April [___], 1998
To the Stockholders of ANICOM, INC.:
You are cordially invited to attend the Annual Meeting of Stockholders of
Anicom, Inc. to be held at Harris Trust & Savings Bank, 111 West Monroe Street,
Chicago, Illinois 60603, on Wednesday, May 20, 1998 at 2:00 p.m., local time.
The attached Notice of Annual Meeting and Proxy Statement fully describe the
formal business to be transacted at the Annual Meeting, which includes the
election of three directors of the Company, the approval of an amendment to the
Company's Restated Certificate of Incorporation to increase the total authorized
common stock, the ratification of increases to the number of shares available
under the Company's 1996 Stock Incentive Plan and the Directors Option Plan and
the adoption of an associate stock purchase plan.
Directors and officers of the Company will be present to help host the Annual
Meeting and to respond to any questions that our stockholders may have. By
attending the Annual Meeting, you will have an opportunity to hear the plans for
our Company's future, to meet your officers and directors and to participate in
the business of the Annual Meeting. Whether or not you plan to attend the Annual
Meeting, it is important that your shares be represented. Regardless of the
number of shares you own, please date, sign and mail the enclosed Proxy
promptly.
We look forward to seeing you on May 20, 1998.
Sincerely,
/s/ ALAN B. ANIXTER /s/ SCOTT C. ANIXTER
ALAN B. ANIXTER SCOTT C. ANIXTER
Chairman of the Board Chairman and Chief Executive Officer
<PAGE>
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
---------------------------
To the Stockholders of
Anicom, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders (the "Annual
Meeting") of Anicom, Inc. (the "Company") will be held at Harris Trust & Savings
Bank, 111 West Monroe Street, Chicago, Illinois 60603, on Wednesday, May 20,
1998 at 2:00 p.m., local time. A Proxy and a Proxy Statement for the Annual
Meeting are enclosed.
The Annual Meeting is for the following purposes:
(1) To elect three directors of the Company.
(2) To amend the Company's Restated Certificate of Incorporation to provide
for an increase in the total authorized shares of the Company's Common
Stock.
(3) To approve an amendment to the Anicom, Inc. 1996 Stock Incentive Plan.
(4) To approve an amendment to the Anicom, Inc. Amended and Restated
Directors Option Plan.
(5) To adopt the Anicom, Inc. 1998 Associate Stock Purchase Plan.
(6) To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The close of business on April 6, 1998 has been fixed as the record date
for determining stockholders entitled to notice of, and to vote, at the Annual
Meeting or any adjournments thereof. For a period of at least ten days prior to
the Annual Meeting, a complete list of stockholders entitled to vote at the
Annual Meeting shall be open to the examination of any stockholder during
ordinary business hours at the offices of Harris Trust & Savings Bank, 111 West
Monroe Street, Chicago, Illinois 60603.
Information concerning the matters to be acted upon at the Annual Meeting
is set forth in the accompanying Proxy Statement.
By Order of the Board of Directors,
/s/ DAVID R. SHEVITZ
David R. Shevitz
Corporate Secretary
Rosemont, Illinois
April [___], 1998
STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE ANNUAL MEETING
IN PERSON ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
Anicom, Inc.
6133 North River Road
Suite 1000
Rosemont, Illinois 60018
(847) 518-8700
----------------------
PROXY STATEMENT
----------------------
ANNUAL MEETING OF STOCKHOLDERS
May 20, 1998
The accompanying Proxy is solicited by the Board of Directors of
Anicom, Inc. (the "Company") for use at the Annual Meeting of Stockholders to be
held on May 20, 1998, or at any adjournments thereof (the "Annual Meeting").
Giving the Proxy will not in any way affect a stockholder's right to attend the
Annual Meeting and to vote in person. The approximate date on which this Proxy
Statement and the accompanying Proxy will be mailed or otherwise delivered to
stockholders is April [___], 1998.
A Proxy in the accompanying form which is properly signed, dated,
returned and not revoked will be voted in accordance with the instructions
contained therein. Unless authority to vote for the election of directors (or
for any nominee) is withheld, Proxies will be voted for the directors proposed
by the Board, and, if no contrary instructions are given, Proxies will be voted
for approval of each of the remaining items on the Proxy. Discretionary
authority is provided in the Proxy as to any matters not specifically referred
to therein. Management is not aware of any other matters which are likely to be
brought before the Annual Meeting. However, if any such matters properly come
before the Annual Meeting, it is understood that the Proxy holder or holders are
fully authorized to vote thereon in accordance with his or their judgment and
discretion.
The Company's Annual Report to Stockholders for the year ended December
31, 1997, containing financial and other information pertaining to the Company,
is enclosed with this Proxy Statement. However, the Annual Report to
Stockholders does not constitute a part of this Proxy Statement.
The Proxy may be revoked at any time before it is exercised by
providing written notice of such revocation to Anicom, Inc., 6133 North River
Road, Suite 1000, Rosemont, Illinois 60018, Attn: Corporate Secretary. The Proxy
also may be revoked by the attendance and voting by a stockholder at the Annual
Meeting or by the execution and delivery to the Company of a Proxy dated
subsequent to a prior Proxy.
RECORD DATE AND OUTSTANDING SHARES
The Board of Directors has fixed the close of business on April 6, 1998
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting. As of March 16, 1998, there were outstanding
23,294,408 shares of Common Stock. The outstanding shares of Common Stock
constitute the only outstanding voting securities of the Company entitled to be
voted at the Annual Meeting. Each holder of Common Stock is entitled to one vote
for each share held by such person with respect to each matter (including
election of directors) to be voted on at the Annual Meeting.
1
<PAGE>
REQUIRED VOTE
A plurality of the shares voted in person or by proxy is required to
elect the nominees for directors. The affirmative vote of a majority of the
outstanding shares of Common Stock entitled to vote thereon is required to
approve the amendment to the Company's Restated Certificate of Incorporation.
The affirmative vote of a majority of the shares of Common Stock entitled to
vote thereon that are present in person or by proxy at the Annual Meeting is
required to approve the amendment to the Anicom, Inc. 1996 Stock Incentive Plan
(the "1996 Stock Incentive Plan"), the amendment to the Amended and Restated
Anicom, Inc. 1995 Directors Stock Option Plan (the "Directors Option Plan") and
the adoption of the Anicom, Inc. 1998 Associate Stock Purchase Plan (the "Stock
Purchase Plan"). Stockholders will not be allowed to cumulate their votes in the
election of directors.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The required quorum for the transaction of business at the Annual
Meeting will be a majority of the shares of Common Stock issued and outstanding
on the Record Date. Abstentions and broker non- votes will be included in
determining the presence of a quorum. Abstentions and broker non-votes will have
the same effect as votes against the proposal to approve the amendment to the
Company's Restated Certificate of Incorporation. Abstentions will be considered
present and entitled to vote with respect to the proposals to approve the
amendments to the 1996 Stock Incentive Plan, to the Directors Option Plan and to
the Stock Purchase Plan and will have the same effect as votes against such
proposal; broker non- votes will not be considered present and entitled to vote
with respect to such proposals and will have no effect on the voting on such
proposals. Neither abstentions nor broker non-votes will have any effect on the
voting on the proposal to elect directors.
PROXIES
Scott C. Anixter and Donald C. Welchko, the persons named as proxies on
the Proxy accompanying this Proxy Statement, have been selected by the Board of
Directors of the Company to serve in such capacity. Messrs. Anixter and Welchko
are both directors of the Company. Each executed and returned Proxy will be
voted in accordance with the directions indicated thereon, or if no direction is
indicated, such Proxy will be voted in accordance with the recommendations of
the Board of Directors contained in this Proxy Statement.
ELECTION OF DIRECTORS
(Proposal 1)
The Restated Certificate of Incorporation of the Company provides that
the members of the Board of Directors shall be divided into three classes of
directors. As specified in the Restated Certificate of Incorporation of the
Company, the initial term of the Class I directors expired at the 1996 annual
meeting of shareholders, the initial term of the Class II directors expired at
the 1997 annual meeting of stockholders and the initial term of the Class III
directors expires at the 1998 annual meeting of stockholders. The Restated
Certificate of Incorporation of the Company provides that, at each annual
meeting of stockholders thereafter, successors to the class of directors whose
term expires at that annual meeting shall be elected for a three-year term. The
term of the directors in Class III expires with this Annual Meeting.
The persons named in the enclosed form of Proxy, unless otherwise
directed therein, intend to vote such Proxy FOR the election of the nominees
named below as director for the term specified. If the nominees become
unavailable for any reason, the persons named in the form of Proxy are expected
to consult with management of the Company in voting the shares represented by
them. Management has
2
<PAGE>
no reason to believe that the nominees will be unavailable or unwilling to serve
if elected to office. To the knowledge of management, the nominees intend to
serve the term for which election is sought.
The Board of Directors has nominated three persons for election as
director in Class III at this Annual Meeting, to serve for a three-year term
expiring at the annual meeting of stockholders in 2001 or until his or her
successor is elected and qualified. The nominees are currently serving as
directors and have consented to serve for a new term.
Nominees for Election as Directors
The following persons, if elected at the Annual Meeting, will serve as
directors until the earlier of the 2001 annual meeting of stockholders or until
their successors are duly elected and qualified:
<TABLE>
<CAPTION>
Name Age Position With the Company and Principal Occupation Director Since
- -------------------------------- ---- -------------------------------------------------- ---------------
<S> <C> <C> <C>
Alan B. Anixter(1).............. 77 Chairman of the Board and Director 1993
William R. Anixter(2)........... 74 Director; President of Chama Resources, Inc. 1994
Ira J. Kaufman.................. 70 Director; Senior Managing Director of Mesirow 1994
Financial, Inc.
- ------------------
<FN>
(1) Alan B. Anixter currently serves as as director in Class II. However, Robert
Brzustewicz Sr., who is currently a director in Class III, has chosen not
to stand for re-election. Accordingly the Board of Directors has nominated
Alan B. Annixter for election as director in Class III (the class in which
Mr. Brzustewicz served as a director) to more equally apportion the
directors among the classes in accordance with the Company's Certificate of
Incorporation.
(2) Member of the Compensation Committee and the Audit Committee.
