirement Benefits" shall mean any benefits, other than retirement income, provided by any Loan Party to retired employees, or to their spouses, dependents or beneficiaries, - 14 - 20 including, without limitation, group medical insurance or benefits, or group life insurance or death benefits. "Potential Default" shall mean any event or condition which with notice, passage of time or a determination by the Lender, or any combination of the foregoing, would constitute an Event of Default. "Prime Rate" as used herein, shall mean the interest rate per annum announced from time to time by Mellon Bank, N.A. as its prime rate. "Reimbursement Obligations" shall have the meaning set forth in Section 3.04 hereof. "Reportable Event" means (a) a reportable event described in Section 4043 of ERISA and regulations thereunder, (b) a withdrawal by a substantial employer from a Plan to which more than one employer contributes, as referred to in Section 4063(b) of ERISA, (c) a cessation of operations at a facility causing more than twenty percent (20%) of Plan participants to be separated from employment, as referred to in Section 4068(f) of ERISA, or (d) a failure to make a required installment or other payment with respect to a Plan when due in accordance with Section 412 of the Code or Section 302 of ERISA which causes the total unpaid balance of missed installments and payments (including unpaid interest) to exceed $750,000. "Responsible Officer" with respect to any Loan Party shall mean the Chief Executive Officer, President, any Vice President, Treasurer, Chief Financial Officer or Controller of such Loan Party. "Revolving Credit Commitment" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Commitment Fee" shall have the meaning set forth in Section 2.02 hereof. "Revolving Credit Committed Amount" shall mean $49,000,000. "Revolving Credit Extensions of Credit" shall have the meaning set forth in Section 2.01(a) hereof. "Revolving Credit Loans" shall have the meaning set forth in Section 2.01(a) hereof. - 15 - 21 "Revolving Credit Maturity Date" shall mean September 30, 2002. "Revolving Credit Note" shall mean the promissory note of the Borrower executed and delivered under Section 2.01(c) hereof, any promissory note issued in substitution therefor under Section 2.12(b), together with all extensions, renewals, refinancings or refundings thereof in whole or part. "Solvent" means, with respect to any Person at any time, that at such time (a) the sum of the debts and liabilities (including, without limitation, contingent liabilities) of such Person is not greater than all of the assets of such Person at a fair valuation, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person has not incurred, will not incur, does not intend to incur, and does not believe that it will incur, debts or liabilities (including, without limitation, contingent liabilities) beyond such person's ability to pay as such debts and liabilities mature, (d) such Person is not engaged in, and is not about to engage in, a business or a transaction for which such person's property constitutes or would constitute unreasonably small capital, and (e) such Person is not otherwise insolvent as defined in, or otherwise in a condition which could in any circumstances then or subsequently render any transfer, conveyance, obligation or act then made, incurred or performed by it avoidable or fraudulent pursuant to, any Law that may be applicable to such Person pertaining to bankruptcy, insolvency or creditors' rights (including but not limited to the Bankruptcy Code of 1978, as amended, and, to the extent applicable to such Person, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any other applicable Law pertaining to fraudulent conveyances or fraudulent transfers or preferences). "Standard Notice" shall mean an irrevocable notice provided to the Lender on a Business Day which is (a) At least one (1) Business Day in advance in the case of selection of, conversion to or renewal of the Base Rate Option or the ABS Rate Option or prepayment of any Base Rate Portion or any ABS Rate Portion; and (b) At least three (3) London Business Days in advance in the case of selection of the Euro-Rate Option of any Euro-Rate Portion. Standard Notice must be provided no later than 10:00 a.m., Pittsburgh time, on the last day permitted for such notice. - 16 - 22 "Stock Payment" by any Person shall mean any dividend, distribution or payment of any nature (whether in cash, securities, or other property) on account of or in respect of any shares of the capital stock (or warrants, options or rights therefor) of such Person, including but not limited to any payment on account of the purchase, redemption, retirement, defeasance or acquisition of any shares of the capital stock (or warrants, options or rights therefor) of such Person, in each case regardless of whether required by the terms of such capital stock (or warrants, options or rights) or any other agreement or instrument. "Subsidiary" of a Person at any time shall mean any corporation of which a majority (by number of shares or number of votes) of any class of outstanding capital stock normally entitled to vote for the election of one or more directors (regardless of any contingency which does or may suspend or dilute the voting rights of such class) is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person, and any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person. "Swaps" shall mean, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "Taxes" shall have the meaning set forth in Section 2.11(a) hereof. 1.02. Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the plural and the part the whole; "or" has the inclusive meaning represented by the phrase "and/or"; and "property" includes all properties and assets of any kind or nature, tangible or intangible, real, personal or mixed. - 17 - 23 References in this Agreement to "determination" (and similar terms) by the Lender include good faith estimates by the Lender (in the case of quantitative determinations) and good faith beliefs by the Lender (in the case of qualitative determinations). The words "hereof," "herein," "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. References herein to "out-of-pocket expenses" of a Person (and similar terms) include, but are not limited to, the reasonable fees of in-house counsel and other in-house professionals of such Person to the extent that such fees are routinely identified and specifically charged under such Person's normal cost accounting system. The section and other headings contained in this Agreement and the Table of Contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection and exhibit references are to this Agreement unless otherwise specified. 1.03. Accounting Principles. (a) As used herein, "GAAP" shall mean generally accepted accounting principles as such principles shall be in effect at the Relevant Date, subject to the provisions of this Section 1.03. As used herein, "Relevant Date" shall mean the date a relevant computation or determination is to be made or the date of relevant financial statements, as the case may be. (b) Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters shall be made, and all financial statements to be delivered pursuant to this Agreement shall be prepared, in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. (c) If any change in GAAP after the date of this Agreement is or shall be required to be applied to transactions then or thereafter in existence, and a violation of one or more provisions of this Agreement shall have occurred or in the opinion of the Borrower would likely occur which would not have occurred or be likely to occur if no change in accounting principles had taken place, (i) The Lender agrees that such violation shall not be considered to constitute an Event of Default or a Potential Default for a period of ninety (90) days from the date the Borrower notifies the Lender of the application of this Section 1.03(c); - 18 - 24 (ii) The Borrower and the Lender agree in such event to negotiate in good faith an amendment of this Agreement which shall approximate to the extent possible the economic effect of the original financial covenants after taking into account such change in GAAP; and (iii) If the Borrower and the Lender are unable to negotiate such an amendment within such ninety-day period, the Borrower shall have the option of (A) prepaying the Revolving Credit Loans and causing the cancellation of any Letters of Credit (pursuant to applicable provisions hereof) or (B) submitting the drafting of such an amendment to a firm of independent certified public accountants of nationally recognized standing acceptable to the Borrower and the Lender, which shall complete its draft of such amendment within ninety (90) days of submission; if the Borrower and the Lender cannot agree, the firm shall be selected by binding arbitration in the City of Pittsburgh, Pennsylvania, in accordance with the rules then being used by the American Arbitration Association. If the Borrower does not exercise either such option within said period, then as used in this Agreement, "GAAP" shall mean generally accepted accounting principles in effect at the Relevant Date. The Lender agrees that if the Borrower elects the option in clause (B) above, until such firm has been selected and completes drafting such amendment, no such violation shall constitute an Event of Default or a Potential Default. (d) If any change in GAAP after the date of this Agreement is required to be applied to transactions or conditions then or thereafter in existence, and the Lender shall assert that the effect of such change is or shall likely be to distort materially the effect of any of the definitions of financial terms in Article I hereof or any of the covenants of the Borrower in Article VII hereof (the "Financial Provisions"), so that the intended economic effect of any of the Financial Provisions will not in fact be accomplished, (i) The Lender shall notify the Borrower of such assertion, specifying the change in GAAP which is objected to, and until otherwise determined as provided below, the specified change in GAAP shall not be made by the Borrower in its financial statements for the purpose of applying the Financial Provisions; and (ii) The Borrower and the Lender shall follow the procedures set forth in paragraph (ii) and the first sentence of paragraph (iii) of subsection (c) of this Section. If the - 19 - 25 Borrower and the Lender are unable to agree on an amendment as provided in said paragraph (ii) and if the Borrower does not exercise either option set forth in the first sentence of said paragraph (iii) within the specified period, then as used in this Agreement "GAAP" shall mean generally accepted accounting principles in effect at the Relevant Date, except that the specified change in GAAP which is objected to by the Lender shall not be made in applying the Financial Provisions. The Lender agrees that if the Borrower elects the option in clause (B) of the first sentence of said paragraph (iii), until such independent firm has been selected and completes drafting such amendment, the specified change in GAAP shall not be made in applying the Financial Provisions. (e) All expenses of compliance with this Section 1.03 shall be paid for by the Borrower. ARTICLE II REVOLVING CREDIT 2.01. Revolving Credit Loans. (a) Revolving Credit Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, the Lender agrees (such agreement being herein called the "Revolving Credit Commitment") to make loans (the "Revolving Credit Loans") to the Borrower at any time or from time to time on or after the date hereof and to but not including the Revolving Credit Maturity Date. The Lender shall have no obligation to make any Revolving Credit Loan to the extent that the sum of (a) the aggregate principal amount of the Revolving Credit Loans at any time outstanding and (b) the aggregate face amount of all Letters of Credit at any time outstanding (such sum being hereinafter referred to as the "Revolving Credit Extensions of Credit") would exceed the Revolving Credit Committed Amount at such time. (b) Nature of Credit. Within the limits of time and amount set forth in this Section 2.01, and subject to the provisions of this Agreement, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder. (c) Revolving Credit Note. The obligation of the Borrower to repay the unpaid principal amount of the Revolving Credit Loans made to it by the Lender and to pay interest thereon shall be evidenced in part by a promissory note of the Borrower, dated the Closing Date, in substantially the form attached hereto - 20 - 26 as Exhibit A, with the blanks appropriately filled, payable to the order of the Lender in a face amount equal to the Revolving Credit Committed Amount. (d) Maturity. To the extent not due and payable earlier, the Revolving Credit Loans shall be due and payable on the Revolving Credit Maturity Date and, to the extent that the aggregate Revolving Credit Extensions of Credit at any time outstanding is in excess of the Revolving Credit Committed Amount at such time (whether as a result of the reduction of the Revolving Credit Committed Amount or otherwise), a portion of the Revolving Credit Loans in an amount equal to such excess shall be immediately due and payable. 2.02. Revolving Credit Commitment Fee. The Borrower shall pay to the Lender a commitment fee calculated at the Commitment Fee Rate for each day from and including the date hereof to but not including the Revolving Credit Maturity Date (or such earlier date on which the Revolving Credit Commitment terminates), on the amount (not less than zero) equal to (a) the Revolving Credit Committed Amount minus (b) Revolving Credit Extensions of Credit on such day. Such Revolving Credit Commitment Fee shall be due and payable for the preceding period for which such fee has not been paid (x) on the first (1st) day of each January, April, July and October and (y) on the date of each reduction of the Revolving Credit Committed Amount on the amount so reduced and (z) on the Revolving Credit Maturity Date. For purposes hereof, the "Commitment Fee Rate" for each day shall mean the applicable percentage set forth in Annex A based on the Applicable Tier on such day times 1/360. 2.03. Making of Revolving Credit Loans. Whenever the Borrower desires that the Lender make a Revolving Credit Loan, the Borrower shall provide Standard Notice to the Lender setting forth the following information: (a) The date, which shall be a Business Day, on which such proposed Revolving Credit Loan is to be made; (b) The principal amount of such proposed Revolving Credit Loan, which shall be the sum of the principal amounts selected pursuant to clause (c) of this Section 2.03, and which shall be an integral multiple of $100,000 not less than $100,000; (c) The interest rate Option or Options selected in accordance with Section 2.04(a) hereof and the principal amounts selected in accordance with Section 2.04(d) hereof of the Base Rate Portion and the ABS Rate Portion and each Funding Segment of the Euro-Rate Portion of such proposed Revolving Credit Loan; and - 21 - 27 (d) With respect to each such Funding Segment of such proposed Revolving Credit Loan, the Euro-Rate Funding Period to apply to such Funding Segment, selected in accordance with Section 2.04(c) hereof. Unless any applicable condition specified in Article V hereof has not been satisfied, on the date specified in such Standard Notice, the Lender shall make the proceeds of the Revolving Credit Loan available to the Borrower in funds immediately available at the Lender's Office. 2.04. Interest Rates. (a) Optional Bases of Borrowing. The unpaid principal amount of the Revolving Credit Loans shall bear interest for each day until due on one or more bases selected by the Borrower from among the interest rate Options set forth below. Subject to the provisions of this Agreement, the Borrower may select different Options to apply simultaneously to different Portions of the Revolving Credit Loans and may select different Funding Segments to apply simultaneously to different parts of the Euro-Rate Portion of the Revolving Credit Loans. The aggregate number of Funding Segments applicable to the Euro-Rate Portion of the Revolving Credit Loans at any time shall not exceed five (5). (i) Base Rate Option: A rate per annum (computed on the basis of a year of 360 days and actual days elapsed) for each day equal to the Base Rate for such day. The "Base Rate" for any day shall mean the Prime Rate for such day such interest rate to change automatically from time to time effective as of the effective date of each change in the Prime Rate. (ii) Euro-Rate Option: A rate per annum (based on a year of 360 days and actual days elapsed) for each day equal to the Euro-Rate for such day plus the Applicable Margin for such day. The "Euro-Rate" for any day shall mean for each Funding Segment of the Euro-Rate Portion corresponding to a proposed or existing Euro-Rate Funding Period the rate per annum determined by the Lender by dividing (the resulting quotient to be rounded upward to the nearest 1/1000 of 1%) (A) the rate of interest (which shall be the same for each day in such Euro-Rate Funding Period) determined in good faith by the Lender in accordance with its usual procedures (which determination shall be conclusive) to be the average of the rates per annum for deposits in Dollars offered to major money center banks in the London interbank market at approximately 11:00 a.m., London time, two (2) London - 22 - 28 Business Days prior to the first day of such Euro-Rate Funding Period for delivery on the first day of such Euro-Rate Funding Period in amounts comparable to such Funding Segment and having maturities comparable to such Euro-Rate Funding Period (except that the Euro-Rate with respect to a two-week Euro-Rate Funding Period shall be determined on the basis of deposits having a maturity of one month and not two weeks) by (B) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The "Euro-Rate" may also be expressed by the following formula: [average of the rates offered to major money] [center banks in the London interbank market] Euro-Rate = [determined by the Lender per subsection (A)] [1.00 - Euro-Rate Reserve Percentage ] "Euro-Rate Reserve Percentage" for any day shall mean the percentage (expressed as a decimal, rounded upward to the nearest 1/1000 of 1%), as determined in good faith by the Lender (which determination shall be conclusive), which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) representing the maximum reserve requirement (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "Eurocurrency liabilities") of a member bank in such System. The Euro-Rate shall be adjusted automatically as of the effective date of each change in the Euro-Rate Reserve Percentage. The Euro-Rate Option shall be calculated in accordance with the foregoing whether or not the Lender is actually required to hold reserves in connection with its eurocurrency funding or, if required to hold such reserves, is required to hold reserves at the "Euro-Rate Reserve Percentage" as herein defined. The Lender shall give prompt notice to the Borrower of the Euro-Rate determined or adjusted in accordance with the definition of the Euro-Rate, which determination or adjustment shall be conclusive if made in good faith. (iii) ABS Rate Option: A rate per annum (computed on the basis of a year of 360 days and the actual days elapsed) for each day equal to the ABS Rate for such day plus one half of one percent (0.50%), such interest rate to change automatically from time to time effective as of the effective date of each change in the ABS Rate. - 23 - 29 (b) Applicable Margin. The Applicable Margin for each day shall mean the applicable percentage set forth in Annex A based on the Applicable Tier on such day. (c) Euro-Rate Funding Periods. At any time when the Borrower shall select, convert to or renew the Euro-Rate Option to apply to any part of the Revolving Credit Loans, the Borrower shall specify one or more periods during which the Euro-Rate Option shall apply, such periods being two weeks or one, two, three or six months ("Euro-Rate Funding Period"); provided, that (i) each Euro-Rate Funding Period shall begin on a London Business Day, and the term "month", when used in connection with a Euro-Rate Funding Period, shall be construed in accordance with prevailing practices in the interbank eurodollar market at the commencement of such Euro-Rate Funding Period, as determined in good faith by the Lender (which determination shall be conclusive); (ii) the Borrower may not select a Euro-Rate Funding Period that would end after the Revolving Credit Maturity Date; and (iii) the Borrower shall, in selecting any Euro-Rate Funding Period, allow for scheduled mandatory payments of the Revolving Credit Loans. (d) Transactional Amounts. Every selection of, conversion from, conversion to or renewal of an interest rate Option and every payment or prepayment of any Revolving Credit Loans shall be in a principal amount such that after giving effect thereto the aggregate principal amount of (i) the Base Rate Portion or the ABS Rate Portion shall be for any aggregate principal amount and (ii) each Funding Segment of the Euro-Rate Portion of the Revolving Credit Loans shall be $100,000 or an integral multiple thereof. (e) Euro-Rate Unascertainable; Impracticability. If (i) on any date on which a Euro-Rate would otherwise be set the Lender shall have determined in good faith (which determination shall be conclusive) that: (A) adequate and reasonable means do not exist for ascertaining such Euro-Rate, (B) a contingency has occurred which materially and adversely affects the interbank eurodollar market, or (C) the effective cost to the Lender of funding a proposed Funding Segment of the Euro-Rate Portion from a Corresponding Source of Funds shall exceed the Euro-Rate applicable to such Funding Segment, or - 24 - 30 (ii) at any time the Lender shall have determined in good faith (which determination shall be conclusive) that the making, maintenance or funding of any part of the Euro-Rate Portion has been made impracticable or unlawful by compliance by the Lender or a Notional Euro-Rate Funding Office in good faith with any Law or guideline or interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or with any request or directive of any such Governmental Authority (whether or not having the force of law); then, and in any such event, the Lender may notify the Borrower of such determination. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of the Lender to allow the Borrower to select, convert to or renew the Euro-Rate Option shall be suspended until the Lender shall have later notified the Borrower of the Lender's determination in good faith (which determination shall be conclusive) that the circumstance giving rise to such previous determination no longer exist. If the Lender notifies the Borrower of a determination under subsection (ii) of this Section 2.04(e), the Euro-Rate Portion of the Revolving Credit Loans shall automatically be converted to the Base Rate Option as of the date specified in such notice (and accrued interest thereon shall be due and payable on such date). If at the time the Lender makes a determination under subsection (i) or (ii) of this Section 2.04(e) the Borrower previously has notified the Lender that it wishes to select, convert to or renew the Euro-Rate Option with respect to any proposed Revolving Credit Loan but such Revolving Credit Loan has not yet been made, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option instead of the Euro-Rate Option with respect to such Loan. 2.05. Conversion or Renewal of Interest Rate Options. (a) Conversion or Renewal. Subject to the provisions of Section 2.10(b) hereof, and if no Event of Default or Potential Default shall have occurred and be continuing or shall exist, the Borrower may convert any part of the Revolving Credit Loans from any interest rate Option or Options to one or more different interest rate Options and may renew the Euro-Rate Option as to any Funding Segment of the Euro-Rate Portion: - 25 - 31 (i) At any time with respect to conversion from the Base Rate Option or the ABS Rate Option; or (ii) At the expiration of any Euro-Rate Funding Period with respect to conversions from or renewals of the Euro-Rate Option as to the Funding Segment corresponding to such expiring Euro-Rate Funding Period. Whenever the Borrower desires to convert or renew any interest rate Option or Options, the Borrower shall provide to the Lender Standard Notice setting forth the following information: (v) The date, which shall be a Business Day, on which the proposed conversion or renewal is to be made; (w) The principal amounts selected in accordance with Section 2.04(d) hereof of the Base Rate Portion and the ABS Rate Option and each Funding Segment of the Euro-Rate Portion to be converted from or renewed; (x) The interest rate Option or Options selected in accordance with Section 2.04(a) hereof and the principal amounts selected in accordance with Section 2.04(d) hereof of the Base Rate Portion and the ABS Rate Portion and each Funding Segment of the Euro-Rate Portion to be converted to; and (y) With respect to each Funding Segment to be converted to or renewed, the Euro-Rate Funding Period selected in accordance with Section 2.04(c) hereof to apply to such Funding Segment. Standard Notice having been so provided, after the date specified in such Standard Notice, interest shall be calculated upon the principal amount of the Revolving Credit Loans as so converted or renewed. Interest on the principal amount of any part of the Revolving Credit Loans converted or renewed (automatically or otherwise) shall be due and payable on the conversion or renewal date. (b) Failure to Convert or Renew. Absent due notice from the Borrower of conversion or renewal in the circumstances described in Section 2.05(a)(ii) hereof, any part of the Euro-Rate Portion for which such notice is not received shall be converted automatically to the Base Rate Option on the last day of the expiring Euro-Rate Funding Period. 2.06. Prepayments Generally. Whenever the Borrower desires or is required to prepay any part of Revolving Credit - 26 - 32 Loans, it shall provide Standard Notice to the Lender setting forth the following information: (a) The date, which shall be a Business Day, on which the proposed prepayment is to be made; (b) The total principal amount of such prepayment, which shall be the sum of the principal amounts selected pursuant to clause (c) of this Section 2.06; and (c) The principal amounts selected in accordance with Section 2.04(d) hereof of the Base Rate Portion and the ABS Rate Portion and each part of each Funding Segment of the Euro-Rate Portion to be prepaid. Standard Notice having been so provided, on the date specified in such Standard Notice, the principal amounts of the Base Rate Portion and the ABS Rate Portion and each part of the Euro-Rate Portion specified in such notice, together with interest on each such principal amount to such date, shall be due and payable. 2.07. Optional Prepayments. The Borrower shall have the right at its option from time to time to prepay the Revolving Credit Loans in whole or part without premium or penalty (subject, however, to Section 2.10(b) hereof): (a) At any time with respect to any part of the Base Rate Portion and the ABS Rate Portion; or (b) At the expiration of any Euro-Rate Funding Period with respect to prepayment of the Euro-Rate Portion with respect to any part of the Funding Segment corresponding to such expiring Euro-Rate Funding Period. Any such prepayment shall be made in accordance with Section 2.06 hereof. 2.08. Interest Payment Dates. Interest on the Base Rate Portion and the ABS Rate Portion shall be due and payable on the first (1st) Business Day of each calendar month. Interest on each Funding Segment of the Euro-Rate Portion shall be due and payable on the last day of the corresponding Euro-Rate Funding Period. After maturity of any part of the Revolving Credit Loans (by acceleration or otherwise), interest on such part of the Revolving Credit Loans shall be due and payable on demand. - 27 - 33 2.09. Payments Generally; Interest on Overdue Amounts. (a) Payments Generally. All payments and prepayments to be made by the Borrower in respect of principal, interest, fees, indemnity, expenses or other amounts due from the Borrower hereunder or under any Loan Document shall be payable in Dollars by 12:00 o'clock Noon, Pittsburgh time, on the day when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature. Such payments shall be made to the Lender at its Office in Dollars in funds immediately available at such Office. Any payment or prepayment received by the Lender after 12:00 o'clock Noon, Pittsburgh time, on any day shall be deemed to have been received on the next succeeding Business Day. (b) Interest on Overdue Amounts. To the extent permitted by law, after there shall have become due (by acceleration or otherwise) principal, interest, fees, indemnity, expenses or any other amounts due from the Borrower hereunder or under any other Loan Document, such amounts shall bear interest for each day until paid (before and after judgment), payable on demand, at a rate per annum (in each case based on a year of 360 days and actual days elapsed) which for each day shall be equal to the following: (i) In the case of any part of the Euro-Rate Portion, (A) until the end of the applicable then-current Euro-Rate Funding Period at a rate per annum two percent (2%) above the rate otherwise applicable to such part, and (B) thereafter in accordance with the following clause (ii); and (ii) In the case of any other amount due from the Borrower hereunder or under any Loan Document, two percent (2%) above the then-current Base Rate Option. To the extent permitted by law, interest accrued on any amount which has become due hereunder or under any Loan Document shall compound on a day-by-day basis, and hence shall be added daily to the overdue amount to which such interest relates. 2.10. Additional Compensation in Certain Circumstances. (a) Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc. If any Law or guideline or interpretation or application thereof by any Governmental Authority charged with the interpretation or - 28 - 34 administration thereof or compliance with any request or directive of any Governmental Authority (whether or not having the force of law) now existing or hereafter adopted: (i) subjects the Lender or any Notional Euro-Rate Funding Office to any tax or changes the basis of taxation with respect to this Agreement, the Revolving Credit Note, the Revolving Credit Loans, the Letters of Credit or payments by the Borrower of principal, interest, commitment fee or other amounts due from the Borrower hereunder or under the Revolving Credit Note (except for taxes on the overall net income or overall gross receipts of the Lender or such Notional Euro-Rate Funding Office imposed by the jurisdictions (federal, state and local) in which the Lender's principal office or Notional Euro-Rate Funding Office is located), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, assets (funded or contingent) of, deposits with or for the account of, other acquisitions of funds by, the Lender or any Notional Euro-Rate Funding Office (other than requirements expressly included herein in the determination of the Euro-Rate hereunder), (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement (A) against assets (funded or contingent) of, or credits or commitments to extend credit extended by, the Lender or any Notional Euro-Rate Funding Office, or (B) otherwise applicable to the obligations of the Lender or any Notional Euro-Rate Funding Office under this Agreement, or (iv) imposes upon the Lender or any Notional Euro-Rate Funding Office any other condition or expense with respect to this Agreement, the Revolving Credit Note or its making, maintenance or funding of any Revolving Credit Loan, any Letter of Credit or any security therefor, and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon the Lender, any Notional Euro-Rate Funding Office or, in the case of clause (iii) hereof, any Person controlling the Lender, with respect to this Agreement, the Revolving Credit Note or the making, maintenance or funding of any Revolving Credit Loan or any Letter of Credit (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on the Lender's or controlling - 29 - 35 Person's capital, taking into consideration the Lender's or controlling Person's policies with respect to capital adequacy) by an amount which the Lender deems to be material (the Lender being deemed for this purpose to have made, maintained or funded each Funding Segment of the Euro-Rate Portion from a Corresponding Source of Funds), the Lender may from time to time notify the Borrower of the amount determined in good faith (using any averaging and attribution methods) by the Lender (which determination shall be conclusive) to be necessary to compensate the Lender or such Notional Euro-Rate Funding Office for such increase, reduction or imposition. Such amount shall be due and payable by the Borrower to the Lender five (5) Business Days after such notice is given, together with an amount equal to interest on such amount from the date two (2) Business Days after the date demanded until such due date at the Base Rate Option. A certificate by the Lender as to the amount due and payable under this Section 2.10(a) from time to time and the method of calculating such amount shall be conclusive. The Lender agrees that it will use good faith efforts to notify the Borrower of the occurrence of any event that would give rise to a payment under this Section 2.10(a); provided, however, that any failure of the Lender to give any such notice shall have no effect on the Borrower's obligations hereunder. (b) Funding Breakage. In addition to all other amounts payable hereunder, if and to the extent for any reason any part of any Funding Segment of any Euro-Rate Portion of the Revolving Credit Loans becomes due (by acceleration or otherwise), or is paid, prepaid or converted to the Base Rate Option (whether or not such payment, prepayment or conversion is mandatory or automatic and whether or not such payment or prepayment is then due), on a day other than the last day of the corresponding Euro-Rate Funding Period (the date such amount so becomes due, or is so paid, prepaid or converted, being referred to as the "Funding Breakage Date"), the Borrower shall pay the Lender an amount ("Funding Breakage Indemnity") determined by the Lender by calculating the following amount: (A) the principal amount of such Funding Segment of the Revolving Credit Loans owing to the Lender which so became due, or which was so paid, prepaid or converted, times (B) the greater of (x) zero or (y) the rate of interest applicable to such principal amount on the Funding Breakage Date minus the market LIBID Rate as of the Funding Breakage Date, times (C) the number of days from and including the Funding Breakage Date to but not including the last day of such Funding Period, times (D) 1/360. Such Funding Breakage Indemnity shall be due and payable on demand. In addition, the Borrower shall, on the due date for payment of any Funding Breakage Indemnity, pay to the Lender an additional amount equal to interest on such Funding Breakage Indemnity from the Funding Breakage Date to but not including such - 30 - 36 due date at the Base Rate Option (calculated on the basis of a year of 360 days and actual days elapsed). The amount payable to the Lender under this Section 2.10(b) shall be determined in good faith by the Lender, and such determination shall be conclusive absent manifest error. 2.11. Taxes. (a) Payments Net of Taxes. All payments made by the Borrower under this Agreement or any other Loan Document shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, and all liabilities with respect thereto, excluding (i) income or franchise taxes imposed on the Lender by the jurisdiction under the laws of which the Lender is organized or any political subdivision or taxing authority thereof or therein or as a result of a connection between the Lender and any jurisdiction other than a connection resulting solely from this Agreement and the transactions contemplated hereby, and (ii) income or franchise taxes imposed by any jurisdiction in which the Lender's lending offices which make or book Revolving Credit Loans are located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld or deducted from any amounts payable to the Lender under this Agreement or any other Loan Document, the Borrower shall pay the relevant amount of such Taxes and the amounts so payable to the Lender shall be increased to the extent necessary to yield to the Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the other Loan Documents. Whenever any Taxes are paid by the Borrower with respect to payments made in connection with this Agreement or any other Loan Document, as promptly as possible thereafter, the Borrower shall send to the Lender a certified copy of an original official receipt received by the Borrower showing payment thereof. (b) Indemnity. The Borrower hereby indemnifies the Lender for the full amount of all Taxes attributable to payments by or on behalf of the Borrower hereunder or under any of the other Loan Documents, any Taxes paid by the Lender, any present or - 31 - 37 future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any Taxes (including any incremental Taxes, interest or penalties that may become payable by the Lender as a result of any failure to pay such Taxes), whether or not such Taxes were correctly or legally asserted. Such indemnification shall be made within thirty (30) days from the date the Lender makes written demand therefor. 