</FN>
</TABLE>
Alan B. Anixter has been Chairman of the Board and a Director of the
Company since July 1993. Mr. Anixter served as Chairman and Chief Financial
Officer of A-Z Anicom, Inc., a predecessor to the Company (the "Predecessor
Corporation"), from July 1991 to June 1993. Mr. Anixter was the co-founder and
Chairman of Anixter Bros., Inc., an international specialist in the distribution
of wire, cable and related products, and served as the Chairman of Anixter
Bros., Inc. until 1988. In 1989, Mr. Anixter founded Alanburt, Inc., a
management advisory firm, for which he continues to serve as President. Mr.
Anixter is the father of Scott C. Anixter and the brother of William R. Anixter.
William R. Anixter has served as a Director of the Company since
December 28, 1994. Mr. Anixter was the co-founder and Vice-Chairman of Anixter
Bros., Inc., an international specialist in the distribution of wire, cable,
fiber optics and related network products, and served as the Vice-Chairman of
Anixter Bros., Inc. until 1987. Since 1989, Mr. Anixter has served as President
of Chama Resources, Inc., a real estate management company located in
Albuquerque, New Mexico. Mr. Anixter is the brother of Alan B. Anixter.
Ira J. Kaufman has served as a Director of the Company since December
28, 1994. In September 1995, Mr. Kaufman joined Mesirow Financial, Inc., a
securities broker-dealer located in Chicago, Illinois, as Senior Managing
Director. From April 1990 to September 1995, Mr. Kaufman served as Chairman of
the Board Emeritus, and was employed by Rodman & Renshaw, Inc., a securities
broker-dealer and commodities futures commission merchant located in Chicago,
Illinois. From prior to January 1989 until April 1990, Mr. Kaufman served as
Chairman of the Board and Chief Executive Officer of Rodman & Renshaw, Inc.
Prior to that time, Mr. Kaufman served as Chairman of the Board and Chief
Executive Officer of Exchange National Bank in Chicago, Illinois. Mr. Kaufman
has served as a Director of American Ecology, a chemical and nuclear waste
company located in Houston, Texas, since May 1995, as a Director of First Eagle
National Bank, an independent national bank located in Hanover Park, Illinois,
since September 1993, and as a Director of Wells-Gardner Electronics
Corporation, a video monitor manufacturing company located in Chicago, Illinois,
since February 1997.
3
<PAGE>
Other Directors
The following persons will continue as directors of the Company after
the Annual Meeting until their terms of office expire (as indicated below) or
until their successors are elected and qualified.
<TABLE>
<CAPTION>
Class and Year In
Position With the Company and Principal Director Which Term Will
Name Age Occupation Since Expire
- ------------------------- ----- -------------------------------------------- ------- -------------------
<S> <C> <C> <C> <C>
Scott C. Anixter......... 49 Chairman, Chief Executive Officer and 1993 Class I 1999
Director
Carl E. Putnam........... 49 President, Chief Operating Officer and 1994 Class I 1999
Director
Donald C. Welchko(1)..... 43 Vice President, Chief Financial Officer and 1995 Class II 2000
Director
Peter H. Huizenga........ 59 Director; President of Huizenga Capital 1997 Class I 1999
Management
Thomas J. Reiman......... 48 Senior Vice President-Public Policy, 1997 Class II 2000
Ameritech
Michael Segal(1)(2)...... 55 President and CEO, Near North Insurance 1994 Class II 2000
Brokerage, Inc.
Lee B. Stern(2).......... 71 Director; President of LBS Co. 1994 Class I 1999
- ------------------
<FN>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</FN>
</TABLE>
Scott C. Anixter has been Chairman, Chief Executive Officer and a
Director of the Company since July 1993. In July 1991, Mr. Anixter founded the
Predecessor Corporation and served as its President and Chief Executive Officer
until April 1992. In April 1992, A-Z Industries, Inc., a distributor of wire and
cable that was controlled by James R. Anixter, the son of Alan B. Anixter and
the brother of Scott C. Anixter, was merged into the Predecessor Corporation.
From April 1992 to June 1993, Scott Anixter served as Vice President and Chief
Operating Officer of the Predecessor Corporation. From 1989 to July 1991, Mr.
Anixter was an Officer and Director of Alanburt, Inc., a management advisory
firm. Mr. Anixter is the son of Alan B. Anixter.
Carl E. Putnam has served as President and Chief Operating Officer of
the Company since July 1993 and was named a Director of the Company in December
1994. Mr. Putnam served as Executive Vice President of the Predecessor
Corporation from July 1991 to June 1993. Mr. Putnam spent 15 years at Anixter
Bros., Inc. where he last served as a Regional Vice President.
4
<PAGE>
Donald C. Welchko has served as Vice President, Chief Financial Officer
and a Director of the Company since January 1995. From 1986 to December 1994,
Mr. Welchko served as a Vice President-- Corporate Lending of Harris Trust and
Savings Bank. Mr. Welchko previously served as a Vice President--Cash Management
of Harris Trust and Savings Bank.
Peter H. Huizenga is the President of Huizenga Capital Management, an
equity investment company. Until May 1997, Mr. Huizenga was a director of Waste
Management, Inc. (NYSE:WMX), a company he co-founded in 1968. He is also Of
Counsel for the law firm of Hlustik, Huizenga, Williams & Vander Woude Ltd.
Thomas J. Reiman has served as a Director of the Company since June
1997. Mr. Reiman has been Senior Vice President of Public Policy for Ameritech
since October 1997 after serving as Ameritech's Senior Vice President of State
and Government Affairs. He has served in various executive capacities for
Ameritech since 1994. From 1992 to 1994, Mr. Reiman was the President of Indiana
Bell.
Michael Segal has served as a Director of the Company since December
28, 1994. Since 1969, Mr. Segal has been the President and Chief Executive
Officer of Near North Insurance Brokerage, Inc., an insurance brokerage firm
located in Chicago, Illinois.
Lee B. Stern has served as a Director of the Company since December 28,
1994. Since December 1992, Mr. Stern has served as the President of LBS Co., the
general partner of LBS Limited Partners, a member firm of the Chicago Board of
Trade. From January 1970 to December 1992, Mr. Stern served as President of Lee
B. Stern & Co., Ltd., a commodities futures commission merchant clearing member
of both the Chicago Board of Trade and the Chicago Mercantile Exchange. Mr.
Stern has been a member of the Chicago Board of Trade since 1949 and a member of
the Chicago Mercantile Exchange since 1963. Since 1982, Mr. Stern has been a
director of AAR Corp., a leading supplier of products and services for the
aviation industry, headquartered in Wood Dale, Illinois. Mr. Stern was the
founder of the Chicago Sting professional soccer team and has been a limited
partner and a director of the Chicago White Sox professional baseball team since
1976.
Meetings and Committees of the Board of Directors
During 1997, the total number of meetings of the Board of Directors was
eight. During the last full fiscal year, each Director attended at least 75% of
the aggregate total number of meetings of the Board of Directors and the total
number of meetings held by all committees of the Board of Directors on which he
served.
The Board of Directors has an Audit Committee currently composed of
Donald C. Welchko, William R. Anixter and Michael Segal. The Audit Committee met
on one occasion during 1997. The Audit Committee generally has responsibility
for recommending independent accountants to the Board for selection, reviewing
the plan and scope of the accountants' audit, reviewing the Company's audit and
control functions and reporting to the full Board of Directors regarding all of
the foregoing.
The Board of Directors established a Compensation Committee in March
1997. The Compensation Committee, which is composed of William Anixter, Lee
Stern and Michael Segal, has responsibility for reviewing with management the
overall compensation policies to be followed by the
5
<PAGE>
Company, establishing the compensation of the Company's executive officers, and
preparing the report of the Compensation Committee for the Company's Proxy
Statement in 1998 and in future years.
The Company does not have a Nominating Committee.
Compensation of Directors
During 1997 and in future years, members of the Board of Directors who
were not also employees or consultants of the Company received, or will receive,
options to purchase 1,000 shares of Common Stock for each meeting they attend
pursuant to the Directors Option Plan. Non-employee directors also receive
annual grants of options to purchase 10,000 shares of Common Stock under the
Directors Option Plan.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following person is an executive officer of the Company who is not
identified in the tables entitled "Election of Directors - Nominees for Election
as Directors" and "Election of Directors - Other Directors," above.
Name Age Position
- ----------------------------- ------- --------------------------------
Robert L. Swanson............ 49 Senior Executive Vice President
Robert L. Swanson was named a Senior Executive Vice President of the
Company in March 1996. Prior to that time, he served as Executive Vice President
of the Company since July 1993. Mr. Swanson served as Vice President--Sales of
the Predecessor Corporation from July 1991 to June 1993.
Compliance with Section 16(a) of The Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires executive officers, directors and persons who
beneficially own more than ten percent (10%) of the Company's stock ("Reporting
Persons"), to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("SEC") and Nasdaq.
Reporting Persons are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
Reporting Persons were complied with.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table provides information concerning the annual and
other compensation for services in all capacities to the Company for the last
three fiscal years of those persons who were at December 31, 1997 (i) the Chief
Executive Officer and (ii) the other four most highly compensated (combined
salary and bonus) executive officers of the Company whose total annual salary
and bonus equalled or exceeded $100,000 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
-----------------
Annual Compensation Awards
------------------------------------------ -----------------
Securities All Other
Salary Bonus Other Annual Underlying Compensation
Name and principal position Year ($) ($) Compensation Options (#)(1) ($)
- ----------------------------------- ----- ---------- ---------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Scott C. Anixter 1997 300,000 72,500 43,070 100,000 2,875
Chairman and Chief Executive 1996 240,000 27,500(3) 38,110 225,000 2,500
Officer(2) 1995 150,000 10,000 --- --- 1,500
Carl E. Putnam 1997 260,000 75,000 100,000 2,600
President and Chief Operating 1996 220,000 25,000(3) --- 125,000 6,215
Officer(4) 1995 138,000 12,000 --- 60,000 5,266
Robert Brzustewicz, Sr. 1997 240,000 --- --- 300,000 ---
Senior Executive Vice 1996 192,658 ---
President(5)
Glen M. Nast 1997 200,000 --- --- 5,000 1,935
Senior Executive Vice 1996 160,548 1,500
President(6)
Donald C. Welchko 1997 170,000 75,000 75,000 1,700
Vice President and Chief 1996 150,000 25,000(3) --- 81,000 1,550
Financial Officer(7) 1995 110,000 14,000 --- 24,000 1,100
- ------------------
<FN>
(1) During 1996, the Company declared and paid a 100% stock dividend
effected in the form of a two-for-one stock split. The number of
securities underlying options granted during each year has been
adjusted to reflect the stock dividend.