2.12. Funding by Branch, Subsidiary or Affiliate. (a) Notional Funding. The Lender shall have the right from time to time, prospectively or retrospectively, without notice to the Borrower, to deem any branch, subsidiary or affiliate of the Lender to have made, maintained or funded any part of the Euro-Rate Portion at any time. Any branch, subsidiary or affiliate so deemed shall be known as a "Notional Euro-Rate Funding Office." The Lender shall deem any part of the Euro-Rate Portion of the Revolving Credit Loans or the funding therefor to have been transferred to a different Notional Euro-Rate Funding Office if such transfer would avoid or cure an event or condition described in Section 2.04(e)(ii) hereof or would lessen compensation payable by the Borrower under Section 2.10(a) hereof, and if the Lender determines in its sole discretion that such transfer would be practicable and would not have a material adverse effect on such part of the Revolving Credit Loans, the Lender or any Notional Euro-Rate Funding Office (it being assumed for purposes of such determination that each part of the Euro-Rate Portion is actually made or maintained by or funded through the corresponding Notional Euro-Rate Funding Office). Notional Euro-Rate Funding Offices may be selected by the Lender without regard to the Lender's actual methods of making, maintaining or funding Revolving Credit Loans or any sources of funding actually used by or available to the Lender. (b) Actual Funding. The Lender shall have the right from time to time to make or maintain any part of the Euro-Rate Portion by arranging for a branch, subsidiary or affiliate of the Lender to make or maintain such part of the Euro-Rate Portion. The Lender shall have the right to (i) hold the Revolving Credit Note for the benefit and account of such branch, subsidiary or affiliate or (ii) request the Borrower to issue one or more promissory notes in the principal amount of such Euro-Rate Portion, in substantially the form attached hereto as Exhibit A, with the blanks appropriately filled, payable to such branch, subsidiary or affiliate and with appropriate changes reflecting that the holder thereof is not obligated to make any additional Revolving Credit Loans to the Borrower. The Borrower agrees to comply promptly with any request under subsection (ii) of this Section 2.12(b). If the Lender causes a branch, subsidiary or - 32 - 38 affiliate to make or maintain any part of the Euro-Rate Portion hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such part of the Euro-Rate Portion and to any note payable to the order of such branch, subsidiary or affiliate to the same extent as if such part of the Euro-Rate Portion were made or maintained and such note were the Revolving Credit Note. ARTICLE III LETTERS OF CREDIT 3.01. Letters of Credit. Subject to the terms and conditions of this Agreement and relying upon the representations and warranties herein set forth, the Lender agrees to issue for the account of the Borrower letters of credit, up to a maximum aggregate face amount of $10,000,000 outstanding at any time, in such form as may from time to time be approved by the Lender (each a "Letter of Credit" and collectively the "Letters of Credit"); provided, that on the date of the issuance of any Letter of Credit, and after giving effect to such issuance, and on each date thereafter, the Revolving Credit Extensions of Credit shall not exceed the Revolving Credit Committed Amount. Each Letter of Credit shall (a) be in favor of such beneficiaries as the Borrower shall specify from time to time (which shall be reasonably satisfactory to the Lender), (b) have an expiration date no later then one (1) year from the date of issuance thereof or, if earlier, the thirtieth (30th) day prior to the Revolving Credit Maturity Date, unless the Lender in its sole discretion shall permit a Letter of Credit to have an expiration date later than one (1) year from the date of issuance thereof, and (c) be denominated in any currency issued by a nation within which is located a banking institution with which the Lender maintains a correspondent banking relationship at the time of issuance of such Letter of Credit or such other currency acceptable to the Lender. 3.02. Letter of Credit Fees. (a) Standby Letters of Credit. (i) Issuance Fee. For each Standby Letter of Credit which the Lender issues pursuant to this Agreement, the Borrower shall pay to the Lender an issuance fee in an amount equal to the issuance fee customarily charged by the Lender from time to time in connection with the issuance of standby letters of credit. (ii) Amendment Fee. For each amendment to a Standby Letter of Credit which the Lender issues pursuant to this - 33 - 39 Agreement, the Borrower shall pay to the Lender an amendment fee in an amount equal to the amendment fee customarily charged by the Lender from time to time in connection with amendments to standby letters of credit. (iii) Commission. The Borrower shall pay to the Lender with respect to each outstanding Standby Letter of Credit a fee at the rate of one percent (1.00%) per annum on the undrawn stated amount of such Standby Letter of Credit from time to time. The fee shall be payable quarterly in advance on the date of issuance of such Standby Letter of Credit and on the first day of each January, April, July and October while such Standby Letter of Credit is outstanding. (b) Documentary Letters of Credit. (i) Issuance Fee and Charges. For each Documentary Letter of Credit which the Lender issues pursuant to this Agreement, the Borrower shall pay to the Lender an issuance fee and other customary charges in an amount equal to the issuance fee and charges customarily charged by the Lender from time to time in connection with the issuance of documentary letters of credit. (ii) Amendment or Transfer Fee. For each amendment to or transfer of a Documentary Letter of Credit which the Lender issues pursuant to this Agreement, the Borrower shall pay to the Lender an amendment or transfer fee, as the case may be, in an amount equal to the amendment or transfer fee, as the case may be, customarily charged by the Lender from time to time in connection with amendments to and transfers of documentary letters of credit. (iii) Negotiation Fee. The Borrower shall pay a negotiation fee to the Lender with respect to each drawing under a Documentary Letter of Credit in an amount equal to the negotiation fee customarily charged by the Lender from time to time in connection with drawings under documentary letters of credit. Such negotiation fee shall be payable at the time of each drawing on a Documentary Letter of Credit. (iv) Commission. The Borrower shall pay to the Lender with respect to each outstanding Documentary Letter of Credit a at the rate of one and 25/100 percent (1.25%) per annum on the undrawn stated amount of such Documentary Letter of Credit from time to time or such higher rate customarily charged by the Lender from time to time with respect to documentary letters of credit. The fee shall be payable quarterly in advance on the date of issuance of such - 34 - 40 Documentary Letter of Credit and on the first day of each January, April, July and October while such Documentary Letter of Credit is outstanding. 3.03. Procedure for Issuance of Letters of Credit. (a) Standby Letters of Credit. The Borrower shall, concurrently with the execution and delivery of this Agreement, execute and deliver to the Lender, a Continuing Letter of Credit Agreement in substantially the form attached hereto as Exhibit B and the Borrower may from time to time request the Lender to issue a Standby Letter of Credit in accordance with the terms thereof. (b) Documentary Letters of Credit. The Borrower may from time to time request, upon at least three (3) Business Days' notice, the Lender to issue a Documentary Letter of Credit by delivering to the Lender an Application and Security Agreement (Documentary Letter of Credit) in substantially the form attached hereto as Exhibit C or the Lender's then current form of application (the "Documentary Letter of Credit Application"), completed to the satisfaction of the Lender, together with such other certificates, documents and other papers and information as the Lender may reasonably request. Upon receipt of any Documentary Letter of Credit Application, the Lender will process such Documentary Letter of Credit Application, and the other certificates, documents and other papers delivered in connection therewith, in accordance with its customary procedures and shall promptly issue such Documentary Letter of Credit (but in no event earlier than two (2) Business Days after receipt by the Lender of the Documentary Letter of Credit Application relating thereto) by issuing the original of such Documentary Letter of Credit to the beneficiary thereof and by furnishing a copy thereof to the Borrower. 3.04. Payments. The Borrower agrees (i) to reimburse the Lender, not later than the Business Day next following any drawing, for any payment made by the Lender under any Letter of Credit ("Reimbursement Obligations") and (ii) to pay to the Lender interest on any unreimbursed portion of any such payment from the date of such payment until reimbursement in full thereof at a fluctuating rate per annum equal to the Base Rate plus two percent (2%) per annum. 3.05. Increased Costs. (a) In the event that any requirement of Law (or any change therein or in the interpretation or application thereof) shall either (i) impose, modify or hold applicable any reserve, special deposit or similar requirement against letters of credit - 35 - 41 issued by the Lender or (ii) impose upon the Lender any other condition regarding any Letter of Credit and the result of any event referred to in clause (i) or (ii) above shall be to increase the cost to the Lender of issuing or maintaining such Letter of Credit or to reduce any amount receivable in connection therewith, then, in any such case the Borrower shall, without duplication of any amounts paid pursuant to Subsection 2.10(a), promptly pay to the Lender upon receipt of its demand setting forth in reasonable detail any additional amounts which shall be sufficient to compensate the Lender for such increased cost or reduced amount receivable, together with interest on each such amount from the date two (2) Business Days after the date demanded until payment in full thereof at the Prime Rate. A certificate as to the fact and amount of such increased cost incurred by the Lender, or such reduced amount receivable as a result of any event mentioned in clause (i) or (ii) above, submitted by the Lender to the Borrower shall be conclusive in the absence of manifest error. (b) In the event that the Lender shall have determined that the adoption of any law, rule, regulation or guideline regarding capital adequacy, or any change therein or in the interpretation or application thereof or compliance by the Lender or any Person controlling the Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, including, without limitation, the issuance of any final rule, regulation or guideline, does or shall have the effect of reducing the rate of return on the Lender's or such controlling Person's capital as a consequence of its obligations hereunder to a level below that which the Lender or such Person could have achieved but for such adoption, change or compliance (taking into consideration the Lender's or such controlling Person's policies with respect to capital adequacy) by an amount deemed by the Lender to be material, then from time to time, after submission by a written request therefor, the Borrower shall promptly pay to the Lender, without duplication of any amounts paid pursuant to subsection 2.10(a) such additional amount or amounts as will compensate the Lender for such reduction. 3.06. Further Assurances. The Borrower hereby agrees, from time to time, to do and perform any and all acts and to execute any and all further instruments reasonably requested by the Lender more fully to effect the purposes of this Agreement insofar as it relates to the issuance of Letters of Credit hereunder. 3.07. Obligations Absolute. The payment obligations of the Borrower under Section 3.04 shall be unconditional and irrevocable and shall be paid strictly in accordance with the - 36 - 42 terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (a) any lack of validity or enforceability of any Letter of Credit or any of the Loan Documents; (b) any amendment or waiver of or any consent to departures from all or any of the Loan Documents; (c) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty; (d) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against any beneficiary, or any transferee, of any Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Lender, or any other Person, whether in connection with this Agreement, the transactions contemplated herein, or any unrelated transaction; (e) any statement or any other document presented under any Letter of Credit opened for its account proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (f) payment by the Lender under any Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit, except payment resulting solely from the gross negligence or willful misconduct of the Lender; or (g) any other circumstances or happening whatsoever, whether or not similar to any of the foregoing, except payment by the Lender under any Letter of Credit resulting solely from the gross negligence or willful misconduct of the Lender. 3.08. Additional Provisions Regarding Letters of Credit. The Borrower hereby indemnifies and holds the Lender harmless from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever (including reasonable attorneys' fees) which the Lender may incur (or which may be claimed against the Lender by any entity or entities whatsoever) by reason of or in connection with the execution and delivery or use or transfer of, or payment of, or failure to pay under, any Letter of Credit, except for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by the Lender's deliberate breach of the terms of a Letter of Credit or the gross negligence or willful misconduct of - 37 - 43 the Lender in determining whether a statement or draft presented under a Letter of Credit complied with the terms of the Letter of Credit. Neither the Lender nor any of its officers or directors shall be liable or responsible for: (a) the use which may be made of any Letter of Credit or for any acts or omissions of the beneficiary or any transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the Lender against presentation of documents which do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to a Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under a Letter of Credit, except only that the Borrower shall have a claim against the Lender, and the Lender shall be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrower which were caused by the Lender's gross negligence, misfeasance or willful misconduct in connection with the matters referred to in clauses (b) through (d) above. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Loan Parties hereby represent and warrant to the Lender as follows: 4.01. Corporate Status. Each Loan Party and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. Each Loan Party and each of its Subsidiaries has corporate power and authority to own its property and to transact the business in which it is engaged or presently proposes to engage. Each Loan Party and each of its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary or advisable. Schedule 4.01 hereof states as of the date hereof the jurisdiction of incorporation of each Loan Party and each of its Subsidiaries, and the jurisdictions in which each such Person is qualified to do business as a foreign corporation. 4.02. Corporate Power and Authorization. Each Loan Party has corporate power and authority to execute, deliver, - 38 - 44 perform, and take all actions contemplated by, each Loan Document to which it is a party, and all such action has been duly and validly authorized by all necessary corporate proceedings on its part. 4.03. Execution and Binding Effect. This Agreement and each other Loan Document to which any Loan Party is a party and which is required to be delivered on or before the Closing Date pursuant to Section 5.01 hereof has been duly and validly executed and delivered by each Loan Party which is a party hereto or thereto, as the case may be. This Agreement and each such other Loan Document to which such Loan Party is a party constitutes, and each other Loan Document when executed and delivered by the applicable Loan Party will constitute, the legal, valid and binding obligation of each Loan Party which is a party hereto or thereto, as the case may be, enforceable against such Loan Party in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies. 4.04. Governmental Approvals and Filings. No approval, order, consent, authorization, certificate, license, permit or validation of, or exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority (collectively, "Governmental Action") is or will be necessary or advisable in connection with execution and delivery of any Loan Document by any Loan Party, consummation by any Loan Party of the transactions herein or therein contemplated, performance of or compliance with the terms and conditions hereof or thereof by any Loan Party or to ensure the legality, validity, binding effect, enforceability or admissibility in evidence hereof or thereof. 4.05. Absence of Conflicts. Neither the execution and delivery of any Loan Document by any Loan Party, nor consummation by any Loan Party of the transactions herein or therein contemplated, nor performance of or compliance with the terms and conditions hereof or thereof by any Loan Party does or will (a) violate or conflict with any Law, or (b) violate, conflict with or result in a breach of any term or condition of, or constitute a default under, or result in (or give rise to any right, contingent or otherwise, of any Person to cause) any termination, cancellation, prepayment or acceleration of performance of, or result in the creation or imposition of (or give rise to any obligation, contingent or - 39 - 45 otherwise, to create or impose) any Lien upon any property of any Loan Party or any Subsidiary thereof pursuant to, or otherwise result in (or give rise to any right, contingent or otherwise, of any Person to cause) any change in any right, power, privilege, duty or obligation of any Loan Party or any Subsidiary thereof under or in connection with (other than any such event which could not reasonably be expected to have a Material Adverse Effect), (i) the certificate of incorporation or by-laws (or other constituent documents) of any Loan Party or any Subsidiary thereof, (ii) any material agreement or instrument creating, evidencing or securing any Indebtedness or Guaranty Equivalent to which any Loan Party or any Subsidiary thereof is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound, or (iii) any other material agreement or instrument to which any Loan Party or any Subsidiary thereof is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound. As of the date of this Agreement, neither Loan Party nor any Subsidiary thereof is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of such Person, any agreement relating thereto or any other contract or agreement (including its charter) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the Borrower of the type to be evidenced by the Revolving Credit Note. 4.06. Audited Financial Statements. The Loan Parties have heretofore furnished to the Lender consolidated balance sheets of the Guarantor and its consolidated Subsidiaries as of March 31, 1998, and March 31, 1997, and the related consolidated statements of operations, cash flows and changes in stockholders' equity for the fiscal years then ended, as examined and reported on by Arthur Andersen LLP, independent certified public accountants for the Guarantor, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly the financial condition of the Guarantor and its consolidated Subsidiaries as of the end of each such fiscal year and the results of their operations and their cash flows for the fiscal years then ended, all in conformity with GAAP. - 40 - 46 4.07. Absence of Undisclosed Liabilities. As of the date of this Agreement, neither Loan Party nor any Subsidiary thereof has any material liability or obligation of any nature whatever (whether absolute, accrued, contingent or otherwise, whether or not due), forward or long-term commitments or unrealized or anticipated losses from unfavorable commitments, except as disclosed in the financial statements referred to in Section 4.06 hereof and the notes thereto. 4.08. Absence of Material Adverse Changes. Since March 31, 1998, there has been no material adverse change in the business, operations, condition (financial or otherwise), or prospects of the Guarantor and the Subsidiaries of the Guarantor taken as a whole, except as disclosed in the financial statements referred to in Section 4.06 hereof or otherwise disclosed in writing to the Lender. 4.09. Accurate and Complete Disclosure. All information heretofore, contemporaneously or hereafter provided (orally or in writing) by or on behalf of any Loan Party or any Subsidiary of any Loan Party to the Lender pursuant to or in connection with any Loan Document or any transaction contemplated hereby or thereby is or will be (as the case may be) true and accurate in all material respects on the date as of which such information is dated (or, if not dated, when received by the Lender) and does not or will not (as the case may be) omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. 