(2) "Other Annual Compensation" includes $15,500, $14,000 and $13,900 which
are attributable to club fees paid by the Company in 1997, 1996 and
1995, respectively, and $15,000 which represents amounts paid by the
Company for a car allowance in 1996. "All Other Compensation" includes
$2,875, $2,500 and $1,500 in Company matching contributions to the
Company's 401(k) Plan in 1997, 1996 and 1995, respectively. The Company
and Mr. Anixter have entered into an employment agreement under which
Mr. Anixter will receive an annual base salary of $360,000 in 1998. See
"Employment Agreements."
(3) The bonuses for 1996 for each of Messrs. Anixter, Putnam and Welchko
were paid in January 1997 based upon 1996 performance, but which were
subject to being employed for the full year of 1997.
(4) "All Other Compensation" includes $4,095 and $3,886 for premiums paid
by the Company for Mr. Putnam on life and disability insurance policies
in 1996 and 1995, respectively and $2,600, $2,120 and $1,380 in Company
matching contributions to the Company's 401(k) Plan in 1997, 1996 and
1995, respectively. The Company and Mr. Putnam have entered into an
employment agreement under which Mr. Putnam will receive an annual base
salary of $312,000 in 1998. See "Employment Agreements."
(5) Effective April 1998, the Company and Mr. Brzustewicz entered into an
agreement accelerating the the expiration of Mr. Brzustewicz'
employment with the Company. See "Certain Transactions."
7
<PAGE>
(6) "All Other Compensation" includes $1,935 and $1,500 in Company matching
contributions to the Company's 401(k) Plan in 1997. Effective April
1998, the Company and Mr. Nast entered into an agreement accelerating
the expiration of Mr. Nast's employment with the Company. See "Certain
Transactions."
(7) "All Other Compensation" includes $1,700, $1,550 and $1,100 in Company
matching contributions to the Company's 401(k) Plan in 1997, 1996 and
1995, respectively. The Company and Mr. Welchko have entered into an
employment agreement under which Mr. Welchko will receive an annual
base salary of $204,000 in 1998. See "Employment Agreements."
</FN>
</TABLE>
Option Grants in 1997
The following table provides information on grants of stock options in
1997 to the Named Officers pursuant to the Second Amended and Restated Anicom,
Inc. 1995 Stock Incentive Plan (the "1995 Stock Incentive Plan") or the 1996
Stock Incentive Plan. No stock appreciation rights were granted by the Company
in 1997.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
Potential Realizable Value at
Number of Assumed Annual Rates of
Shares Percent of Total Stock Price Appreciation for
Underlying Options Granted Exercise or Option Terms (2)
Options to Employees In Base Price Expiration -----------------------------
Name Granted (#)(1) Fiscal Year ($/Sh)(1) Date 5% ($) 10% ($)
- -------------------------- ------------- --------------- -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Scott C. Anixter.......... 100,000(2) 18.35% $ 14.625 11/07/07 919,758 2,330,848
Carl E. Putnam............ 100,000(2) 18.35 14.625 11/07/07 919,758 2,330,848
Robert Brzustewicz, Sr.... -- -- -- -- -- --
Glen M. Nast.............. -- -- -- -- -- --
Donald C. Welchko......... 75,000(2) 13.76 14.625 11/07/07 689,818 1,748,136
- ------------------
<FN>
(1) Potential realizable value is presented net of the option exercise price
but before any Federal or state income taxes associated with exercise.
These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercise are dependent on the future
performance of the Common Stock, as well as the option holder's continued
employment throughout the vesting period. The amounts reflected in the
table may not necessarily be achieved.
(2) These Options become exercisable in five equal annual increments, beginning
on November 7, 1998, the first anniversary of the date of grant.
</FN>
</TABLE>
8
<PAGE>
Year-End 1997 Option Values
The following table provides information on the Named Officers'
unexercised options at December 31, 1997. All such options were granted under
either the Second Amended and Restated Anicom, Inc. 1995 Stock Incentive Plan
(the "1995 Stock Incentive Plan") or the 1996 Stock Incentive Plan.
YEAR-END 1997 OPTION VALUES
<TABLE>
<CAPTION>
Numbers of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at 12/31/97 at Fiscal Year End(1)
------------------------- -----------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------------------------------- ------------------------- -----------------------------
<S> <C> <C>
Scott C. Anixter............................. 45,000/280,000 $320,625/$1,282,500
Carl E. Putnam............................... 50,400/228,600 405,600/1,149,100
Robert Brzustewicz, Sr....................... 100,000/200,000 968,750/1,937,500
Glen M. Nast................................. 1,000/4,000 7,125/28,500
Donald C. Welchko............................ 25,800/154,200 262,725/699,150
- ----------------
<FN>
(1) The value of the "in-the-money" options represents the difference between
the exercise price of such options and $15.875, the closing sale price of
the Common Stock on December 31, 1997.
</FN>
</TABLE>
Employment Agreements
The Company has entered into employment agreements with each of Scott
C. Anixter, Carl E. Putnam, Robert L. Swanson and Donald C. Welchko. Each of
Mr. Anixter's, Mr. Putnam's, Mr. Swanson's and Mr. Welchko's employment
agreements contains non-competition and non-solicitation provisions commencing
on the date of the employment agreement and ending two years after termination
of employment (unless such termination occurs following a change in control). In
the event of a change in control, the employment agreements provide for
severance payments to such employees. A "change in control" of the Company is
triggered upon the acquisition by any individual, entity or group of a stated
percentage of the then outstanding shares of Common Stock of the Company (30%
with respect to Mr. Anixter, 50% with respect to Messrs. Putnam, Swanson and
Welchko), the approval by the stockholders of certain specified types of
corporate transactions or business combinations, or the replacement of a
majority of the incumbent Board of Directors.
Following a change in control of the Company, if (i) during the next 24
months, Mr. Anixter's employment with the Company is terminated by either Mr.
Anixter or the Company for any reason, or (ii) at any time Mr. Anixter's
employment with the Company is terminated by him for good reason or by the
Company without cause, the Company is obligated to pay Mr. Anixter the greater
of (i) $1,000,000 or (ii) three times Mr. Anixter's average annual compensation
during each of the five full fiscal years immediately prior to the date of
termination of employment. In the event of a change in control, if (i) during
the next 24 months, Mr. Anixter's employment with the Company is terminated for
any reason or (ii) at any time his employment is terminated by him with good
reason or by the Company without cause, Mr. Anixter will have the option of
extending the non-competition and non-solicitation provisions for two years
following termination for additional consideration in an amount equal to two
times his highest annual compensation during any of the five full fiscal years
immediately prior to termination of employment.
In the event of a change in control, if either Mr. Putnam's, Mr.
Swanson's, or Mr. Welchko's employment with the Company is terminated by such
employee for good reason or by the Company
9
<PAGE>
without cause during the next 36 months, the Company is obligated to pay such
employee a lump sum cash payment equal to the greater of (i) $1,000,000 for Mr.
Putnam, $500,000 for Mr. Swanson, $750,000 for Mr. Welchko, or (ii) three times
such employee's average annual compensation during each of the five full fiscal
years immediately prior to the date of termination of employment. In addition,
following a change in control, if either Mr. Putnam, Mr. Swanson or Mr. Welchko
terminates employment with the Company without good reason during the next 6
months, the Company shall pay to such employee an amount equal to 20% of the
amount described in the prior sentence. Following a change in control, if either
Mr. Putnam's, Mr. Swanson's, or Mr. Welchko's employment with the Company is
terminated by such employee for good reason or by the Company without cause
during the next 36 months, such employee will have the option of extending the
non-competition and non-solicitation provisions for an additional term of two
years for additional consideration in an amount equal to two times the highest
annual compensation during any of the five full fiscal years immediately prior
to termination of employment. Messrs. Anixter, Putnam, Swanson and Welchko also
are entitled to gross-up payments to the extent that the payments described
above are subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code. The aggregate base salary paid to Messrs. Anixter, Putnam, Swanson
and Welchko in 1997 was $870,000 and the aggregate base salary to be paid to
them in 1998 is $1,026,000.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Historically, annual compensation and bonuses for the Company's
executive officers (other than the Chief Executive Officer) have been determined
by the Company's Chief Executive Officer in consultation with the Board of
Directors due to the relatively small number of executive officers and the Chief
Executive Officer's personal knowledge of the relative performance and
responsibilities of each executive officer. The annual compensation and bonuses
for the Company's Chief Executive Officer have been subject to the review and
approval of the Board of Directors. Option grants to all executive officers have
been determined by the Option Committee under the Stock Incentive Plan.
Executive compensation for the Company's executive officers in 1996 was
established in this manner.
In March 1997, the Board of Directors established a Compensation
Committee, composed of William Anixter, Lee Stern and Michael Segal. The
Compensation Committee has responsibility for reviewing with management the
overall compensation policies to be followed by the Company, establishing the
compensation of the Company's executive officers, and preparing the report of
the Compensation Committee for the Company's Proxy Statement.
The compensation policy of the Company has been, and will remain, to
provide a total compensation package that attracts and retains quality
individuals that possess the extent of industry experience necessary for the
Company to continue to maintain strong relationships with major vendors and
customers and to implement the Company's integrated growth strategy. The
executive compensation program is intended to recognize individual contribution
to corporate performance and to increases in stockholder value.
Base Compensation
Individual base compensation levels for executive officers are
established based upon a variety of factors, including the particular
executive's scope of responsibilities, tenure with the Company and industry
experience, and attainment of performance goals in recent years. In 1997, the
Company reviewed the total compensation package of executives in companies
representative of those with which it competes for executive talent. Based upon
its review, the Compensation Committee believes that the current base
compensation levels of executive officers of the Company are comparable to the
market. The "market" refers to companies against which the Company believes it
competes for executive talent and is not limited to companies that specialize in
the sale and distribution of communications related wire, cable, fiber optics
and computer network and connectivity products.
Bonuses
Individual bonuses for each year are determined based upon an
evaluation of individual performance during the prior year as compared to such
person's performance goals. Generally, performance criteria are established by
the Company's Chief Executive Officer in consultation with the other executive
officers. The performance goals for each officer take into account a wide range
of departmental and company-wide objectives. For 1997, the Compensation
Committee considered, among other things, the Company's successful integration
of a number of acquired companies in 1997, the Company's realization of strong
internal growth, the prospects for the contribution of further transactions
anticipated for the fourth quarter of 1997, the completion of the private equity
financing in May 1997 and the subsequent conversion of all of the preferred
stock from such placement within four months of closing, the private placement
in December 1997, the increase of the Company's credit facility while reducing
its interest rate and a variety of operational improvements implemented in 1997.
11
<PAGE>
Stock Options
The Company currently has in place two stock incentive plans: The 1995
Stock Incentive Plan and the 1996 Stock Incentive Plan. The purpose of each of
the plans is to promote the overall financial objectives of the Company and its
stockholders by motivating eligible participants to achieve long-term growth in
stockholder equity in the Company and to retain the association of these
individuals. Each of the executive officers of the Company is eligible to
participate in each of these plans. Each of these plans is administered by the
Compensation Committee which consists of William Anixter, Michael Segal and Lee
Stern. The Compensation Committee considered the factors outlined above under
the caption "Bonuses" in approving the grant of options to purchase the
following number of shares to each of the Named Officers: Scott C. Anixter -
100,000 shares; Carl E. Putnam - 100,000 shares; and Donald C.
Welchko - 75,000 shares.
Compensation of the Chief Executive Officer
Base compensation for the Company's Chief Executive Officer, Scott C.
Anixter, in 1997 was determined by the Board of Directors. In 1997, Mr.
Anixter's base compensation was $300,000, as compared to $240,000 in 1996. This
increase was determined based upon the significant growth experienced by the
Company and based upon an evaluation of the Chief Executive Officer's
contribution to achieving such growth. Mr. Anixter's 1997 bonus and option
grants, as well as his 1998 base compensation, were established by the
Compensation Committee. As with the other executive officers of the Company, Mr.
Anixter's performance based compensation consisted of a combination of stock
option grants and a cash bonus determined based upon an evaluation of his
contribution to the Company's growth and performance in 1997.
Section 162(m)
The Board of Directors currently intends for all compensation paid to
executive officers to be tax deductible to the Company pursuant to Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Section
162(m) of the Code provides that compensation paid to executive officers in
excess of $1 million cannot be deducted by the Company for federal income tax
purposes unless, in general, such compensation is performance based, is
established by an independent committee of directors, is objective and the plan
or agreement providing for such performance based compensation has been approved
in advance by stockholders. The requirements of Section 162(m) of the Code,
however, are uncertain at this time and, the Company believes, arbitrary and
inflexible. In the future, the Board of Directors may determine to adopt a
compensation program that does not satisfy the conditions of Section 162(m) of
the Code if, in the Board of Directors' judgment, after considering the
additional costs of not satisfying Section 162(m) of the Code, such program is
appropriate.
Compensation Committee of the Board of Directors
William R. Anixter
Michael Segal
Lee B. Stern
Compensation Committee Interlocks and Insider Participation
William R. Anixter, Michael Segal and Lee B. Stern were members of the
Compensation Committee for 1997. In 1997, Near North Insurance Brokerage, Inc.
received approximately $88,000 in commissions earned from insurance premiums
paid by the Company to Near North Insurance
12
<PAGE>
Brokerage, Inc. Michael Segal, a director of the Company, is the President and
Chief Executive Officer of Near North Insurance Brokerage, Inc.
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Common Stock of the Company since its initial public offering on February
22, 1995 with the cumulative total return of all stocks in the Nasdaq
Non-Financial Sector and all companies in the SIC Group1/ (assuming the
investment of $100 in the Common Stock at its closing price on February 23, 1995
and in each index on January 31, 1995 and the reinvestment of all dividends).
[GRAPHIC OMITTED]
================================================================================
2/23/95 12/31/95 12/31/96 12/31/97
- --------------------------------------------------------------------------------
Anicom, Inc. 100 177 308 529
- --------------------------------------------------------------------------------
SIC Group 100 133 151 205
- --------------------------------------------------------------------------------
Nasdaq Non-Financial 100 140 170 199
================================================================================
- --------
1/ The SIC Group is an index of the twenty-one (21) domestic companies
listed on the NASDAQ National Market which have indicated that their
primary industry is electrical goods (SIC Codes 5063-5065) (compiled by
FactSet Research Systems, Inc.).
14
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of March 31, 1998, certain
information with respect to the beneficial ownership of the Company's Common
Stock by (i) each person known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, (ii) each director of the Company,
(iii) each Named Officer and (iv) all executive officers and directors as a
group.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address(1) Beneficially Owned Ownership
- ---------------------------------------------------------------------- ------------------------- --------------
<S> <C> <C>
Scott C. Anixter(2)................................................... 2,175,000 9.34%
Alan B. Anixter(3).................................................... 205,002 *
Carl E. Putnam(4)..................................................... 190,702 *
Donald C. Welchko(5).................................................. 44,002 *
Robert Brzustewicz, Sr.(6)............................................ 370,692 1.59%
Glen M. Nast(7)....................................................... 69,766 *
William R. Anixter(8)................................................. 92,000 *
Peter H. Huizenga (9)................................................. 982,679 4.21%
Ira J. Kaufman(8)(10)................................................. 87,000 *
Thomas J. Reiman (11)................................................. 17,000 *
Michael Segal(12)..................................................... 68,000 *
Lee B. Stern(12)...................................................... 103,500 *
Northwestern Mutual Life Insurance Company(13)........................ 1,461,540 6.27%
Directors and executive officers as a group (13 persons).............. 4,558,543 19.53%
- ------------------
* less than one percent.
<FN>
(1) Except as otherwise indicated, the address of each stockholder listed is
c/o Anicom, Inc., 6133 North River Road, Suite 1000, Rosemont, Illinois
60018.
(2) Includes 704,426 shares held by trusts for the benefit of Scott C.
Anixter's children of which Penny W. Anixter has sole voting and investment
power as investment advisor, 604,800 shares held in custodial accounts for
the benefit of Scott C. Anixter's children of which Scott C. Anixter has
sole voting and investment power as custodian and 780,774 shares held by
Anixter Enterprises, L.P., a limited partnership of which Scott C. Anixter
is general partner. Also includes 85,000 shares issuable on or before May
30, 1998 upon exercise of options granted pursuant to the 1995 Stock
Incentive Plan or the 1996 Stock Incentive Plan.
(3) Includes 50,000 shares held in a trust for the benefit of Gail Anixter,
Alan B. Anixter's wife, for which Gail Anixter has sole voting and
investment power as trustee and of which Alan B. Anixter disclaims
beneficial ownership. Also includes 95,000 shares issuable on or before May
30, 1998 upon exercise of options granted pursuant to the 1995 Stock
Incentive Plan or the 1996 Stock Incentive Plan.
(4) Includes 70,400 shares issuable on or before May 30, 1998 upon exercise of
options granted pursuant to the 1995 Stock Incentive Plan or the 1996 Stock
Incentive Plan.
(5) Includes 600 shares held in custodial accounts for the benefit of Mr.
Welchko's children and includes 39,400 shares issuable on or before May 30,
1998 upon exercise of options granted pursuant to the 1995 Stock Incentive
Plan or the 1996 Stock Incentive Plan.
(6) Includes 200,000 shares issuable upon exercise of options granted pursuant
to the 1995 Stock Incentive Plan.
(7) Includes 1,000 shares issuable upon exercise of options granted pursuant to
the 1996 Stock Incentive Plan.
(8) Includes 39,000 shares issuable upon exercise of options granted pursuant
to the Directors Option Plan.
(9) Includes 14,000 shares issuable upon exercise of options granted pursuant
to the Directors Option Plan. Includes 654,403 shares held in various
trusts of which Peter H. Huizenga as trustee has sole voting and investment
power and of which Peter H. Huizenga disclaims beneficial ownership.
Includes 173,116 shares held in two trusts of which the spouse of Peter H.
Huizenga, Heidi Huizenga, as trustee, has sole voting and investment power
and of which Peter H. Huizenga disclaims beneficial ownership.
(10) Includes 28,000 shares issuable upon exercise of common stock warrants.
(11) Includes 15,000 shares issuable upon exercise of options granted pursuant
to the Directors Option Plan.
(12) Includes 38,000 shares issuable upon exercise of options granted pursuant
to the Directors Option Plan.
15
<PAGE>
(13) As reported on a Schedule 13G filed by The Northwestern Mutual Life
Insurance Company on February 9, 1998. According to such Schedule 13G, The
Northwestern Mutual Life Insurance Company has sole voting power and sole
dispositive power with respect to all of these shares. The address of this
stockholder is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
</FN>
</TABLE>
CERTAIN TRANSACTIONS
In connection with the formation of the Company, on June 30, 1993, the
Company, Alan B. Anixter, Scott C. Anixter, individually and as custodian of
certain accounts for the benefit of his children, Carl E. Putnam, Robert L.
Swanson and William K. Leino entered into a shareholders agreement. Under this
agreement, certain parties to this agreement and their affiliates may not sell
or otherwise transfer any of their shares of Common Stock to anyone not a party
to this agreement, except certain permitted transferees (as defined), unless he
or she has first provided other parties to this agreement or the Company an
option to purchase such shares at a price computed in accordance with the terms
of the agreement. This agreement also provides Scott C. Anixter and certain
affiliated parties of Scott C. Anixter with the first option to purchase shares
of Common Stock owned by other parties to this agreement upon the occurrence of
certain events including, but not limited to, death, disability or bankruptcy.
This agreement terminates on the first to occur of (i) the dissolution of the
Company, (ii) a shareholder becoming the beneficial owner of all of the shares
of Common Stock which are subject to this agreement and (iii) notice of
termination executed by all of the parties to this agreement.
Ira J. Kaufman, a director of the Company, is a Senior Managing
Director of Mesirow Financial, Inc., which served as a placement agent for a
private placement by the Company of its Common Stock in December 1997. Mesirow
received a placement agent fee of $780,000 in connection with such transaction.
In 1997, Near North Insurance Brokerage, Inc. received approximately
$88,000 in commissions earned from insurance premiums paid by the Company to
Near North Insurance Brokerage, Inc. Michael Segal, a director of the Company,
is the President and Chief Executive Officer of Near North Insurance Brokerage,
Inc.