4.10. Margin Regulations. No part of the proceeds of any Revolving Credit Loan hereunder will be used for the purpose of buying or carrying any "margin stock," as such term is used in Regulations G and U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of buying or carrying any "margin stock." Neither Loan Party nor any Subsidiary thereof is engaged in the business of extending credit to others for the purpose of buying or carrying "margin stock." Neither Loan Party nor any Subsidiary thereof owns any "margin stock." Neither the making of any Revolving Credit Loan nor any use of proceeds of any such Revolving Credit Loan will violate or conflict with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, as amended from time to time. 4.11. Subsidiaries. Schedule 4.11 hereof states as of the date of this Agreement the authorized capitalization of each Subsidiary of the Guarantor, the number of shares of each class of capital stock issued and outstanding of each such Subsidiary, and - 41 - 47 the number and percentage of outstanding shares of each such class of capital stock owned by each Loan Party and by each Subsidiary thereof. The outstanding shares of each Subsidiary of each Loan Party have been duly authorized and validly issued and are fully paid and nonassessable. Each Loan Party and each Subsidiary thereof owns beneficially and of record and has good title to all of the shares it is listed as owning in such Schedule 4.11, free and clear of any Lien. 4.12. Partnerships, etc. Neither Loan Party nor any Subsidiary thereof is a partner (general or limited) of any partnership, is a party to any joint venture or owns (beneficially or of record) any equity or similar interest in any Person (including but not limited to any interest pursuant to which such Loan Party or Subsidiary has or may in any circumstance have an obligation to make capital contributions to, or be generally liable for or on account of the liabilities, acts or omissions of such other Person), except for (x) capital stock of Subsidiaries referred to in Section 4.11 hereof, (y) equity investments permitted under Section 7.07 hereof and (z) matters set forth in Schedule 4.12 hereof. 4.13. Ownership and Control. Schedule 4.13 hereof states as of the date of this Agreement the authorized capitalization of each Loan Party and the number of shares of each class of capital stock issued and outstanding of each Loan Party. All of the issued and outstanding shares of capital stock of the Borrower are owned beneficially and of record by a Subsidiary of the Guarantor and the Guarantor owns all of the issued and outstanding shares of capital stock of such Subsidiary. The outstanding shares of capital stock of each Loan Party have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth in Schedule 4.13 hereof, there are no options, warrants, calls, subscriptions, conversion rights, exchange rights, preemptive rights or other rights, agreements or arrangements (contingent or otherwise) which may in any circumstances now or hereafter obligate a Subsidiary of the Guarantor to issue any shares of its capital stock. 4.14. Litigation. There is no pending or (to a Loan Party's knowledge after due inquiry) threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting any Loan Party or any Subsidiary thereof, except for (a) matters that if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect and (b) the matters set forth on Schedule 4.14 hereof. - 42 - 48 4.15. Absence of Events of Default. No event has occurred and is continuing and no condition exists which constitutes an Event of Default or Potential Default. 4.16. Absence of Other Conflicts. Neither any Loan Party nor any Subsidiary thereof is in violation of or conflict with, or is subject to any contingent liability on account of any violation of or conflict with: (a) any Law, (b) its certificate of incorporation or by-laws (or other constituent documents), or (c) any agreement or instrument to which it is party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, except for matters that, individually or in the aggregate, could not have a Material Adverse Effect. 4.17. Insurance. Each Loan Party and each Subsidiary thereof maintains with financially sound and reputable insurers insurance with respect to its properties and business and against at least such liabilities, casualties and contingencies and in at least such types and amounts as is customary in the case of corporations engaged in the same or a similar business or having similar properties similarly situated. 4.18. Title to Property. Each Loan Party and each Subsidiary thereof has good and marketable title in fee simple to all real property owned or purported to be owned by it and good title to all other property of whatever nature owned or purported to be owned by it, including but not limited to all property reflected in the most recent audited balance sheet referred to in Section 4.06 hereof or submitted pursuant to Section 6.01(a) hereof, as the case may be (except as sold or otherwise disposed of in the ordinary course of business after the date of such balance sheet), in each case free and clear of all Liens, except for Liens permitted by Section 7.04. 4.19. Intellectual Property. Each Loan Party and each Subsidiary thereof owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, service, fictitious or otherwise), copyrights, technology (including but not limited to computer programs and software), processes, data bases and other rights, free from burdensome restrictions, necessary to own and operate its properties and to carry on its business as presently conducted and presently planned - 43 - 49 to be conducted without material conflict with the rights of others. 4.20. Taxes. All tax and information returns required to be filed by or on behalf of any Loan Party or any Subsidiary thereof have been properly prepared, executed and filed. All taxes, assessments, fees and other governmental charges upon any Loan Party or any Subsidiary thereof or upon any of their respective properties, incomes, sales or franchises which are due and payable have been paid. 4.21. Employee Benefits. No accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan. No liability to the PBGC has been or is expected by a Loan Party or any Controlled Group Member to be incurred with respect to any Plan by a Loan Party, any Subsidiary thereof or any Controlled Group Member which does or would have a Material Adverse Effect. Neither Loan Party, any Subsidiary thereof nor any Controlled Group Member has contributed or presently contributes to any Multiemployer Plan. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will be exempt from, or will not involve any transaction which is subject to, the prohibitions of section 406 of ERISA and will not involve any transaction in connection with which a penalty could be imposed under section 502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code. A copy of the most recent Annual Report (5500 Series Form) as of the date hereof including all attachments thereto as filed with the Internal Revenue Service for each Plan has been provided to the Lender and fairly presents the funding status of each Plan. There has been no material deterioration in any Plan's funding status since the date of such Annual Report. Schedule 4.21 hereof sets forth as of the date hereof a list of all Plans and Multiemployer Plans, and all information available to a Loan Party with respect to the direct, indirect or potential withdrawal liability to any Multiemployer Plan of any Loan Party or any Controlled Group Member. Except as set forth in Schedule 4.21 hereof, no Loan Party and no Subsidiary thereof has any liability (contingent or otherwise) for, or in connection with, and none of their respective properties is subject to a Lien in connection with, any Pension-Related Event. No Loan Party and no Subsidiary thereof has any liability (contingent or otherwise) for, or in connection with, any Postretirement Benefits. The PBGC premiums and contributions required to meet the minimum funding requirements of ERISA and the Code for all Plans have not exceeded $1,000,000 on an annual basis for any of the past three (3) years. The amount of unfunded benefit liabilities (as defined in Section 4001(a)(16) of ERISA), - 44 - 50 as certified to by the Plan's actuary, for any Plan do not exceed $1,000,000 and for all Plans do not exceed $1,000,000. 4.22. Environmental Matters. (a) Each Loan Party and each Subsidiary thereof and each of their respective Environmental Affiliates is and has been in full compliance with all applicable Environmental Laws, except for matters which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. There are no circumstances that may prevent or interfere with such full compliance in the future. (b) Each Loan Party and each Subsidiary thereof and their respective Environmental Affiliates have all Environmental Approvals necessary for the ownership and operation of their respective properties, facilities and businesses as presently owned and operated and as presently proposed to be owned and operated, except for such Environmental Approvals the absence of which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (c) There is no Environmental Claim pending or to the knowledge of any Loan Party after due inquiry threatened, and, to the knowledge of any Loan Party, there are no past or present acts, omissions, events or circumstances that could form the basis of any Environmental Claim, against any Loan Party or any Subsidiary thereof or any of their respective Environmental Affiliates, except for matters which, if adversely decided, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (d) No facility or property now or previously owned, operated or leased by any Loan Party or any Subsidiary thereof or any of their respective Environmental Affiliates is an Environmental Cleanup Site. To the knowledge of any Loan Party, neither any Loan Party nor any Subsidiary thereof nor any of their respective Environmental Affiliates has directly transported or directly arranged for the transportation of any Environmental Concern Materials to any Environmental Cleanup Site. No Lien exists, and no condition exists which could result in the filing of a Lien, against any property of any Loan Party or any Subsidiary thereof or any of their respective Environmental Affiliates, under any Environmental Law. 4.23. Solvency. On and as of the Closing Date, after consummation of the transactions contemplated herein and after giving effect to all Revolving Credit Loans, Letters of Credit and other obligations and liabilities being incurred on such date in - 45 - 51 connection therewith, and on the date of each subsequent Revolving Credit Loan, issuance of a Letter of Credit or other extension of credit hereunder and after giving effect to application of the proceeds thereof in accordance with the terms of the Loan Documents, each Loan Party is and will be Solvent. 4.24. Regulatory Status. Neither Loan Party nor any Subsidiary thereof is (a) an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, (b) a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Act of 1935, as amended, or (c) a "public utility" within the meaning of the Federal Power Act, as amended. 4.25. Permits and Other Operating Rights. Each Loan Party and each Subsidiary thereof has all such valid and sufficient certificates of convenience and necessity, franchises, licenses, permits, operating rights and other authorizations from federal, state, regional, municipal or other governmental bodies having jurisdiction over such Person or any of its respective properties, as are necessary for the ownership, operation and maintenance of its businesses and properties, subject to exceptions and deficiencies which do not materially affect the business and operations of such Person or any material part thereof, and such certificates of convenience and necessity, franchises, licenses, permits, operating rights and other authorizations from federal, state, regional, municipal and other local regulatory bodies or administrative agencies or other governmental bodies having jurisdiction over such Person or any of its properties are free from burdensome restrictions or conditions of an unusual character or restrictions or conditions materially adverse the business or operations of such Person, and none of such Persons is in violation of any thereof in any material respect. 4.26. Year 2000 Compliance. The Guarantor has reviewed its operations and those of its Subsidiaries with a view to assessing whether their businesses, taken as a whole, will be vulnerable to a Year 2000 Problem. As of the date of this Agreement, the Guarantor has a reasonable basis to believe that, solely with respect to the internal operations of the Guarantor and its Subsidiaries under the direct control of such Person, and in view of the efforts of such Person to date to address a potential Year 2000 Problem and its ongoing remediation program, neither the Guarantor nor any of its Subsidiaries will experience a Year 2000 Problem that will have a Material Adverse Effect; provided, however, that nothing contained herein shall be deemed - 46 - 52 to be a representation or warranty that the operations, hardware, software, embedded chips or other systems of third parties with whom the Guarantor or any of its Subsidiaries interact will not cause a Year 2000 Problem that will have a Material Adverse Effect. "Year 2000 Problem" means any significant risk that computer hardware, software or equipment containing embedded microchips of the Guarantor or any of its Subsidiaries which is essential to their business operations will not, in the case of dates occurring after December 31, 1999, function at least as reliably as in the case of dates occurring before January 1, 2000, including the making of accurate leap year calculations, provided that all third party hardware, software, systems or equipment containing embedded microchips interacting with the Guarantor's or its Subsidiaries' computer hardware, software or equipment containing embedded microchips is also able to function in the same manner with respect to such dates and calculations. ARTICLE V CONDITIONS OF LENDING 5.01. Conditions to Initial Revolving Credit Loans. The obligation of the Lender to make Revolving Credit Loans or to issue Letters of Credit on the Closing Date is subject to the satisfaction, immediately prior to or concurrently with the making of such Revolving Credit Loan or the issuance of Letters of Credit, of the following conditions precedent, in addition to the conditions precedent set forth in Section 5.02 hereof: (a) Agreement; Revolving Credit Note. The Lender shall have received an executed counterpart of this Agreement, duly executed by each Loan Party, and the Revolving Credit Note conforming to the requirements hereof, duly executed on behalf of the Borrower. (b) Corporate Proceedings. The Lender shall have received certificates by the Secretary or Assistant Secretary of each Loan Party dated as of the Closing Date as to (i) true copies of the certificates of incorporation and by-laws of each Loan Party in effect on such date, (ii) true copies of all corporate action taken by each Loan Party relative to this Agreement and the other Loan Documents and (iii) the incumbency and signature of the respective officers of each Loan Party executing this Agreement and the other Loan Documents to which such Loan Party is a party, together with satisfactory evidence of the incumbency of such Secretary or Assistant Secretary. The Lender shall have received certificates from the appropriate Secretaries of State or other applicable Governmental Authorities dated not more than thirty - 47 - 53 (30) days before the Closing Date showing the good standing of each Loan Party in its state of incorporation. (c) Legal Opinion of Counsel to the Loan Parties. The Lender shall have received an opinion addressed to the Lender, dated the Closing Date, of counsel to each of the Loan Parties as to such matters as may be requested by the Lender and in form and substance satisfactory to the Lender. (d) Fees, Expenses, etc. The Borrower shall have paid all out-of-pocket costs and expenses incurred by the Lender in connection with the preparation, execution and delivery of this Agreement and the other Loan Documents and in connection with the transactions contemplated hereby and thereby, including without limitation attorney's fees and costs, lien search fees, filing fees and appraisal costs. (e) Additional Matters. All corporate and other proceedings, and all documents, instruments and other matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be satisfactory in form and substance to the Lender. 