In April 1998, the Company entered into an agreement with Robert
Brzustewicz, Sr. regarding his employment with the Company ("Brzustewicz
Agreement"). Pursuant to the Brzustewicz Agreement, the Company and Mr.
Brzustewicz agreed to accelerate the expiration of Mr. Brzustewicz' term of
employment in consideration for the payment of $600,000. The Company also agreed
to provide health insurance to Mr. Brzustewicz until March 12, 2001. The Company
agreed that the remaining 100,000 options of options to purchase up to 300,000
shares of the Company's common stock at an exercise price of $6.1875 per share,
which were previously granted to Mr. Brzustewicz, shall fully vest as of the
date of the Brzustewicz Agreement, and be exercisable through March 12, 2006.
Mr. Brzustewicz also has chosen to not stand for re-election as a director of
the Company. Pursuant to the Brzustewicz Agreement, Mr. Brzustewicz is subject
to the non-competition and non-solicitation provisions of his employment
agreement until March 12, 2003.
In April 1998, the Company entered into an agreement with Glen M. Nast
regarding his employment with the Company ("Nast Agreement"). Pursuant to the
Nast Agreement, the Company and Mr. Nast agreed to accelerate the expiration of
Mr. Nast's term of employment in consideration for the payment of $540,000. The
Company also agreed to provide health insurance to Mr. Nast until March 12,
2001. The Company agreed that the remaining 4,000 options of options to purchase
up to 5,000 shares of the Company's common stock at an exercise price of $8.75
per share, which were previously granted to Mr. Nast, shall fully vest as of the
date of the Nast Agreement, and be exercisable through December 9, 2006.
Pursuant to the Nast Agreement, Mr. Nast is subject to the non-competition and
non-solicitation provisions of his employment agreement until March 12, 2003.
AMENDMENT OF COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE TOTAL AUTHORIZED COMMON STOCK
(Proposal 2)
In March 1998, the Board of Directors proposed and recommended for
adoption by the Company's stockholders an amendment to the Company's Certificate
of Incorporation that would increase the total authorized common stock of the
Company from 60,000,000 shares to 100,000,000 shares. No change will be made to
the number of authorized shares of Preferred Stock. The Company's stockholders
are asked to approve this amendment.
The proposed amendment provides that paragraph A of Article Four of the
Company's Restated Certificate of Incorporation be amended to read in its
entirety as follows:
"A.The Corporation shall have authority to issue the following classes of stock,
in the number of shares and at the par value as indicated opposite the name of
the class:
16
<PAGE>
The proposed amendment provides that paragraph A of Article Four of the
Company's Restated Certificate of Incorporation be amended to read in its
entirety as follows:
"A. The Corporation shall have authority to issue the following
classes of stock, in the number of shares and at the par value
as indicated opposite the name of the class:
Number of Par Value
Class Shares Authorized Per Share
----------------- ----------------- --------------
Common Stock 100,000,000 $.001
Preferred Stock 1,000,000 $.01"
As of March 16, 1998, there were 23,294,408 shares of Common Stock
issued and outstanding, and 4,450,000 shares reserved for issuance under the
Company's stock option and stock incentive plans including shares under the 1996
Stock Incentive Plan, the Directors Option Plan and the Anicom, Inc. Associate
Stock Purchase Plan, subject to stockholder approval at the Annual Meeting of
the increase in shares available under the 1996 Stock Incentive Plan and the
Directors Option Plan and the adoption of the Associate Stock Purchase Plan. In
addition, 81,364 shares were reserved for issuance pursuant to certain warrants.
Consequently, 32,174,228 shares of Common Stock were available for future
issuance as of March 31, 1998.
The Board of Directors believes that it is important for the Company to
have available additional authorized but unissued shares of Common Stock to
provide the Company with shares of Common Stock to be used for general corporate
purposes, future acquisitions and equity financings. Approval of the proposed
amendment now will eliminate the delays and expense which otherwise would be
incurred if stockholder approval were required to increase the authorized number
of shares of Common Stock for possible future transactions involving the
issuance of additional shares. The Company does not have any current plan or
intention to issue any of the additional authorized shares of Common Stock for
which approval is sought.
The additional shares of Common Stock may be issued, subject to certain
exceptions, by the Board of Directors at such times, in such amounts and upon
such terms as the Board may determine without further approval of the
stockholders. The Company's current stockholders could suffer a dilution of
voting rights, net income and net tangible book value per share of the Common
Stock as the result of any such issuance of Common Stock depending on the number
of shares issued and the purpose, terms and conditions of the issuance.
The Board of Directors recommends that stockholders vote FOR the
amendment to the Company's Certificate of Incorporation to increase the
Company's number of authorized shares of Common Stock.
AMENDMENT TO 1996 STOCK INCENTIVE PLAN
(Proposal 3)
Subject to the approval of the Company's stockholders at the Annual
Meeting, the Board of Directors has approved an amendment to the 1996 Stock
Incentive Plan to increase the number of shares of common stock reserved for
issuance under the Plan from 1,800,000 to 2,600,000. The 1996 Stock Incentive
Plan, as amended, remains in all other respects identical to the 1996 Stock
Incentive Plan as
17
<PAGE>
originally adopted by the Company's stockholders. A copy of the amendment to the
1996 Stock Incentive Plan is set forth in Appendix A hereto.
Stockholder approval of the amendment to the 1996 Stock Incentive Plan
is sought to continue (i) to qualify the 1996 Stock Incentive Plan, as amended,
under Rule 16b-3 of the Act and thereby render certain transactions under the
1996 Stock Incentive Plan exempt from certain provisions of Section 16 of the
Act and (ii) to qualify certain compensation under the 1996 Stock Incentive Plan
as performance based compensation that is tax deductible without limitation
under Section 162(m) of the Code.
The following is a brief summary of certain features of the 1996 Stock Incentive
Plan, as amended.
General
The 1996 Stock Incentive Plan is a flexible plan that provides the
Option Committee broad discretion to fashion the terms of the awards to provide
eligible participants with stock-based incentives including: (i) non-qualified
and incentive stock options for the purchase of Common Stock, (ii) stock
appreciation rights ("SARs"), (iii) restricted stock ("Restricted Stock"), and
(iv) deferred stock ("Deferred Stock"). The persons eligible to participate in
the 1996 Stock Incentive Plan are officers, directors, employees and consultants
of the Company. It is estimated that approximately 790 persons are eligible to
participate in the 1996 Stock Incentive Plan. The purpose of the 1996 Stock
Incentive Plan is to promote the overall financial objectives of the Company and
its stockholders by motivating eligible participants to achieve long-term growth
in stockholder equity in the Company and to retain the association of these
individuals. The 1996 Stock Incentive Plan will be administered by the Option
Committee. The Option Committee is and shall remain comprised of at least two
independent directors, within the meaning of Rule 16b-3. Members of the Option
Committee will not be eligible to participate in the 1996 Stock Incentive Plan.
The 1996 Stock Incentive Plan provides for the grant of options and
other awards of up to 2,600,000 shares of Common Stock. In the discretion of the
Option Committee, shares of Common Stock subject to an award under such Plan
that remain unissued upon termination of such award, are forfeited or are
received by the Company as consideration for the exercise or payment of an award
shall become available for additional awards under the Plan. In the event of a
stock dividend, stock split, recapitalization, sale of substantially all of the
assets of the Company, reorganization or other similar event, the Option
Committee will adjust the aggregate number of shares of Common Stock subject to
the 1996 Stock Incentive Plan and the number, class and price of such shares
subject to outstanding awards.
The Board of Directors or Option Committee may amend, modify or
discontinue the 1996 Stock Incentive Plan at any time, except if such amendment
(i) impairs the rights of a participant without the participant's consent, or
(ii) would disqualify the Plan from the exemption provided by Rule 16b-3 under
the Act. Amendments may be subject to stockholder approval under applicable law.
Any amendment by the Option Committee is subject to approval of the Board of
Directors. The Option Committee may amend the terms of any award granted under
the Plan (other than to decrease the option price), subject to the consent of a
participant if such amendment impairs the rights of such participant.
18
<PAGE>
Awards Under the 1996 Stock Incentive Plan
Stock Options. The Option Committee shall determine the number of
shares of Common Stock subject to the options to be granted to each participant.
During any three-calendar-year period, options to purchase no more than 400,000
shares of Common Stock may be granted to any participant in the 1996 Stock
Incentive Plan. The Compensation Committee may grant non-qualified stock
options, incentive stock options or a combination thereof to a participant. Only
persons who on the date of the grant are employees of the Company may be granted
options which qualify as incentive stock options. Options granted under the 1996
Stock Incentive Plan will provide for the purchase of Common Stock at prices
determined by the Option Committee, but in no event will an option intended as
an incentive stock option be granted at less than fair market value on the date
of grant. When incentive stock options are granted to an individual who owns
Common Stock possessing more than 10% of the combined voting power of all
classes of stock of the Company, the option price shall not be less than 110% of
fair market value. No non-qualified stock option or incentive stock option shall
be exercisable later than the tenth anniversary date of its grant. In the case
of an incentive stock option granted to a participant who owns more than 10% of
the combined voting power of all classes of stock of the Company or any parent
or subsidiary of the Company, such option shall not be exercisable later than
the fifth anniversary date of its grant. No incentive stock option shall be
granted later than the tenth anniversary date of the adoption of the 1996 Stock
Incentive Plan or its approval by the stockholders of the Company, whichever is
earlier.
Options granted under the 1996 Stock Incentive Plan shall be
exercisable at such times and subject to such terms and conditions set forth in
the 1996 Stock Incentive Plan and as the Option Committee shall determine or
provide in an option agreement. Except as provided in any option agreement,
options may only be transferred under the laws of descent and distribution or,
if permitted without liability under applicable law, pursuant to a qualified
domestic relations order. Otherwise, options shall be exercisable only by the
participant during such participant's lifetime. The option exercise price shall
be payable by the participant (i) in cash, (ii) in shares of Common Stock having
a fair market value equal to the exercise price, (iii) by delivery of evidence
of indebtedness, (iv) by authorizing the Company to retain shares of Common
Stock having a fair market value equal to the exercise price, (v) by "cashless
exercise" as permitted under the Federal Reserve Board's Regulation T, (vi) by
certifying ownership of shares of Common Stock to the satisfaction of the Option
Committee for later delivery to the Company as specified by the Option Committee
or (vii) by any combination of the foregoing. Upon termination of a
participant's employment with the Company due to death or Disability (as defined
in the 1996 Stock Incentive Plan), all of such participant's options shall be
exercisable for the shorter of their remaining term or one year after
termination of employment (or such other period as the Option Committee may
determine). If a participant retires, all of such participant's options shall
terminate, except that, to the extent such options are then exercisable, such
options may be exercised for the shorter of their remaining terms or one year
(or such shorter period as the Option Committee may specify) after termination
of employment. If a participant involuntarily ceases to be an employee of the
Company (other than due to death, Disability or as a result of termination for
Cause), all of such participant's options shall terminate, except that, to the
extent such options are then exercisable, such options may be exercised for the
shorter of their remaining terms or three months (or such shorter period as the
Option Committee may specify) after termination of employment. If a participant
voluntarily ceases to be an employee of the Company (other than due to
retirement) or is terminated as a result of Cause (as defined in the Plan), all
of his outstanding options shall terminate immediately.