5.02. Conditions to All Revolving Credit Loans. The obligation of the Lender to make any Revolving Credit Loan or to issue any Letter of Credit is subject to performance by each of the Loan Parties of their respective obligations to be performed hereunder or under the other Loan Documents on or before the date of such Revolving Credit Loan or the issuance of such Letter of Credit, satisfaction of the conditions precedent set forth herein and in the other Loan Documents and to satisfaction of the following further conditions precedent: (a) Notice. Appropriate notice of such Revolving Credit Loan or Letter of Credit shall have been given by the Borrower as provided in Article II hereof or Article III hereof, as the case may be. (b) Representations and Warranties. Each of the representations and warranties made by each Loan Party herein and in each other Loan Document shall be true and correct in all material respects on and as of such date as if made on and as of such date (except for representations and warranties made as of the date of this Agreement, which need to be true and correct in all material respects only as of the date of this Agreement), both before and after giving effect to the Revolving Credit Loans requested to be made or the Letters of Credit requested to be issued on such date. - 48 - 54 (c) No Defaults. No Event of Default or Potential Default shall have occurred and be continuing on such date or after giving effect to the Revolving Credit Loans requested to be made or the Letters of Credit requested to be issued on such date. (d) No Violations of Law, etc. Neither the making nor use of the Revolving Credit Loans nor the issuance of the Letters of Credit shall cause the Lender to violate or conflict with any Law. (e) No Material Adverse Change. There shall not have occurred, or be threatened, a material adverse change in the business, operations, assets or condition (financial or otherwise) or prospects of any Loan Party since the Closing Date. Each request by the Borrower for any Revolving Credit Loan or Letter of Credit shall constitute a representation and warranty by the Loan Parties that the conditions set forth in this Section 5.02 have been satisfied as of the date of such request. Failure of the Lender to receive notice from any Loan Party to the contrary before such Revolving Credit Loan is made or such Letter of Credit is issued shall constitute a further representation and warranty by the Loan Parties that the conditions referred to in this Section 5.02 have been satisfied as of the date such Revolving Credit Loan is made or such Letter of Credit is issued. ARTICLE VI AFFIRMATIVE COVENANTS The Loan Parties hereby covenant to the Lender as follows: 6.01. Basic Reporting Requirements. (a) Annual Audit Reports. As soon as practicable, and in any event within one hundred twenty (120) days after the close of each fiscal year of the Guarantor, the Loan Parties shall furnish to the Lender consolidated statements of income, cash flows and changes in stockholders' equity of the Guarantor and its consolidated Subsidiaries for such fiscal year and a consolidated balance sheet of the Guarantor and its consolidated Subsidiaries as of the close of such fiscal year, and notes to each, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year. Such financial statements shall be accompanied by an opinion of independent certified public accountants of recognized national standing selected by the Guarantor and reasonably satisfactory to the Lender. Such opinion shall be free of exceptions or - 49 - 55 qualifications not acceptable to the Lender and in any event shall be free of any exception or qualification which is of "going concern" or like nature or which relates to a limited scope of examination. Such opinion in any event shall contain a written statement of such accountants substantially to the effect that (i) such accountants examined such financial statements in accordance with generally accepted auditing standards and accordingly made such tests of accounting records and such other auditing procedures as such accountants considered necessary in the circumstances and (ii) in the opinion of such accountants such financial statements present fairly the financial position of the Guarantor and its consolidated Subsidiaries as of the end of such fiscal year and the results of their operations and their cash flows and changes in stockholders' equity for such fiscal year, in conformity with GAAP. (b) Quarterly Consolidated Reports. As soon as practicable, and in any event within sixty (60) days after the close of each fiscal quarter of each fiscal year of the Guarantor, the Loan Parties shall furnish to the Lender unaudited consolidated statements of income, cash flows and changes in stockholders' equity of the Guarantor and its consolidated Subsidiaries for such fiscal quarter and for the period from the beginning of such fiscal year to the end of such fiscal quarter and an unaudited consolidated balance sheet of the Guarantor and its consolidated Subsidiaries as of the close of such fiscal quarter, all in reasonable detail, setting forth in comparative form the corresponding figures for the same periods or as of the same date during the preceding fiscal year (except for the consolidated balance sheet, which shall set forth in comparative form the corresponding balance sheet as of the prior fiscal year end). Such financial statements shall be certified by a Responsible Officer of the Guarantor as presenting fairly the financial position of the Guarantor and its consolidated Subsidiaries as of the end of such fiscal quarter and the results of their operations and their cash flows and changes in stockholders' equity for such fiscal year, in conformity with GAAP, subject to normal and recurring year-end audit adjustments. (c) Consolidating Reports. As soon as practicable, and in any event within sixty (60) days after the close of each of the first three fiscal quarters of each fiscal year of the Guarantor and one hundred twenty (120) days after the close of each fiscal year of the Guarantor, the Loan Parties shall furnish to the Lender unaudited consolidating statements of income of the Guarantor and each of its Subsidiaries for such fiscal quarter or fiscal year, as the case may be, and unaudited consolidating balance sheets of the Guarantor and each of its Subsidiaries as of the close of such fiscal quarter or fiscal year, as the case may be, all in reasonable detail. Such statements shall be certified by a Responsible Officer of the Guarantor as presenting fairly the financial position of the Guarantor and each of its Subsidiaries as of the end of such fiscal quarter or fiscal year, as the case may - 50 - 56 be, and the results of their operations for such fiscal quarter or fiscal year, as the case may be, in conformity with GAAP (exclusive of principles of consolidation), subject (in the case of quarterly reports) to normal and recurring year-end audit adjustments. (d) Quarterly Compliance Certificates. The Loan Parties shall deliver to the Lender a Quarterly Compliance Certificate (herein so defined), duly completed and signed by a Responsible Officer of the Guarantor concurrently with the delivery of the financial statements referred to in subsections (a) and (b) of this Section 6.01. The Quarterly Compliance Certificate will state, among other reasonable items: (i) that as of the date thereof no Event of Default or Potential Default has occurred and is continuing or exists, or if an Event of Default or Potential Default has occurred and is continuing or exists, specifying in detail the nature and period of existence thereof and any action with respect thereto taken or contemplated to be taken by the Loan Parties and (ii) in reasonable detail the information and calculations necessary to establish compliance with the provisions of Sections 7.01, 7.02 and 7.03 hereof and (iii) in reasonable detail the information and calculations necessary to determine the Applicable Tier. (e) Accountants' Certificate. Each set of financial statements delivered pursuant to Section 6.01(a) hereof shall be accompanied by (i) a certificate or report dated the date of such statements and balance sheet by the independent certified public accountants who opined on such financial statements stating in substance that they have reviewed this Agreement and that in making the examination necessary for their certification of such statements and balance sheet they did not become aware of any Event of Default or Potential Default, or if they did become so aware, such certificate or report shall state the nature and period of existence thereof, and (ii) a certificate or report dated as of the date of such financial statements by such accountants stating in reasonable detail the information and calculations necessary to establish compliance with the covenants set forth in Article VII hereof. (f) Projections. As soon as practicable and in any event within thirty (30) days after the close of each fiscal year of the Guarantor, the Loan Parties shall furnish to the Lender a certificate signed by a Responsible Officer on behalf of the Guarantor containing a consolidated projection of the revenues, - 51 - 57 expenditures (capital or otherwise) and results of operations and cash position of the Guarantor and each Subsidiary of the Guarantor and the amounts and ratios described in Sections 7.01, 7.02 and 7.03 hereof as of the end of each month or, in the case of such amounts and ratios, as of the end of each fiscal quarter in the forthcoming fiscal year, together with a statement of the assumptions and estimates upon which such projections are based. Such projections, estimates and assumptions, as of the date of preparation thereof, shall be reasonable, made in good faith, shall be consistent with the Loan Documents, and shall represent the Guarantor's best judgment as to such matters. (g) Certain Other Reports and Information. Promptly upon their becoming available to a Loan Party, such Loan Party shall deliver to the Lender a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which such Loan Party or any Subsidiary of such Loan Party shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) all reports, proxy statements, financial statements and other information distributed by such Loan Party to its stockholders, bondholders or the financial community generally, and (iii) all accountants' management letters pertaining to, all other reports submitted by accountants in connection with any audit of, and all other reports from outside accountants with respect to, such Loan Party or any of its Subsidiaries. (h) Further Information. Each Loan Party shall promptly furnish to the Lender such other information and in such form as the Lender may reasonably request from time to time. (i) Notice of Certain Events. Promptly after a Responsible Officer's knowledge of any of the following, a Loan Party shall give the Lender notice thereof, together with a written statement of a Responsible Officer of such Loan Party setting forth the details thereof and any action with respect thereto taken or proposed to be taken by such Loan Party: (i) Any Event of Default or Potential Default. (ii) Any material adverse change in the business, operations or condition (financial or otherwise) or prospects of a Loan Party and its Subsidiaries taken as a whole. (iii) Any pending or threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting such Loan Party or any Subsidiary of such Loan Party, except for matters that if adversely - 52 - 58 decided, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (iv) Any material violation, breach or default by such Loan Party or any Subsidiary of such Loan Party of or under any agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of such Loan Party and its Subsidiaries taken as a whole. (v) Any Pension-Related Event. Such notice shall be accompanied by: (A) a copy of any notice, request, return, petition or other document received by such Loan Party or any Controlled Group Member from any Person, or which has been or is to be filed with or provided to any Person (including without limitation the Internal Revenue Service, PBGC or any Plan participant, beneficiary, alternate payee or employer representative), in connection with such Pension-Related Event, and (B) in the case of any Pension-Related Event with respect to a Plan, the most recent Annual Report (5500 Series), with attachments thereto, and the most recent actuarial valuation report, for such Plan. (vi) Any Environmental Claim pending or threatened against such Loan Party or any Subsidiary of such Loan Party or any of their respective Environmental Affiliates, or any past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by such Loan Party or any Subsidiary of such Loan Party or any of their respective Environmental Affiliates) that could form the basis of such Environmental Claim, which Environmental Claim, if adversely resolved, individually or in the aggregate, could have a Material Adverse Effect. (vii) The expiration or earlier termination of the License Agreement. (vii) The occurrence of a Change of Control Event. (j) Visitation; Verification. Each Loan Party shall permit such Persons as the Lender may designate from time to time, at such Loan Party's expense while an Event of Default is continuing and otherwise at the Lender's expense, to visit and inspect any of the properties of such Loan Party and of any Subsidiary of such Loan Party, to examine their respective books and records and take copies and extracts therefrom and to discuss - 53 - 59 their respective affairs with their respective directors, officers, key employees and independent accountants at such times and as often as the Lender may request. Each Loan Party hereby authorizes such officers, key employees and independent accountants to discuss with the Lender the affairs of such Loan Party and its Subsidiaries. The Lender shall have the right to examine and verify accounts, inventory and other properties and liabilities of each Loan Party and its Subsidiaries from time to time, and each Loan Party shall cooperate, and shall cause each of its Subsidiaries to cooperate, with the Lender in such verification. 6.02. Insurance. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as is customary in the case of corporations engaged in the same or similar businesses or having similar properties similarly situated. 6.03. Payment of Taxes and Other Potential Charges and Priority Claims. Each Loan Party shall, and shall cause each of its Subsidiaries to, pay or discharge (a) on or prior to the date on which penalties attach thereto, all taxes, assessments and other governmental charges imposed upon it or any of its properties; (b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such property; and (c) on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any such property or which, if unpaid, might give rise to a claim entitled to priority over general creditors of such Loan Party or Subsidiary in a case under Title 11 (Bankruptcy) of the United States Code, as amended; provided, that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced, such Loan Party or Subsidiary need not pay or discharge any such tax, assessment, charge or claim so long as (x) the validity thereof is contested in good faith and by appropriate proceedings diligently conducted, (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor. - 54 - 60 6.04. Preservation of Corporate Status. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain its status as a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and to be duly qualified to do business as a foreign corporation and in good standing in all jurisdictions in which the ownership of its properties or the nature of its business or both make such qualification necessary or advisable; provided, however, that a Subsidiary of a Loan Party (other than another Loan Party) may merge out of existence, liquidate, wind-up or dissolve if such merger, liquidation, winding-up or dissolution would not be disadvantageous, in any material respect, to a Loan Party and its Subsidiaries taken as a whole (as determined in good faith by the Guarantor) and will not adversely affect the Lender (as reasonably determined by the Lender). 6.05. Governmental Approvals and Filings. Each Loan Party shall, and shall cause each of its Subsidiaries to, keep and maintain in full force and effect all Governmental Actions necessary or advisable in connection with the execution and delivery of any Loan Document by any Loan Party, consummation by any Loan Party of the transactions herein or therein contemplated, performance of or compliance with the terms and conditions hereof or thereof by any Loan Party or to ensure the legality, validity, binding effect, enforceability or admissibility in evidence hereof or thereof. 6.06. Maintenance of Properties. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by it (ordinary wear and tear excepted) and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times. Each Loan Party shall, and shall cause each of its Subsidiaries to, procure and maintain in full force and effect all franchises, patents, trademarks, trade names, service marks, copyrights, licenses and other rights, in each case, that are necessary in any material respect for the business and operation of the Guarantor and its Subsidiaries, taken as a whole. 6.07. Avoidance of Other Conflicts. A Loan Party shall not, and shall not permit any of its Subsidiaries to, violate or conflict with, be in violation of or conflict with, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with - 55 - 61 (a) any Law, (b) its certificates of incorporation of by-laws (or other constituent documents), or (c) any agreement or instrument to which it is party or by which any of them or any of their respective Subsidiaries is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound, except for matters that could not reasonably be expected , individually or in the aggregate, to have a Material Adverse Effect. Each Loan Party shall, and shall cause each of its Subsidiaries and each of its Environmental Affiliates to, comply with, or operate pursuant to valid waivers of, applicable Environmental Laws, including, without limitation, to the extent required by applicable Environmental Laws, conducting, on a timely basis, periodic tests and monitoring for contamination of ground water, surface water, air and land and for biological toxicity and completing proper, thorough and effective clean-up, removal, remediation and/or restoration, except to the extent that failure so to comply with any Environmental Law does not have a Material Adverse Effect, and except that, with respect to any testing, monitoring, clean-up, removal, remediation or other such action required pursuant to such Environmental Laws, neither a Loan Party nor any of its Subsidiaries or Environmental Affiliates shall be required to perform any such action if the applicability or validity thereof is being contested in good faith by appropriate proceedings and adequate reserves have been established in accordance with GAAP. 6.08. Financial Accounting Practices. Each Loan Party shall, and shall cause each of its Subsidiaries to, make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect its transactions and dispositions of its assets and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization, (b) transactions are recorded as necessary (i) to permit preparation of financial statements in conformity with GAAP and (ii) to maintain accountability for assets, (c) access to assets is permitted only in accordance with management's general or specific authorization and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. - 56 - 62 6.09. Use of Proceeds. The Borrower shall use the proceeds of the Revolving Credit Loans and the Letters of Credit for general corporate purposes and shall not use any such proceeds directly or indirectly for any unlawful purpose, in any manner inconsistent with Section 4.10 hereof, or inconsistent with any other provision of any Loan Document. 6.10. Continuation of or Change in Business. Each Loan Party and each of its Subsidiaries shall continue to engage in its business substantially as conducted and operated during the present and preceding fiscal year, and a Loan Party shall not, and shall not permit any of its Subsidiaries to, engage in any other business. 6.11. Consolidated Tax Return. A Loan Party shall not, and shall not suffer any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person other than the Guarantor, the Borrower and their respective Subsidiaries. 6.12. Fiscal Year. The Loan Parties shall not, and shall not suffer any of their respective Subsidiaries to, change their respective fiscal year or fiscal quarter (except to conform to the fiscal year of the Loan Parties). 6.13. Covenant to Secure Note Equally. If a Loan Party or any Subsidiary of a Loan Party shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by the provisions of Section 7.04 (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to Section 10.03), it will make or cause to be made effective provision satisfactory in form and substance to the Lender (including, without limitation, opinions of counsel relating thereto) whereby the Revolving Credit Note and the Reimbursement Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness thereby secured so long as any such other Indebtedness shall be so secured. Securing the Revolving Credit Note as provided in this Section 6.13 shall not permit the existence of any Lien not permitted by Section 7.04. ARTICLE VII NEGATIVE COVENANTS The Loan Parties hereby covenant to the Lender as follows: - 57 - 63 7.01. Consolidated Net Worth. Consolidated Net Worth of the Guarantor shall not at any time during a fiscal year of the Guarantor be less than the sum of (x) $100,000,000 plus (y) 50% of the Guarantor's Consolidated Net Income for the immediately preceding fiscal year. 7.02. Leverage. As of the last day of each fiscal quarter, the Consolidated Leverage Ratio shall not be greater than 3.0 to 1.0. 7.03. Cash Flow. As of the last day of each fiscal quarter, the Consolidated Cash Flow Coverage Ratio shall not be less than 1.25 to 1.0. 7.04. Liens. A Loan Party shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its property (now owned or hereafter acquired), except for the following: (a) Liens existing on the date hereof securing obligations existing on the date hereof, as such Liens and obligations are listed in Schedule 7.04 hereto (and extension, renewal and replacement Liens upon the same property theretofor subject to a listed Lien, provided the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the Lien theretofor existing); (b) Liens arising from taxes, assessments, charges or claims described in Section 6.03 hereof that are not yet due or that remain payable without penalty or to the extent permitted to remain unpaid under the proviso to such Section 6.03; (c) Liens incurred or deposits or pledges of cash or securities in the ordinary course of business to secure (i) workmen's compensation, unemployment insurance or other social security obligations, (ii) performance of bids, tenders, trade contracts (other than for payment of money) or leases, (iii) stay, surety or appeal bonds, or (iv) other obligations of a like nature incurred in the ordinary course of business; (d) Liens by a Loan Party or a Subsidiary of a Loan Party on property securing all or part of the purchase price thereof and Liens (whether or not assumed) existing in property at the time of purchase thereof by a Loan Party or a Subsidiary of a Loan Party, provided that (i) such Lien is created before or substantially simultaneously with the purchase of such property by such Loan Party or such Subsidiary, (ii) such Lien is confined solely to the property so purchased, improvements thereto and proceeds thereof and (iii) the aggregate amount secured by all - 58 - 64 Liens described in this Section 7.04(d) shall not at any time exceed $10,000,000; (e) Liens by a foreign Subsidiary of any Loan Party securing Indebtedness of such foreign Subsidiary permitted by Section 7.05(c) hereof; (f) Liens resulting from the recharacterization of any Capital Lease permitted by Section 7.05(d) hereof; (g) Judgment liens fully bonded or stayed pending appeal; (h) Liens in favor of the United States which arise in the ordinary course of business resulting from progress payments or partial payments under United States government contracts or subcontracts thereunder; (i) Zoning restrictions, easements, minor restrictions on the use of real property, minor irregularities in the title thereto and other minor Liens that do not secure the payment of money or the performance of an obligation and that do not individually or in the aggregate materially detract from the value of a property or asset to, or materially impair its use in the business of, a Loan Party and its Subsidiaries, taken as a whole; and (j) Liens securing Indebtedness in an amount not in excess of $1,000,000 at any one time outstanding. 7.05. Indebtedness. A Loan Party shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness to the Lender pursuant to this Agreement and the other Loan Documents; (b) Indebtedness of the Guarantor and its Subsidiaries existing on the date hereof and listed in Schedule 7.05 hereof, but not any extensions, renewals or refinancings thereof; (c) Indebtedness for borrowed money incurred by the Guarantor and its Subsidiaries from time to time; provided, that the aggregate principal amount of such Indebtedness shall not exceed $10,000,000 at any time; (d) Indebtedness incurred by a Loan Party or any Subsidiary of a Loan Party from a Loan Party or Subsidiary of a Loan Party, provided that (i) any Subsidiary involved in any such - 59 - 65 lending arrangement be consolidated, for financial statement reporting purposes, with the Guarantor, (ii) any lending Person involved in any such lending arrangement be Solvent at the time of such lending arrangement and after giving effect thereto and (iii) the aggregate principal amount of Indebtedness under this Section 7.05(d) shall not exceed (y) $10,000,000 to any one Person and (z) and $30,000,000 in the aggregate to all such Persons; (e) Capitalized Lease Obligations of the Guarantor and its Subsidiaries in an aggregate amount not in excess of $10,000,000 at any one time, provided that such Capitalized Leases are otherwise permitted by Section 7.13; and (f) Indebtedness for borrowed money in the form of a note or notes payable by the Borrower to the order of BBox Holding Company, a Delaware corporation (the "Holding Company"), issued in connection with a Stock Payment made to the Holding Company or in connection with the payment of interest with respect to any such note or notes, which note or notes (i) shall be substantially in the form attached hereto as Exhibit D, or otherwise in form and substance satisfactory to the Lender and the Borrower, the Lender hereby agreeing that any such note or notes may have a stated term of seven (7) years, but be payable on demand and require the payment of interest on an annual basis, and (ii) shall be subordinated to the Revolving Credit Note on the terms identified in Exhibit E attached hereto; provided however, that this subparagraph shall be applicable only so long as the Holding Company is wholly owned, directly or indirectly, by the Guarantor; provided, however, that Indebtedness borrowed by the Borrower from any Affiliate of the Borrower shall be subordinated to the Revolving Credit Note on the terms identified in Exhibit E attached hereto. 7.06. Guarantees, Indemnities of the Borrower, etc. The Loan Parties shall not, and shall not permit any of their respective Subsidiaries to, be or become subject to or bound by any Guaranty Equivalent, except for the Obligations owed to the Lender under the Loan Documents and: (a) Contingent liabilities arising from the endorsement of negotiable or other instruments for deposit or collection or similar transactions in the ordinary course of business; (b) Guaranty Equivalents securing Assured Obligations not in excess of $10,000,000 at any one time; - 60 - 66 (c) Indemnities of the liabilities of its directors, officers and employees in their capacities as such as permitted by Law; (d) Guaranty Equivalents constituting usual and customary indemnities with respect to liabilities (other than Indebtedness) in connection with an acquisition or disposition of stock or assets by any Loan Party or any Subsidiary of a Loan Party; and (e) Guaranty Equivalents by any Loan Party or a Subsidiary of any Loan Party from time to time of Assured Obligations constituting Indebtedness permitted under Section 7.05(c) or (d). 7.07. Loans, Advances and Investments. The Loan Parties shall not, and shall not permit any of their respective Subsidiaries to, at any time make or suffer to exist or remain outstanding any loan or advance to, or purchase, acquire or own (beneficially or of record) any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) in, or any other interest in, or make any capital contribution to or other investment in, any other Person, except: (a) The capital stock of a Subsidiary of a Loan Party owned on the date hereof and listed on Schedule 4.11 hereto and the matters set forth on Schedule 4.12 hereto; (b) Loans or advances, so long as no Event of Default or Potential Default shall have occurred and be continuing or shall occur after giving effect thereto, permitted under Section 7.05(d); (c) So long as no Event of Default or Potential Default shall have occurred and be continuing or shall occur after giving effect thereto, additional capital stock of any of the Subsidiaries listed on Schedule 4.11 hereto and additional interests with respect to those matters set forth on Schedule 4.12 hereto or the capital stock of any new wholly owned Subsidiary of any Loan Party or of any existing wholly owned Subsidiary of a Loan Party; provided, that the acquisition of such additional interests shall not require the expenditure of more than $10,000,000 in the aggregate; (d) So long as no Event of Default or Potential Default shall have occurred and be continuing or shall occur after giving effect thereto, investments in any other Person where (i) such Person is in the same or a similar line of business as any Loan Party or any Subsidiary of a Loan Party, (ii) such investment is in the form of an Acquisition and (iii) the investment in such - 61 - 67 Person shall not exceed $50,000,000; provided, that where the consideration payable in connection with such Acquisition consists of any consideration other than the capital stock of the Guarantor, such investment in such Person shall not exceed $20,000,000 and in any fiscal year of the Guarantor, the commitments to make such non-stock Acquisitions shall not exceed $30,000,000 in the aggregate; and (e) Cash Equivalent Investments. 7.08. Dividends and Related Distributions. A Loan Party shall not, and shall not permit any of its Subsidiaries to, declare or make any Stock Payment if an Event of Default or Potential Default shall have occurred and is continuing or if the same shall occur after giving effect thereto. 7.09. Sale-Leasebacks. A Loan Party shall not, and shall not permit any of its Subsidiaries to, at any time enter into or suffer to remain in effect any transaction to which such Loan Party or Subsidiary is a party involving the sale, transfer or other disposition by such Loan Party or Subsidiary of any property (now owned or hereafter acquired), with a view directly or indirectly to the leasing back of any part of the same property or any other property used for the same or a similar purpose or purposes. 7.10. Mergers, Acquisitions, etc. A Loan Party shall not, and shall not permit any of its Subsidiaries to (v) merge with or into or consolidate with any other Person, (w) liquidate, wind-up, dissolve or divide, (x) acquire all or any substantial portion of the properties of any going concern or going line of business, or (y) acquire all or any substantial portion of the properties of any other Person other than in the ordinary course of business, except: (a) Acquisitions (as defined herein) that satisfy the conditions set forth in Section 7.07(c) or (d) hereof. (b) Provided that no Event of Default or Potential Default shall occur and be continuing or shall exist at such time or after giving effect to such transaction, a Subsidiary of a Loan Party (other than another Loan Party) may merge out of existence, liquidate, wind-up or dissolve if such merger, liquidation, winding-up or dissolution (i) would not disadvantageous, in any material respect, to a Loan Party and its Subsidiaries taken as a whole (as determined in good faith by the Guarantor) and (ii) would not adversely affect the Lender (as reasonably determined by the Lender). - 62 - 68 7.11. Dispositions of Properties. A Loan Party shall not, and shall not permit any of its Subsidiaries to, sell, convey, assign, lease, transfer, abandon or otherwise dispose of, voluntarily or involuntarily, any of its properties, except: (a) Each Loan Party and each Subsidiary of each Loan Party may sell inventory in the ordinary course of business; and (b) Each Loan Party and each Subsidiary of each Loan Party may dispose of equipment which is obsolete or no longer useful in the business of the Borrower or such Subsidiary; provided, however, that a Loan Party will not, and will not permit any of its Subsidiaries to, sell, convey, assign, lease, license, transfer or otherwise permit use of, by any Person other than the Guarantor or any of its Subsidiaries, any customer or mailing list owned by a Loan Party or any of its Subsidiaries. 7.12. Dealings with Affiliates. A Loan Party shall not permit any of its Subsidiaries to, directly or indirectly deal with, in the ordinary course of business or otherwise, any Affiliate, except (a) any Affiliate who is a natural person may serve as an employee, officer, consultant and/or director of a Loan Party or any Subsidiary of a Loan Party and receive reasonable compensation for his or her services in such capacity, (b) in transactions which are pursuant to the reasonable requirements of such Person's business operations and which are on no less favorable terms to such Person than would be the case with a similar transaction with an unaffiliated Person negotiated at arm's length. 7.13. Capital Expenditures. A Loan Party shall not, and shall not permit any of its Subsidiaries to, make any Capital Expenditures on or after the date hereof if an Event of Default or Potential Default shall have occurred and is continuing or if the same shall occur after giving effect thereto. 7.14. Limitation on Other Restrictions on Liens. The Loan Parties shall not, and shall not permit any of their Subsidiaries to, enter into, become or remain subject to any agreement or instrument to which such Person is a party or by which such Person or any of its properties (now owned or hereafter acquired) may be subject or bound that would prohibit the grant of any Lien upon any of its properties (now owned or hereafter acquired) or the payment of any Stock Payment, except the Loan Documents. 7.15 License Agreement. Without the prior written consent of the Lender, the Borrower shall not amend, modify or - 63 - 69 supplement the License Agreement in any manner that would be materially disadvantageous to the Borrower nor exercise any right to terminate the License Agreement. ARTICLE VIII DEFAULTS 8.01. Events of Default. An Event of Default shall mean the occurrence or existence of one or more of the following events or conditions (for any reason, whether voluntary, involuntary or effected or required by Law): (a) Any Loan Party shall fail to pay when due principal of or interest on any Revolving Credit Loan, any Reimbursement Obligation, any fees, indemnity or expenses, or any other amount due hereunder or under any other Loan Document. (b) Any representation or warranty made or deemed made by any Loan Party or any Subsidiary of any Loan Party in or pursuant to or in connection with any Loan Document, or any statement made by any Loan Party or any Subsidiary of any Loan Party in any financial statement, certificate, report, exhibit or document furnished by any Loan Party or any Subsidiary of any Loan Party to the Lender pursuant to or in connection with any Loan Document, shall prove to have been false or misleading in any material respect as of the time when made or deemed made (including by omission of material information necessary to make such representation, warranty or statement not misleading). (c) Any Loan Party shall default in the performance or observance of any covenant contained in Article VII hereof or the covenant contained in Section 6.01(i) hereof. (d) Any Loan Party shall default in the performance or observance of any other material covenant, agreement or duty under this Agreement or any other Loan Document and such default shall have continued for a period of ten (10) Business Days. (e) Any Loan Party or any Subsidiary of any Loan Party shall default beyond any applicable cure period in the payment of principal or interest on any obligation for borrowed money in excess of $500,000 or in the performance of any provision contained in any instrument under which any such obligation for borrowed money is created or secured (including the breach of any covenant thereunder) if an effect of such default is to cause, or permit any Person to cause such obligation to become due prior to its stated maturity, unless, solely with respect to a non-payment default (i) such Loan Party or such Subsidiary is actively and - 64 - 70 diligently contesting the existence of such default and (ii) the obligee has not taken any action to accelerate the maturity of such obligation or to exercise any other remedy available to it under such instrument. (f) One or more judgments for the payment of money shall have been entered against any Loan Party or any Subsidiary of any Loan Party, which judgment or judgments exceed $2,000,000 in the aggregate, and such judgment or judgments shall have remained undischarged and unstayed for a period of thirty (30) consecutive days. (g) Any one or more Pension-Related Events referred to in subsection (a)(ii), (b) or (e) of the definition of "Pension-Related Event" shall have occurred; or any one or more other Pension-Related Events shall have occurred and the Lender shall determine in good faith (which determination shall be conclusive) that such other Pension-Related Events, individually or in the aggregate, could have a Material Adverse Effect. (h) There shall have occurred a material adverse change in the business, condition (financial or otherwise), results of operations or prospects of any Loan Party. (i) A proceeding shall have been instituted in respect of any Loan Party or any Subsidiary of any Loan Party (i) seeking to have an order for relief entered in respect of such Person, or seeking a declaration or entailing a finding that such Person is insolvent or a similar declaration or finding, or seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to such Person, its assets or its debts under any Law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar Law now or hereafter in effect, or (ii) seeking appointment of a receiver, trustee, liquidator, assignee, sequestrator or other custodian for such Person or for all or any substantial part of its property and such proceeding shall result in the entry, making or grant of any such order for relief, declaration, finding, relief or appointment, or such proceeding shall remain undismissed and unstayed for a period of thirty (30) consecutive days. - 65 - 71 (j) Any Loan Party or any Subsidiary of any Loan Party shall become insolvent; shall fail to pay, become unable to pay, or state that it is or will be unable to pay, its debts as they become due; shall voluntarily suspend transaction of its or his business; shall make a general assignment for the benefit of creditors; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 8.01(i)(i) hereof, or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such order for relief, declaration, finding or relief described therein; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 8.01(i)(ii) hereof, or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such appointment or to the taking of possession by any such custodian of all or any substantial part of its or his property; shall dissolve, wind-up, revoke or forfeit its charter (or other constituent documents) or liquidate itself or any substantial part of its property other than proceedings for the voluntary liquidation and dissolution of a Subsidiary of the Guarantor permitted by Section 6.04 hereof; or shall take any action in furtherance of any of the foregoing. (k) The expiration or earlier termination of the License Agreement. (l) Any provision of Article IX hereof shall cease to be in full force and effect, or the Guarantor shall deny or disaffirm its obligations thereunder. (m) The Guarantor shall cease to own, directly or indirectly, one hundred percent (100%) of the outstanding capital stock of the Borrower. (n) A Change of Control Event shall occur. 