Upon receipt of a notice from a participant to exercise an option, the
Option Committee may elect to cash out all or part of any such option by paying
the participant, in cash or shares of Common Stock, the following amount: (i)
the excess of the fair market value of the Common Stock subject to the
unexercised
19
<PAGE>
option over the exercise price of the option, multiplied by (ii) the number of
shares for which the option is to be exercised.
Stock Appreciation Rights. An SAR shall entitle a participant to
receive Common Stock, cash or a combination thereof. If granted in conjunction
with an option, the exercise of an SAR shall require the cancellation of the
corresponding portion of the option. SARs may be granted on or after the
corresponding grant of non-qualified stock options, but only at the same time as
the corresponding grant of incentive stock options. The Option Committee in its
discretion shall determine the number of SARs awarded to a participant, but in
no event shall SARs covering more than 400,000 shares of Common Stock be granted
to any participant during any three-calendar-year period. The Option Committee
shall determine the terms and conditions of any SAR which shall be subject to an
agreement between the Company and the participant. If granted in conjunction
with options, the SAR shall be exercisable for and during the same period as the
corresponding options. Upon exercise of an SAR, a participant shall receive an
amount in cash, shares of Common Stock or both equal to (i) the excess of the
fair market value of the Common Stock over the option price per share (if the
SAR is granted in conjunction with an option), multiplied by (ii) the number of
shares of Common Stock subject to the SAR. In the case of an SAR granted on a
stand alone basis, the Option Committee shall determine in its discretion the
value to be used in lieu of the option price. In no event shall an SAR granted
in tandem with an incentive stock option be exercised unless the fair market
value of the Common Stock at the time of the exercise exceeds the option price.
With respect to participants who are subject to Section 16(b) of the Exchange
Act (generally officers and directors of the Company) ("16(b) Persons"), the
Option Committee may require that the SARs be exercised in compliance with Rule
16b-3, including the restriction that an SAR shall not be exercisable within the
first six months of its term. The transferability and termination provisions of
an SAR are as set forth above with respect to stock options.
Restricted Stock. Restricted Stock awards are grants of shares of
Common Stock, usually without cash consideration from the participant, that are
subject to restrictions on transferability and ownership. The Option Committee
in its discretion shall determine the persons to whom Restricted Stock shall be
granted, the number of shares of Restricted Stock to be granted to each
participant, the periods for which Restricted Stock is restricted, and any other
restrictions to which the Restricted Stock is subject. The Option Committee may
condition the award of Restricted Stock on such performance goals and other
criteria as it may determine. The terms and conditions of the Restricted Stock
shall be confirmed in and subject to an agreement between the Company and the
participant. During the restriction period, the Option Committee may require
that the certificates evidencing the Restricted Stock be held by the Company.
During the restriction period, the Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered. Other than the foregoing
restrictions, the participant shall have all the rights of a holder of Common
Stock. If a restriction relates to a period of employment and the participant's
employment terminates during the restriction period due to death or Disability,
the restrictions on the Restricted Stock shall lapse. If a participant's
employment terminates for any other reason, unless otherwise agreed by the
Option Committee, the remaining Restricted Stock shall be forfeited by the
participant to the Company.
Deferred Stock. Deferred Stock awards are grants of shares of Common
Stock, usually without cash consideration, that are to be delivered in the
future. The Option Committee in its discretion shall determine the persons to
whom Deferred Stock shall be granted, the number of shares of Deferred Stock to
be granted to each participant, the duration of the period prior to which Common
Stock will be delivered, the conditions under which receipt of the Common Stock
will be deferred, and any other terms and conditions of the granting of the
award. The terms and conditions of the Deferred Stock shall be confirmed in and
subject to an agreement between the Company and the participant. The Option
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Committee may condition the award of Deferred Stock on such performance goals
and criteria as it may determine. During the deferral period, the Deferred Stock
may not be sold, assigned, transferred, pledged or otherwise encumbered. At the
expiration of the deferral period, the Option Committee may deliver to the
participant Common Stock, cash equal to the fair market value of such Common
Stock or a combination thereof for the shares covered by the Deferred Stock
awards. Cash dividends on Common Stock subject to Deferred Stock awards shall be
automatically deferred and reinvested in Deferred Stock, and stock dividends on
Common Stock subject to Deferred Stock awards shall be paid in the form of
Deferred Stock. If a participant's employment terminates during the deferred
period due to death or Disability, the deferral restrictions shall lapse. If a
participant's employment terminates for any other reason, unless otherwise
agreed by the Option Committee, the rights to the shares still covered by
Deferred Stock awards shall be forfeited by the participant.
Changes in Control
Upon the occurrence of a Change in Control (as defined in the 1996
Stock Incentive Plan), the following shall occur: (i) all unexercised stock
options and SARs shall become immediately exercisable, and (ii) all restrictions
on the Restricted Stock and deferral limitations on the Deferred Stock shall
lapse.
Discussion of Federal Income Tax Consequences
The following summary of tax consequences with respect to the awards
granted under the 1996 Stock Incentive Plan is not comprehensive and is based
upon laws and regulations in effect as of March 1, 1998. Such laws and
regulations are subject to change.
Non-Qualified Stock Options
Participant. Generally, a Participant receiving a non-qualified stock
option does not realize any taxable income for Federal income tax purposes at
the time of grant. Upon exercise of such Option, the excess of the fair market
value of the shares of Common Stock subject to the non-qualified stock option on
the date of exercise over the exercise price will be taxable to the Participant
as ordinary income. The Participant will have a capital gain (or loss) upon the
subsequent sale of the shares of Common Stock received upon exercise of the
option in an amount equal to the sale price reduced by the fair market value of
the shares of Common Stock on the date the option was exercised. The holding
period for purposes of determining whether the capital gain (or loss) is a
long-term or short-term capital gain (or loss) will commence on the date the
non-qualified stock option is exercised.
Tax Withholding. The amount of income that is taxable to a Participant
upon the exercise of a non-qualified stock option will be treated as
compensation income. Accordingly, such amount will be subject to applicable
withholding of Federal, state and local income taxes and Social Security taxes.
If the Participant Uses Company Stock to Pay the Option Exercise Price.
If the Participant who exercises a non-qualified stock option pays the exercise
price by tendering shares of Common Stock and receives back a larger number of
shares of Common Stock, the Participant will realize taxable income in an amount
equal to the fair market value of the additional shares of Common Stock received
on the date of exercise, less any cash paid in addition to the shares of Common
Stock tendered. Upon a subsequent sale of the Common Stock received, the number
of shares of Common Stock equal to the number delivered as payment of the
exercise price will have a tax basis equal to that of the shares of Common Stock
originally tendered. The additional newly-acquired shares of Common Stock
obtained upon exercise of the non-qualified stock option will have a tax basis
equal to the fair market value of such shares on the date of exercise.
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The Company. The Company generally will be entitled to a tax deduction
in the same amount and in the same year in which the Participant recognizes
ordinary income resulting from the exercise of a non-qualified stock option.
Incentive Stock Options
Participant. Generally, a Participant will not realize any taxable
income for Federal income tax purposes at the time an Incentive Stock Option is
granted. Upon exercise of the Incentive Stock Option, the Participant will incur
no income tax liability (other than pursuant to the alternative minimum tax, if
applicable). If the Participant transfers shares of Common Stock received upon
the exercise of an Incentive Stock Option within a period of two years from the
date of grant of such Incentive Stock Option or one year from the date of
receipt of the shares of Common Stock (the "Holding Period"), then, in general,
the Participant will have taxable ordinary income in the year in which the
transfer occurs in an amount equal to the excess of the fair market value on the
date of exercise over the exercise price, and will have long-term or short-term
capital gain (or loss) in an amount equal to the difference between the sale
price of the shares of Common Stock and the fair market value of such shares on
the date of exercise. However, if the sale price is less than the fair market
value of such shares on the date of exercise, the ordinary income will be not
more than the difference between the sale price and the exercise price. If the
Participant transfers the shares of Common Stock after the expiration of the
Holding Period, he or she will recognize income taxable at the capital gains tax
rate on the difference between the sale price and the exercise price.
Tax Withholding. If the Participant makes any disqualifying disposition
prior to the completion of the Holding Period with respect to shares of Common
Stock acquired upon the exercise of an Incentive Stock Option granted under the
Plan, then such Participant must remit to the Company an amount sufficient to
satisfy all Federal, state, and local withholding taxes thereby incurred.
If the Participant Uses Common Stock to Pay the Option Exercise Price.
If a Participant who exercises an Incentive Stock Option pays the option
exercise price by tendering shares of Common Stock, such Participant will
generally incur no income tax liability (other than pursuant to the alternative
minimum tax, if applicable), provided any Holding Period requirement for the
tendered shares is met. If the tendered stock was subject to the Holding Period
requirement when tendered, payment of the exercise price with such stock
constitutes a disqualifying disposition. If the Participant pays the exercise
price by tendering shares of Common Stock and the Participant receives back a
larger number of shares, under proposed Treasury Regulations, the Participant's
basis in the number of shares of newly acquired stock equal to the number of the
shares delivered as payment of the exercise price will have a tax basis equal to
that of the shares originally tendered, increased, if applicable, by any amount
included in the Participant's gross income as compensation. The additional newly
acquired shares obtained upon exercise of the Option will have a tax basis of
zero. All Common Stock acquired upon exercise will be subject to the Holding
Period requirement, including the number of shares equal to the number tendered
to pay the exercise price. Any disqualifying disposition will be deemed to be a
disposition of Common Stock with the lowest basis.