8.02. Consequences of an Event of Default. (a) If an Event of Default specified in subsections (a) through (n) of Section 8.01 hereof shall occur and be continuing or shall exist, then, in addition to all other rights and remedies which the Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Lender shall be under no further obligation to make Revolving Credit Loans or to issue Letters of Credit hereunder, and the Lender may by notice to the Borrower, from time to time do any or all of the following: (i) Declare the Revolving Credit Commitment terminated, whereupon the Revolving Credit Commitment will terminate and any fees hereunder shall be immediately due and payable - 66 - 72 without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (ii) Declare the unpaid principal amount of the Revolving Credit Loans, interest accrued thereon and all other Obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (b) If an Event of Default specified in subsection (i) or (j) of Section 8.01 hereof shall occur or exist, then, in addition to all other rights and remedies which the Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Revolving Credit Commitment shall automatically terminate and the Lender shall be under no further obligation to make Revolving Credit Loans or to issue Letters of Credit, and the unpaid principal amount of the Revolving Credit Loans, interest accrued thereon and all other Obligations shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. ARTICLE IX GUARANTY AND SURETYSHIP 9.01. Guaranty and Suretyship. The Guarantor hereby absolutely, unconditionally and irrevocably guarantees and becomes surety for the full and punctual payment and performance of the Guaranteed Obligations as and when such payment or performance shall become due (at scheduled maturity, by acceleration or otherwise) in accordance with the terms of the Loan Documents. The obligations of the Guarantor hereunder constitute an agreement of suretyship as well as of guaranty, are a guarantee of payment and performance and not merely of collectability, and are in no way conditioned upon any attempt to collect from or proceed against the Borrower or any other Person or any other event or circumstance. The obligations of the Guarantor hereunder are direct and primary obligations of the Guarantor and are independent of the Guaranteed Obligations, and a separate action or actions may be brought against the Guarantor regardless of whether action is brought against the Borrower or any other Person or whether the Borrower or any other Person is joined in any such action or actions. 9.02. Obligations Absolute. The Guarantor agrees that the Guaranteed Obligations will be paid and performed strictly in - 67 - 73 accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting the Guaranteed Obligations, any of the terms of the Loan Documents or the rights of the Lender or any other Person with respect thereto. The obligations of the Guarantor hereunder shall be absolute, unconditional and irrevocable, irrespective of any of the following: (a) Any lack of genuineness, legality, validity, enforceability or allowability (in a bankruptcy, insolvency, reorganization or similar proceeding, or otherwise), or any avoidance or subordination, in whole or in part, of any Loan Document or any of the Guaranteed Obligations. (b) Any increase, decrease or change in the amount, nature, type or purpose of any of the Guaranteed Obligations (whether or not contemplated by the Loan Documents as presently constituted); any change in the time, manner, method or place of payment or performance of, or in any other term of, any of the Guaranteed Obligations; any execution or delivery of any additional Loan Documents; or any amendment, modification or supplement to, or refinancing or refunding of, any Loan Document or any of the Guaranteed Obligations. (c) Any failure to assert any breach of or default under any Loan Document or any of the Guaranteed Obligations; any extensions of credit in excess of the amount committed under or contemplated by the Loan Documents, or in circumstances in which any condition to such extensions of credit has not been satisfied; any other exercise or non-exercise, or any other failure, omission, breach, default, delay or wrongful action in connection with any exercise or non-exercise, of any right or remedy against the Borrower or any other Person under or in connection with any Loan Document or any of the Guaranteed Obligations; any refusal of payment or performance of any of the Guaranteed Obligations, whether or not with any reservation of rights against the Guarantor; or any application of collections (including but not limited to collections resulting from realization upon any direct or indirect security for the Guaranteed Obligations) to other obligations, if any, not entitled to the benefits of this Agreement, in preference to Guaranteed Obligations entitled to the benefits of this Agreement, or if any collections are applied to Guaranteed Obligations, any application to particular Guaranteed Obligations. (d) Any taking, exchange, amendment, modification, supplement, termination, subordination, release, loss or impairment of, or any failure to protect, perfect, or preserve the value of, or any enforcement of, realization upon, or exercise of - 68 - 74 rights or remedies under or in connection with, or any failure, omission, breach, default, delay or wrongful action by the Lender or any other Person in connection with the enforcement of, realization upon, or exercise of rights or remedies under or in connection with, or any other action or inaction by the Lender or any other Person in respect of, any direct or indirect security for any of the Guaranteed Obligations. As used in this Agreement, "direct or indirect security" for the Guaranteed Obligations, and similar phrases, includes but is not limited to any collateral security, guaranty, suretyship, letter of credit, capital maintenance agreement, put option, subordination agreement or other right or arrangement of any nature providing direct or indirect assurance of payment or performance of any of the Guaranteed Obligations, made or on behalf of any Person. (e) Any merger, consolidation, liquidation, dissolution, winding-up, charter revocation or forfeiture, or other change in, restructuring or termination of the corporate structure or existence of, the Borrower or any other Person; any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Borrower or any other Person; or any action taken or election made by the Lender (including but not limited to any election under Section 1111(b)(2) of the United States Bankruptcy Code), the Borrower or any other Person in connection with any such proceeding. (f) Any defense, setoff or counterclaim (excluding only the defense of full, strict and indefeasible payment and performance), which may at any time be available to or be asserted by the Borrower or any other Person with respect to any Loan Document or any of the Guaranteed Obligations; or any discharge by operation of law or release of the Borrower or any other Person from the performance or observance of any Loan Document or any of the Guaranteed Obligations. (g) Any other event or circumstance, whether similar or dissimilar to the foregoing, and whether known or unknown, which might otherwise constitute a defense available to, or limit the liability of, the Guarantor, a guarantor or a surety, excepting only full, strict and indefeasible payment and performance of the Guaranteed Obligations in full. 9.03. Waivers, etc. The Guarantor hereby waives any defense to or limitation on its obligations under this Agreement arising out of or based on any event or circumstance referred to in Section 9.02 hereof. Without limitation, the Guarantor waives each of the following: - 69 - 75 (a) All notices, disclosures and demands of any nature which otherwise might be required from time to time to preserve intact any rights against the Guarantor, including without limitation the following: any notice of any event or circumstance described in Section 9.02 hereof; any notice required by any law, regulation or order now or hereafter in effect in any jurisdiction; any notice of nonpayment, nonperformance, dishonor, or protest under any Loan Document or any of the Guaranteed Obligations; any notice of the incurrence of any Guaranteed Obligation; any notice of any default or any failure on the part of the Borrower or any other Person to comply with any Loan Document or any of the Guaranteed Obligations or any direct or indirect security for any of the Guaranteed Obligations; and any notice of any information pertaining to the business, operations, condition (financial or otherwise) or prospects of the Borrower or any other Person. (b) Any right to any marshalling of assets, to the filing of any claim against the Borrower or any other Person in the event of any bankruptcy, insolvency, reorganization or similar proceeding, or to the exercise against the Borrower or any other Person of any other right or remedy under or in connection with any Loan Document or any of the Guaranteed Obligations or any direct or indirect security for any of the Guaranteed Obligations; any requirement of promptness or diligence on the part of the Lender or any other Person; any requirement to exhaust any remedies under or in connection with, or to mitigate the damages resulting from default under, any Loan Document or any of the Guaranteed Obligations or any direct or indirect security for any of the Guaranteed Obligations; any benefit of any statute of limitations; and any requirement of acceptance of this Agreement, and any requirement that the Guarantor receive notice of such acceptance. (c) Any defense or other right arising by reason of any law now or hereafter in effect in any jurisdiction pertaining to election of remedies (including but not limited to anti-deficiency laws, "one action" laws or the like), or by reason of any election of remedies or other action or inaction by the Lender (including but not limited to commencement or completion of any judicial proceeding or nonjudicial sale or other action in respect of collateral security for any of the Guaranteed Obligations), which results in denial or impairment of the right of the Lender to seek a deficiency against the Borrower or any other Person or which otherwise discharges or impairs any of the Guaranteed Obligations. 9.04. Reinstatement. The obligations of the Guarantor hereunder shall continue to be effective, or be automatically reinstated, as the case may be, if at any time payment of any of - 70 - 76 the Guaranteed Obligations is avoided, rescinded or must otherwise be returned by the Lender for any reason (including, without limitation, by reason of such payment being a preference or fraudulent conveyance), all as though such payment had not been made. 9.05. No Stay. Without limitation of any other provision hereof, if any declaration of default or acceleration or other exercise or condition to exercise of rights or remedies under or with respect to any Guaranteed Obligation shall at any time be stayed, enjoined or prevented for any reason (including but not limited to stay or injunction resulting from of the pendency against the Borrower or any other Person of a bankruptcy, insolvency, reorganization or similar proceeding), the Guarantor agrees that, for purposes of this Agreement and its obligations hereunder, the Guaranteed Obligations shall be deemed to have been declared in default or accelerated, and such other exercise or conditions to exercise shall be deemed to have been taken or met. 9.06. Payments. All payments to be made by Guarantor pursuant to the provisions hereof shall be made at the times and in the manner prescribed for payments in Section 2.09 hereof, without setoff, counterclaim, withholding or other deduction of any nature. 9.07. Subrogation, etc. The Guarantor hereby agrees that any and all rights it now has or hereafter may have (known and unknown, whether arising by operation of law, by agreement or otherwise) against the Borrower or any other Person arising from the existence, payment, performance or enforcement of any of the obligations of the Guarantor hereunder or in connection herewith, including without limitation any and all rights of subrogation, reimbursement, exoneration, contribution and indemnity or similar rights which the Guarantor may have against the Borrower at any time, shall be subordinate in any and all events to any and all rights which the Lender may have against the Borrower in respect of the Guaranteed Obligations, and the Guarantor will not enforce any such right until the Guaranteed Obligations have been paid and performed in full and all commitments to extend credit under the Loan Documents have been fully terminated. 9.08. Continuing Guaranty. The obligations of the Guarantor hereunder constitute a continuing agreement and shall continue in full force and effect (notwithstanding that no Guaranteed Obligations may be outstanding from time to time, or any other event or circumstance) until all Guaranteed Obligations and all other amounts payable under this Agreement have been paid and performed in full, and all commitments to extend credit under the Loan Documents have terminated, subject in any event to - 71 - 77 reinstatement in accordance with Section 9.04 hereof. Any purported termination, revocation or discharge of the obligations of the Guarantor hereunder shall be void and of no effect. For purposes hereof, the Guaranteed Obligations shall not be deemed to have been paid in full until the Lender shall have received payment of the Guaranteed Obligations in full and in cash and all commitments to extend credit under the Loan Documents have terminated. 9.09. Subordination. The Guarantor further agrees that any and all present and future debts and obligations of the Borrower, any endorser, or any guarantor of any part or all of the Guaranteed Obligations to the Guarantor and any and all claims of the Guarantor against the Borrower, any endorser, or any guarantor of any part or all of the Guaranteed Obligations, or any of their respective properties, howsoever arising, shall be subordinate and subject in right of payment to the prior payment, in full, of the Guaranteed Obligations and as security for the obligations of the Guarantor hereunder, the Guarantor hereby assigns to the Lender all claims of any nature which the Guarantor may now or hereafter have against the Borrower. ARTICLE X MISCELLANEOUS 10.01. Holidays. Whenever any payment or action to be made or taken hereunder or under any other Loan Document shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. 10.02. Records. The unpaid principal amount of the Revolving Credit Loans, the unpaid interest accrued thereon, the interest rate or rates applicable to such unpaid principal amount, the duration of such applicability, and the accrued and unpaid Revolving Credit Commitment Fees and fees pursuant to Section 3.02 hereof shall at all times be ascertained from the records of the Lender, which shall be conclusive absent manifest error. 10.03. Amendments and Waivers. Neither this Agreement nor any Loan Document may be amended, modified or supplemented except by an agreement in writing signed by the party against whom enforcement of any such amendment, modification or supplement is sought. - 72 - 78 10.04. No Implied Waiver; Cumulative Remedies. No course of dealing and no delay or failure of the Lender in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Lender under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Lender would otherwise have hereunder or thereunder, at law, in equity or otherwise. 10.05. Notices. (a) Except to the extent otherwise expressly permitted hereunder or thereunder, all notices, requests, demands, directions and other communications (collectively "notices") under this Agreement or any other Loan Document shall be in writing (including telecopied communication) and shall be sent by first-class mail, or by nationally-recognized overnight courier, or by telecopier (with confirmation in writing mailed first-class or sent by such an overnight courier), or by personal delivery. All notices shall be sent to the applicable party at the address stated on the signature pages hereof or in accordance with the last unrevoked written direction from such party to the other parties hereto, in all cases with postage or other charges prepaid. Any such properly given notice shall be effective on the earliest to occur of receipt, telephone confirmation of receipt of telex or telecopy communication, one (1) Business Day after delivery to a nationally-recognized overnight courier, or three (3) Business Days after deposit in the mail, except Standard Notice, which shall be effective when received by the Lender. (b) The Lender may rely on any notice (whether or not such notice is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the Borrower or any other Loan Party, and the Lender shall have no duty to verify the identity or authority of any Person giving such notice. 10.06. Expenses; Taxes; Indemnity. (a) The Borrower agrees to pay or cause to be paid and to save the Lender harmless against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, consulting engineers, appraisers, and all - 73 - 79 other professional, accounting, evaluation and consulting costs) incurred by the Lender from time to time arising from or relating to (i) the negotiation, preparation, execution, delivery, administration and performance of this Agreement and the other Loan Documents, (ii) any requested amendments, modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any Loan Document, and (iii) the enforcement or preservation of rights under this Agreement or any Loan Document (including but not limited to any such costs or expenses arising from or relating to (A) collection or enforcement of an outstanding Revolving Credit Loan, Reimbursement Obligation or any other amount owing hereunder or thereunder by the Lender and (B) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the Loan Documents). (b) The Borrower hereby agrees to pay all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by the Lender to be payable in connection with this Agreement or any other Loan Document or any other documents, instruments or transactions pursuant to or in connection herewith or therewith, and the Borrower agrees to save the Lender harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such fees, taxes or impositions. (c) The Borrower hereby agrees to reimburse and indemnify each of the Indemnified Parties from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnified Party shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnified Party as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Revolving Credit Loan (and without in any way limiting the generality of the foregoing, including any violation or breach of any Environmental Law or any other Law by any Loan Party or any Subsidiary of any Loan Party or any Environmental Affiliate of any of them; any Environmental Claim arising out of the management, use, control, ownership or operation of property by any of such Persons, - 74 - 80 including all on-site and off-site activities involving Environmental Concern Materials; or any exercise by the Lender of any of its rights or remedies under this Agreement or any other Loan Document); but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of such Indemnified Party, as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Borrower under this subsection (c), or any other indemnification obligation of the Borrower hereunder or under any other Loan Document, are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. 10.07. Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 10.08. Prior Understandings. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein. 10.09. Duration; Survival. All representations and warranties of the each Loan Party contained herein or in any other Loan Document or made in connection herewith or therewith shall survive the making of, and shall not be waived by the execution and delivery, of this Agreement or any other Loan Document, any investigation by or knowledge of the Lender, the making of any Revolving Credit Loan, the issuance of any Letter of Credit or any other event or condition whatever. All covenants and agreements of each Loan Party contained herein or in any other Loan Document shall continue in full force and effect from and after the date hereof so long as the Borrower may borrow hereunder or request the issuance of Letters of Credit hereunder and until payment in full of all Obligations. Without limitation, all obligations of the Borrower hereunder or under any other Loan Document to make payments to or indemnify the Lender shall survive the payment in full of all other Obligations, termination of the Borrower's right to borrow or to request the issuance of Letters of Credit hereunder, and all other events and conditions whatever. - 75 - 81 10.10. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. 10.11. Limitation on Payments. The parties hereto intend to conform to all applicable Laws in effect from time to time limiting the maximum rate of interest that may be charged or collected. Accordingly, notwithstanding any other provision hereof or of any other Loan Document, the Borrower shall not be required to make any payment to or for the account of the Lender, and the Lender shall refund any payment made by the Borrower, to the extent that such requirement or such failure to refund would violate or conflict with nonwaivable provisions of applicable Laws limiting the maximum amount of interest which may be charged or collected by the Lender. 10.12. Set-Off. Each Loan Party hereby agrees that, to the fullest extent permitted by law, if an Event of Default shall occur and be continuing, and if any Obligation of such Loan Party shall be due and payable (by acceleration or otherwise), the Lender shall have the right, without notice to such Loan Party, to set-off against and to appropriate and apply to such Obligation any indebtedness, liability or obligation of any nature owing to such Loan Party by the Lender, including but not limited to all deposits (whether time or demand, general or special, provisionally credited or finally credited, whether or not evidenced by a certificate of deposit) now or hereafter maintained by such Loan Party with the Lender. If an Event of Default shall occur and be continuing, such right shall be absolute and unconditional in all circumstances and, without limitation, shall exist whether or not the Lender or any other Person shall have given notice or made any demand to the such Loan Party or any other Person, whether such indebtedness, obligation or liability owed to such Loan Party is contingent, absolute, matured or unmatured (it being agreed that the Lender may deem such indebtedness, obligation or liability to be then due and payable at the time of such setoff), and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to the Lender or any other Person. Each Loan Party hereby agrees that, to the fullest extent permitted by law, any Participant and any branch, subsidiary or affiliate of the Lender or any Participant shall have the same rights of set-off as the Lender as provided in this Section (regardless of whether such Participant, branch, subsidiary or affiliate would otherwise be deemed in privity with or a direct creditor of such Loan Party). The rights provided by this Section are in addition to all other rights of set-off and banker's lien and all other rights and - 76 - 82 remedies which the Lender (or any such Participant, branch, subsidiary or affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise, and nothing in this Agreement or any Loan Document shall be deemed a waiver or prohibition of or restriction on the rights of set-off or bankers' lien of any such Person. 10.13. Successors and Assigns; Participations. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Loan Parties, the Lender, all future holders of the Revolving Credit Note, and their respective successors and assigns, except that neither the Lender nor any Loan Party may assign or transfer any of its rights hereunder or interests herein without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed) and any purported assignment without such consent shall be void. (b) Participations. The Lender may, in the ordinary course of its commercial banking business and in accordance with applicable Law, at any time sell participations to one or more commercial banks or other Persons (each a "Participant") in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of the Revolving Credit Commitment and the Revolving Credit Loans owing to it and the Revolving Credit Note); provided, that (i) the Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) the Lender shall remain solely responsible to the Loan Parties for the performance of such obligations, (iii) each Loan Party shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under this Agreement and each of the other Loan Documents, and (iv) the Lender may enter into any amendment to this Agreement or to any of the other Loan Documents without the prior consent of any such Participant, except any amendment which would (A) increase the Revolving Credit Committed Amount, (B) extend the maturity of the principal of or any interest on any amount owed to the Lender by the Loan Parties under this Agreement or any of the other Loan Documents, (C) reduce the principal amount of or the rate of interest on any amount owed to the Lender by the Loan Parties under this - 77 - 83 Agreement or any of the other Loan Documents, (D) waive any Event of Default under this Agreement, or (E) release the Guarantor from any obligation hereunder. Each Loan Party agrees that any such Participant shall be entitled to the benefits of Sections 2.10, 2.11 and 10.06 hereof with respect to its participation in the Revolving Credit Commitment and the Revolving Credit Loans outstanding from time to time; provided, that no such Participant shall be entitled to receive any greater amount pursuant to such Sections than the Lender would have been entitled to receive in respect of the amount of the participation transferred to such Participant had no such transfer occurred. (c) Financial and Other Information. Each Loan Party authorizes the Lender to disclose to any Participant and any prospective transferee any and all financial and other information in the Lender's possession concerning any Loan Party and their respective Subsidiaries and affiliates which has been or may be delivered to the Lender by or on behalf of any Loan Party in connection with this Agreement or any other Loan Document or the Lender's credit evaluation of any Loan Party and their respective Subsidiaries and affiliates. 10.14. Governing Law; Submission to Jurisdiction: Waiver of Jury Trial; Limitation of Liability. (a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS (EXCEPT TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN DOCUMENTS) SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES. (b) Certain Waivers. EACH LOAN PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY: (i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED LITIGATION") MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN ALLEGHENY COUNTY, PENNSYLVANIA, SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND TO THE FULLEST EXTENT PERMITTED BY LAW AGREES THAT IT WILL NOT BRING ANY RELATED LITIGATION IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM); - 78 - 84 (ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PERSON; (iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE LOAN PARTY AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 10.05 HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW); AND (iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION. (c) Limitation of Liability. TO THE FULLEST EXTENT PERMITTED BY LAW, NO CLAIM MAY BE MADE BY A LOAN PARTY AGAINST THE LENDER OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF THE LENDER FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY). EACH LOAN PARTY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR ARISES HEREAFTER AND WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. 10.15. Termination of Existing Revolving Credit Facilities. Upon the execution and delivery of this Agreement by each of the parties hereto and the satisfaction of each of the other conditions set forth in Section 5.01 hereof, the Existing Revolving Credit Facilities and the Security Documents (as defined therein) and the obligations of the Lender to make Revolving Credit Extensions of Credit thereunder shall be, and hereby are, terminated and the Lender shall cause any Liens securing the Obligations thereunder to be terminated or released. Notwithstanding the foregoing, to the extent that any Revolving Credit Extensions of Credit or any other Obligations remain outstanding under any of the Existing Revolving Credit Facilities (including without limitation Letters of Credit), the Loan Parties hereby acknowledge and agree that such Revolving Credit Extensions - 79 - 85 of Credit and other Obligations shall constitute Obligations of the Loan Parties hereunder and not under any of the Existing Revolving Credit Facilities. 10.16. Confidentiality. In accordance with its usual and customary practices, the Lender shall maintain the confidentiality of Confidential Information (as hereinafter defined). "Confidential Information" means any materials, documents or information furnished by or on behalf of the Borrower in connection with this Agreement designated by or on behalf of any Loan Party as confidential, except that Confidential Information shall not include materials, documents or information that (a) is or becomes publicly available other than as a result of a breach of this Agreement, (b) becomes available to the Lender on a non-confidential basis from third party or (c) was available to the Lender on a non-confidential basis. - 80 - 86 IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. BLACK BOX CORPORATION OF PENNSYLVANIA By: /s/ Anna M. Baird -------------------------- Title: Chief Financial Officer -------------------------- Address for Notices: 1000 Park Drive Pittsburgh, PA 15241 Attn: Anna M. Baird Telephone: 412/873-6750 Telecopier: 412/873-6784 BLACK BOX CORPORATION By: /s/ Anna M. Baird -------------------------- Title: Chief Financial Officer -------------------------- Address for Notices: 1000 Park Drive Pittsburgh, PA 15241 Attn: Anna M. Baird Telephone: 412/873-6750 Telecopier: 412/873-6784 MELLON BANK, N.A. By: /s/ Mark Latterner -------------------------- Title: Vice President -------------------------- Address for Notices: 230 Two Mellon Bank Center Pittsburgh, PA 15259 Attn: Mark T. Latterner Telephone: 412/236-1226 Telecopier: 412/234-9010 - 81 - 87 ANNEX A To Omnibus Credit Facility Agreement
- ----------------------------------------- --------------------------------------- -------------------------------------- Applicable Tier Applicable Margin Commitment Fee Rate - ----------------------------------------- --------------------------------------- -------------------------------------- Tier I .5000% .2000% - ----------------------------------------- --------------------------------------- -------------------------------------- Tier II .6250% .2500% - ----------------------------------------- --------------------------------------- -------------------------------------- Tier III .7500% .3125% - ----------------------------------------- --------------------------------------- -------------------------------------- Tier IV .8750% .3125% - ----------------------------------------- --------------------------------------- -------------------------------------- Tier V 1.000% .3750% - ----------------------------------------- --------------------------------------- --------------------------------------
As used in this Agreement, the term "Applicable Tier" means, on any date, whichever of Tier I, Tier II, Tier III, Tier IV or Tier V applies on such date. Subject to the other provisions of this definition, on the Closing Date the Applicable Tier shall be Tier I. Thereafter, subject to the other provisions of this definition, (a) following the end of each fiscal quarter of the Guarantor, the Loan Parties shall prepare and deliver to the Lender in accordance with Section 6.01(d) a Quarterly Compliance Certificate, duly completed and signed by a Responsible Officer, computing which of the financial tests in the table set forth below the Loan Parties satisfy as of the last day of such fiscal quarter and (b) the Applicable Tier corresponding to such financial test shall take effect on the first day of the month following the month in which the Lender receives such Quarterly Compliance Certificate, and such Applicable Tier shall continue in effect until reset in accordance with this definition. If a Quarterly Compliance Certificate is not received by the Lender by the last day of the month in which it is required to be delivered under Section 6.01(d), then, without limiting any other rights and remedies of the Lender, the Applicable Tier shall be deemed to be Tier V for each day from and including the first day of the month in which such Quarterly Compliance Certificate was required to be delivered to and including the fifth day after the date on which such Quarterly Compliance Certificate is received by the Lender. Notwithstanding anything to the contrary in this definition, the Applicable Tier shall be deemed to be Tier V in each day on which an Event of Default has occurred and is continuing. - i - 88 For purposes of the foregoing, the "Applicable Tier" shall be determined by using the following chart:
- ------------------------------------------------------------- ---------------------------------------------------------- Applicable Tier Consolidated Leverage Ratio - ------------------------------------------------------------- ---------------------------------------------------------- Tier 1 Less than or equal to 1.00 to 1 - ------------------------------------------------------------- ---------------------------------------------------------- Tier II Less than or equal to 1.50 and greater than 1.00 to - ------------------------------------------------------------- ---------------------------------------------------------- Tier III Less than or equal to 2.00 and greater than 1.50 to 1 - ------------------------------------------------------------- ---------------------------------------------------------- Tier IV Less than or equal to 2.50 and greater than 2.00 to 1 - ------------------------------------------------------------- ---------------------------------------------------------- Tier V Less than or equal to 3.00 and greater than 2.50 to 1 - ------------------------------------------------------------- ----------------------------------------------------------
[END OF ANNEX A] EX-21.1 3 SUBSIDIARIES OF THE COMPANY 1 Exhibit 21.1 SUBSIDIARIES OF THE COMPANY
NAME LOCATION STATE OF INCORPORATION - ---- -------- ---------------------- Advanced Communications, Corporation Columbia, South Carolina, USA South Carolina American Telephone Wiring Company Charleston, West Virginia, USA West Virginia Associated Network Solutions, Inc. St. Petersburg, Florida, USA Florida ATIMCO Network Services, Inc. Pittsburgh, Pennsylvania, USA Pennsylvania BBox Holding Company Wilmington, Delaware, USA Delaware BB Technologies, Inc. Wilmington, Delaware, USA Delaware Black Box Corporation of Pennsylvania Lawrence, Pennsylvania, USA Delaware Cable Consultants, Incorporated Atlanta, Georgia, USA Georgia Midwest Communications Technologies, Inc. Columbus, Ohio, USA Ohio Key-Four, Inc. Atlanta, Georgia, USA Georgia Todd Communications, Inc. Winston-Salem, North Carolina, USA North Carolina Aicon Telemarketing Tecnologico Ltda. Santiago, Chile Alpeco International Foreign Sales Corporation Bridgetown, Barbados Black Box Catalog Australia Pty. Ltd. Croydon VIC, Australia Black Box Canada Corporation Ontario, Canada Black Box Catalog New Zealand Limited Wellington, New Zealand Black Box Catalogue, Ltd. Reading, England Black Box Communication SANV Zaventum, Belgium Black Box Datacom, B.V. Utrecht, Netherlands Black Box de Mexico, S.A. de C.V. Mexico City, Mexico Black Box Deutschland GmbH Munich, Germany Black Box do Brazil Industria e Comercio Ltda. Sao Paulo, Brazil Black Box France, S.A. Rungis, France Black Box Foreign Sales Corporation St. Thomas, U.S.V.I. Black Box Italia, SpA Vimodrone, Italy Black Box Japan Kabushiki Kaisha Tokyo, Japan Black Box Puerto Rico Corp. San Juan, Puerto Rico Datacom Black Box Services AG Altendorf, Switzerland Datacom Black Box Holding, AG Zug, Switzerland Ohmega Installations Limited Newbury, Berkshire, England South Hills Datacomm Chile, S.A. Santiago, Chile
EX-23.1 4 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports, included in this Form 10-K, into the Company's previously filed registration statements on Form S-8, Registration No. 33-75254; Form S-8, Registration No. 33-75252; Form S-8, Registration No. 33-92656; Form S-8, Registration No. 333-01978; Form S-8, Registration No. 333-34839; and Form S-8, Registration No. 333-34837, relating to the Company's 1992 Employee Stock Option Plan, 1992 Director Stock Option Plan, First Amendment to the Employee Plan, Second Amendment to the Employee Plan, Third Amendment to the Employee Plan and First Amendment to the Director Plan, Form S-3, Registration No. 333-48421, Form S-4, Registration No. 333-52937 and Form S-4, Registration No. 333-77343. /s/ ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania, June 24, 1999 EX-27.1 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX CORPORATION'S FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAR-31-1999 APR-01-1998 MAR-31-1999 5,946 0 66,864 4,023 32,258 117,217 44,931 20,741 246,275 43,955 204 0 0 18 192,634 246,275 329,974 329,974 167,672 167,672 (238) 2,923 553 63,050 24,905 38,145 0 0 0 38,145 2.19 2.09
EX-27.2 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX CORPORATION'S FORM 10-Q FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1999 OCT-01-1998 DEC-31-1998 2,366 0 54,420 3,640 36,257 99,834 37,464 17,781 212,548 34,969 6,307 0 0 18 163,053 212,548 84,789 84,789 42,716 42,716 92 730 237 16,010 6,405 9,605 0 0 0 9,605 0.55 0.53
EX-27.3 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX CORPORATION'S FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1999 JUL-01-1998 SEP-30-1998 3,444 0 54,274 3,298 34,318 100,752 32,890 16,447 211,453 36,446 16,894 0 0 17 148,343 211,453 79,130 79,130 40,534 40,534 11 730 100 14,453 5,689 8,764 0 0 0 8,764 0.51 0.49
EX-27.4 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX CORPORATION'S FORM 10-Q FOR THE FISCAL QUARTER ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1999 APR-01-1998 JUN-30-1998 10,936 0 47,149 2,442 32,808 96,417 29,279 15,529 181,984 33,505 83 0 0 17 137,572 181,984 73,096 73,096 36,911 36,911 (77) 730 183 13,685 5,401 8,284 0 0 0 8,284 0.48 0.46
EX-27.5 9 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX CORPORATION'S FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAR-31-1998 APR-01-1997 MAR-31-1998 11,166 0 53,074 2,655 32,283 104,131 28,355 14,807 190,283 40,786 8,189 0 0 17 130,231 190,283 299,276 299,276 151,441 151,441 (415) 1,333 2,636 53,676 21,272 32,404 0 0 0 32,404 1.89 1.79
EX-27.6 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX CORPORATION'S FORM 10-Q FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1998 OCT-01-1997 DEC-31-1997 1,755 0 49,285 2,666 36,948 96,146 28,025 14,299 183,489 42,963 8,191 0 0 17 120,513 183,489 74,206 74,206 37,180 37,180 (184) 333 605 13,222 5,114 8,107 0 0 0 8,107 0.47 0.45
EX-27.7 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX CORPORATION'S FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1998 JUL-01-1997 SEP-30-1997 1,684 0 50,993 2,408 36,445 98,177 27,540 13,587 186,689 45,095 17,359 0 0 17 112,234 186,689 74,596 74,596 37,762 37,762 (262) 333 716 13,216 5,265 7,951 0 0 0 7,951 0.46 0.44
EX-27.8 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX CORPORATION'S FORM 10-Q FOR THE FISCAL QUARTER ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 1,280 0 48,724 2,365 36,638 94,802 26,571 12,936 183,926 45,920 21,167 0 0 17 104,716 183,926 69,269 69,269 34,449 34,449 96 333 797 12,076 4,884 7,193 0 0 0 7,193 0.42 0.40
EX-27.9 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX CORPORATION'S FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAR-31-1997 APR-01-1996 MAR-31-1997 1,725 0 48,393 2,499 30,666 86,714 25,874 12,227 176,826 47,350 21,280 0 0 17 95,942 176,826 246,413 246,413 117,698 117,698 164 664 3,654 42,419 17,627 24,792 0 0 0 24,792 1.47 1.40
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