The Company. The Company is not entitled to a tax deduction upon grant,
exercise or subsequent transfer of shares of Common Stock acquired upon exercise
of an Incentive Stock Option, provided that the Participant holds the shares
received upon the exercise of such Option for the Holding Period. If the
Participant transfers the Common Stock acquired upon the exercise of an
Incentive Stock Option prior to the end of the Holding Period, the Company
generally is entitled to a deduction at the time the Participant recognizes
ordinary income in an amount equal to the amount of ordinary income recognized
by such Participant as a result of such transfer.
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Stock Appreciation Rights
Upon the grant of a Stock Appreciation Right ("SAR"), the Participant
will not recognize any taxable income and the Company will not be entitled to a
deduction. Upon the exercise of an SAR, the consideration paid to the
Participant upon exercise of the SAR will constitute compensation taxable to the
Participant as ordinary income. In determining the amount of the consideration
paid to the Participant upon the exercise of an SAR for the Common Stock, the
fair market value of the shares on the date of exercise is used, except that in
the case of an Insider, the fair market value will be determined six months
after the date on which the Common Stock is transferred unless such Participant
makes an election under Section 83(b) of the Code to be taxed based on the fair
market value on the date of exercise. The Company in computing its Federal
income tax generally will be entitled to a deduction in an amount equal to the
compensation taxable to the Participant.
Other Awards
With respect to other Awards granted under the Plan that result in the
payment or issuance of cash or shares of Common Stock or other property that is
either not restricted as to transferability or not subject to a substantial risk
of forfeiture, the Participant must generally recognize ordinary income equal to
the cash or the fair market value of shares of Common Stock or other property
received. Thus, deferral of the time of payment or issuance will generally
result in the deferral of the time the Participant will be liable for income
taxes with respect to such payment or issuance. The Company generally will be
entitled to a deduction in an amount equal to the ordinary income received by
the Participant. With respect to Awards involving the issuance of shares of
Common Stock or other property that is restricted as to transferability and
subject to a substantial risk of forfeiture, the Participant must generally
recognize ordinary income equal to the fair market value of the shares of Common
Stock or other property received at the first time the shares of Common Stock or
other property become transferable or not subject to a substantial risk of
forfeiture, whichever occurs earlier. The Company generally will be entitled to
a deduction in an amount equal to the ordinary income received by the
Participant. A Participant may elect under Section 83(b) of the Code to be taxed
at the time of receipt of shares of Common Stock or other property rather than
upon lapse of restrictions on transferability or the substantial risk of
forfeiture, but if the Participant subsequently forfeits such shares or property
the Participant would not be entitled to any tax deduction, including a capital
loss, for the value of the shares or property on which he previously paid tax.
The Participant must file such election with the Internal Revenue Service within
30 days of the receipt of the shares of Common Stock or other property.
Parachute Payments
In the event any payments or rights accruing to a Participant upon a
Change in Control, or any other payments Awarded under the Plan, constitute
"parachute payments" under Section 280G of the Internal Revenue Code, depending
upon the amount of such payments accruing and the other income of the
Participant from the Company, the Participant may be subject to an excise tax
(in addition to ordinary income tax) and the Company may be disallowed a
deduction for the amount of the actual payment.
The Board of Directors recommends that stockholders vote FOR the amendment to
the Company's 1996 Stock Incentive Plan.
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AMENDMENT TO THE AMENDED AND RESTATED
ANICOM, INC. 1995 DIRECTORS STOCK OPTION PLAN
(Proposal 4)
Subject to the approval of the Company's stockholders at the Annual
Meeting, the Board of Directors approved an amendment to the Directors Option
Plan to increase the number of shares of common stock reserved for issuance
under the Directors Option Plan from 300,000 to 450,000. A copy of the amendment
to the Directors Option Plan is set forth in Appendix B hereto.
Stockholder approval of the Directors Option Plan is sought to continue
(i) to qualify the Directors Option Plan, as amended, under Rule 16b-3 of the
Act and thereby render certain transactions under the Directors Option Plan
exempt from certain provisions of Section 16 of the Act and (ii) to qualify the
Directors Option Plan as performance based compensation that is tax deductible
without limitation under Section 162(m) of the Code.
The Board of Directors originally adopted the Directors Option Plan,
effective January 20, 1995, in order to provide for the grant of options to
acquire shares of the Company's Common Stock to the non-employee directors of
the Company. In adopting the Directors Option Plan, the Board of Directors noted
that many other companies had adopted equity plans to compensate their
non-employee directors and that such plans appropriately compensate non-employee
directors. The Board continues to believe that equity plans are appropriate to
compensate non-employee directors and to align the interests of the non-employee
directors with the interests of the Company's stockholders.
The Directors Option Plan is administered by the Option Committee of
the Company's Board of Directors. The following is a brief summary of certain
features of the Directors Option Plan, as amended.
Terms of the Directors Option Plan
The Directors Option Plan provides for the issuance of options to
purchase up to 450,000 shares of Common Stock, which shares are reserved and
available for purchase upon the exercise of options granted under the Directors
Option Plan. Only directors who are not employees or officers of the Company are
eligible to participate in the Directors Option Plan. There currently are six
non-employee directors eligible to participate in the Directors Option Plan.
Each non-employee director who becomes a director of the Company in the
future will be granted an option to purchase 10,000 shares of the Company's
Common Stock on the date he or she becomes a director of the Company (the
"Initial Grant Date"). Beginning on the date of the Company's 1997 annual
meeting of stockholders, or the Initial Grant Date in the case of a new
director, and on the date of each annual meeting of stockholders thereafter,
each non-employee director who is still a director on such date will be granted
an option to purchase 10,000 shares of Common Stock. Each non-employee director
will be granted an Option to purchase 1,000 shares of Common Stock for each
Board meeting that such director attends. The total number of shares for which
options may be granted to a director under the Directors Option Plan shall not
exceed 75,000 shares. If there are not sufficient shares remaining and available
to all non-employee directors eligible for an automatic grant at the time at
which an automatic grant would otherwise be made, then each eligible
non-employee director shall receive an option to purchase a pro rata number of
shares.
All options granted under the Directors Option Plan are immediately
exercisable on the date of grant. If any options under the Directors Option Plan
are surrendered before exercise or lapse without exercise, in whole or in part,
the shares reserved for grant will revert to the status of available shares. All
options expire on the earlier to occur of (a) seven years following the grant
date and (b) the termination of the non-employee director's directorship for
"Cause" (as defined in the Directors Option Plan). In the event
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of a non-employee director's death or "Disability" (as defined in the Directors
Option Plan), any vested, unexpired and unexercised option granted to such
non-employee Director shall become immediately exercisable for a period of one
(1) year (or such other period as the Option Committee may specify) or until the
expiration of the option period, whichever is shorter.
Except as provided in any option agreement or as determined by the
Option Committee, options may only be transferred under the laws of descent and
distribution or, if permitted without liability under applicable law, pursuant
to a qualified domestic relations order. Otherwise, options shall be exercisable
only by the director during such director's lifetime. The option exercise price
is payable by the director (i) in cash, (ii) in shares of Common Stock having a
fair market value equal to the exercise price, (iii) by delivery of evidence of
indebtedness, (iv) by authorizing the Company to retain shares of Common Stock
having a fair market value equal to the exercise price, (v) by "cashless
exercise" as permitted under the Federal Reserve Board's Regulation T, or (vi)
by any combination of the foregoing.
In the event of any stock dividends, stock splits, combinations,
recapitalizations, reorganizations, liquidations or similar transactions, the
Company will appropriately adjust the number of shares available under the
Directors Option Plan, the number of shares covered by outstanding options and
the exercise prices of such outstanding options.
The Board of Directors or the Option Committee may amend the Directors
Option Plan, subject to stockholder approval if required by applicable law. No
amendment may impair the rights of a holder of an outstanding option without the
consent of such holder, nor may an amendment be made in any manner which fails
to comply with Rule 16b-3(c)(2)(ii)(B) under the Act. In addition, any amendment
by the Option Committee is subject to approval by the Board of Directors.
Discussion of Federal Income Tax Consequences
The following summary of tax consequences with respect to options under
the Directors Option Plan is not comprehensive and is based upon laws and
regulations in effect on March 1, 1998. Such laws and regulations are subject to
change.
A director granted an option under the Directors Option Plan does not
recognize taxable income upon grant, and the Company is not entitled to a
deduction for Federal income tax purposes upon such grant. Upon exercise of an
option, participants generally will be taxed at ordinary income tax rates on the
difference between the exercise price of the option and the fair market value of
the Common Stock issued thereunder. In determining the amount of the difference,
the fair market value will be determined on the date of exercise. The Company
will receive a corresponding deduction for the amount of income recognized by a
participant upon exercise of an option. Any gain or loss realized upon the
subsequent sale of the Common Stock issued upon exercise of the option (measured
by the difference between the fair market value, determined or utilized by the
optionee as described above, and the sale price) will be taxed at either
long-term or short-term capital gain (or loss) rates, depending on the selling
stockholder's holding period. Such subsequent sale would have no tax
consequences for the Company.
The Board of Directors recommends that stockholders vote FOR the amendment to
the Company's Amended and Restated Directors Stock Option Plan.
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APPROVAL OF THE
ANICOM, INC. 1998 ASSOCIATE STOCK PURCHASE PLAN
(Proposal 5)
Subject to the approval of the Company's stockholders at the Annual
Meeting, the Board of Directors has adopted the Anicom, Inc. 1998 Associate
Stock Purchase Plan (the "Stock Purchase Plan"), effective as of July 1, 1998.
The Company wishes to provide a stock purchase plan within the meaning of
Section 423 of the Code, for its employees and the employees of its subsidiaries
to encourage them to hold a proprietary interest in the Company and to provide
them with an additional incentive to work for the long-term success of the
Company. Stockholders are being asked to approve the adoption of the Stock
Purchase Plan (i) to qualify the Stock Purchase Plan under Section 423 of the
Code and (ii) to qualify the Stock Purchase Plan pursuant to Rule 16b-3 under
the Act and thereby render certain transactions under the Stock Purchase Plan
exempt from Section 16 of the Act. A copy of the Stock Purchase Plan is set
forth in Appendix C hereto.
The Stock Purchase Plan is administered by a committee of the Board of
Directors made up of directors who are not eligible to participate in the Stock
Purchase Plan and have not been so eligible for at least one year prior to
serving on the committee. At present, that committee is the Compensation
Committee of the Board of Directors (the "Stock Purchase Plan Committee"). The
Stock Purchase Plan Committee has plenary discretion and control respecting the
administration of the Stock Purchase Plan. The following brief summary of
certain features of the Stock Purchase Plan is qualified in its entirety by
reference to the full text of the Stock Purchase Plan, which is set forth in the
attached Appendix C.
Terms of the Stock Purchase Plan
Employees eligible to participate in the Stock Purchase Plan ("Eligible
Employees") consist of all persons employed by the Company and any subsidiaries
which have adopted the Stock Purchase Plan with the consent of the Board of
Directors. The Stock Purchase Plan allows the Stock Purchase Plan Committee to
exclude from participation any employee (i) who has accrued less than a minimum
period of service with the Company as established by the Stock Purchase Plan
Committee (but not to exceed 2 years), (ii) whose customary employment is for 20
hours or less per week, or (iii) whose customary employment is for not more than
5 months during a calendar year.
Except for the first six month period which will begin on July 1, 1998,
and end on December 31, 1998, the Stock Purchase Plan will operate on an annual
basis from January 1 to the last day of the next following December (such period
to be known as a "Plan Year"). In order to be eligible to participate during a
Plan Year, an Eligible Employee must file the required enrollment and payroll
deduction authorization forms prior to a specified due date known as the "Grant
Date." The Stock Purchase Plan Committee currently anticipates that Grant Dates
will occur on July 1, 1998, and October 1, 1998, for the first Plan Year, and
four times per year thereafter (generally, as of January 1, April 1, July 1 and
October 1); however, the determination of Grant Dates is in the complete
discretion of the Stock Purchase Plan Committee.
Eligible Employees participate by electing payroll deductions, with all
such deductions credited to an account, but the Company will not segregate any
assets relating to the account and all assets may be used
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for any lawful corporate purpose of the Company, and all Eligible Employees will
be unsecured creditors of the Company. Payroll deductions held by the Company
will be held without interest for participants. The Stock Purchase Plan
Committee may determine what elements of compensation will be eligible for
payroll deductions but will generally include base salary, commissions, overtime
pay, shift premiums and shift differential pay.
There generally will be one annual purchase date on the last day of
each Plan Year (to be known as the "Exercise Date"); however, the Stock Purchase
Plan Committee is authorized to determine alternate dates. Any period between
the dates the shares will be purchased is known as the "Option Period." This is
the period during which the amounts (not to exceed $8,000 per participant for
any Option Period) will be deducted from payroll before being applied to
purchase the Common Stock. The Option Period will be determined by the Stock
Purchase Plan Committee and generally will be for a period of 12, 9, 6 or 3
months, with an Option Period ending on the last day of each Plan Year but
Option Periods may be as long as 27 months. On each Exercise Date, participants'
payroll deductions credited to their accounts will be applied automatically to
the purchase of Common Stock at a price per share which is the lesser of
eighty-five percent (85%) of the fair market value of the Common Stock on the
Grant Date or on the Exercise Date. The fair market value on the relevant day is
the closing price of the Common Stock on the Nasdaq National Market on the date
in question (or if there has been no trading on that date, then on the first
previous day on which there was trading). The number of shares actually
purchasable per participant for the quarterly period will be the number of whole
shares obtained by dividing the amount in such participant's account by the
purchase price. Any amounts remaining will be held for the purchase of Common
Stock in the next Option Period.
No participant may purchase shares of Common Stock in any calendar year
under the Stock Purchase Plan with an aggregate fair market value (determined as
of the Grant Date) in excess of $25,000. Also, as of each Grant Date the Stock
Purchase Plan Committee may further set a maximum number of shares of Common
Stock available for purchase by any one participant or in the aggregate by all
participants. As of any Grant Date the Stock Purchase Plan Committee shall
determine the maximum number of shares of Common Stock that may be purchased as
of the Grant Date, and absent any such other determination by the Stock Purchase
Plan Committee, the maximum number shall be $25,000 divided by the lowest
closing price reported on the principal exchange or other market on which the
Common Stock was traded during the 12 consecutive month period ending
immediately preceding the Grant Date. There is also a maximum number of 200,000
shares of Common Stock available under the Stock Purchase Plan. If participant
contributions are such that the total number of shares of Common Stock to be
purchased would exceed the Stock Purchase Plan maximum, then the number of
shares to be purchased by any participant shall be reduced in the proportion
that the participant's payroll deductions bear to the total of all payroll
deductions (and any excess payroll deductions will be credited to the
participant for the next succeeding period).
If a participant dies, no further payroll deductions may be made under
the Stock Purchase Plan; however, a participant's representative may make a
single sum payment (the amount of which will be determined by the Stock Purchase
Plan Committee) equal to what would have been deducted had the participant
continued in employment through the conclusion of the then current Option
Period. Alternatively, the participant's representative may withdraw the
participant's contributions to the Stock Purchase Plan by notifying the Stock
Purchase Plan Committee, in writing, prior to the next Exercise Date, in which
case no shares of Common Stock will be purchased. If the participant's
representative does not withdraw the participant's previous contributions, then
such contributions will be used to purchase Common Stock.
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If a participant's employment with the Company terminates as a result
of disability or retirement, no further payroll deductions may be made under the
Stock Purchase Plan; however, such participant may make a single sum payment
(the amount of which will be determined by the Stock Purchase Plan Committee)
equal to what would have been deducted had the participant continued in
employment through the next Exercise Date. Alternatively, the participant may
withdraw his or her contributions to the Plan prior to the next Exercise Date,
in which case no shares of Common Stock will be purchased. If the participant
does not withdraw the previous contributions, then such contributions will be
used to purchase Common Stock.
If a participant terminates his or her employment with the Company
(other than as a result of death, disability or retirement), then the amount
previously withheld from the participant's pay will be returned to the
participant and no shares of Common Stock will be purchased for the participant.
A Change in Control of the Company will generally be treated as an
Exercise Date. A "Change in Control" is deemed to occur in the event of certain
acquisitions of 25% or more of (the combined voting power of) the Company's
outstanding Common Stock, certain changes of a majority of the Board of
Directors, or certain qualifying reorganizations, mergers, consolidations or
sales of the Company's assets.
At any time during an Option Period, a participant may cancel his or
her payroll deductions and receive a refund of the amounts previously deducted.
A participant may also suspend payroll deductions, but prior payroll deductions
shall not be distributed.
The shares of Common Stock to be offered shall be authorized but
unissued shares. In the event there is any change in the shares of the Company
by reason of stock dividends, stock splits, recapitalizations, or combinations
or exchanges of shares, or otherwise, appropriate adjustments in the number of
shares available for purchase, as well as the shares subject to purchase rights
and the purchase price thereof, shall be made, but no fractional shares shall be
subject to purchase and, upon any adjustment, each purchase right shall be
adjusted down to the nearest full share.
No person will be able to purchase stock under the Stock Purchase Plan,
if such person, immediately after the purchase, would own stock possessing 5% or
more of the total combined voting power or value of all classes of stock of the
Company. Participants do not have the right to assign or transfer their rights
to purchase the Common Stock under the Stock Purchase Plan.
The Board has authority to amend the Stock Purchase Plan, subject to
the limitation that no amendment may be made without stockholder approval to the
extent such approval is required by law (including Section 423 of the Code). The
Board may at any time suspend or terminate the Stock Purchase Plan, but no such
action may adversely affect the participants' rights and obligations with
respect to purchase rights at that time outstanding under the Stock Purchase
Plan.
Discussion of Federal Income Tax Consequences
The following summary of tax consequences with respect to awards under
the Stock Purchase Plan is not comprehensive and is based upon laws and
regulations in effect on April 2, 1998. Such laws and regulations are subject to
change.
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The Stock Purchase Plan is intended to qualify as an employee stock
purchase plan under Section 423 of the Code. Under present law, a participant
will not be deemed to have received any compensation for Federal income tax
purposes on either a Grant Date or Exercise Date.
If a participant's account is applied to purchase Common Stock while
the participant is an employee and the participant disposes (for example, by a
sale, exchange, gift or transfer of legal title, subject to narrow exceptions)
of the Common Stock purchased under the Stock Purchase Plan either within two
years after the Grant Date or within one year after the Exercise Date (a
"disqualifying disposition"), the excess of the fair market value of the Common
Stock on the Exercise Date over the exercise price of the Common Stock under the
Stock Purchase Plan will be taxable as ordinary income (even if there is no gain
realized at the time of the disposition) and, for purposes of computing gain or
loss on the disposition, the participant's cost basis will be increased by the
amount of the ordinary income recognized. Any additional gain or loss to be
recognized upon disposition will be a capital gain or loss.
If a participant's account is applied to purchase Common Stock while
the participant is an employee and the employee disposes of Common Stock
purchased under the Stock Purchase Plan two years or more after the Grant Date
and one year or more after the Exercise Date (a "qualifying disposition"), the
tax treatment will be different. The participant must recognize as ordinary
income the lesser of (a) any excess of the fair market value of the Common Stock
on the Grant Date over the exercise price on the Grant Date; and (b) any excess
of the fair market value of the Common Stock on the date the stock is disposed
of over the amount paid for the stock. The participant's basis in the Common
Stock is increased by the amount of ordinary income recognized. The difference
between the fair market value on the date of disposition and the adjusted basis
(i.e., basis increased by ordinary income recognized) will be taxable as a
capital gain. If the Common Stock is sold at a price below the exercise price,
the loss will be treated as a capital loss.
The Company will not be entitled to a deduction for any difference
between the fair market value of the Common Stock and the purchase price for the
Common Stock under the Stock Purchase Plan, except to the extent it is taxed to
the participant as ordinary income upon a disqualifying disposition and the
Company makes any necessary and appropriate tax withholding arrangements.
Different dates for recognizing gain may apply to participants who are subject
to Section 16(b) of the Securities and Exchange Act.
Stock Purchase Plan Benefits
It is not possible to determine the number of shares of Common Stock
that will in the future be purchased under the Stock Purchase Plan by any
particular individual.
The Board of Directors recommends that stockholders vote FOR approval of the
Anicom, Inc. Stock Purchase Plan.
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INDEPENDENT AUDITORS
The Company's Board of Directors, upon recommendation of the Audit
Committee, has selected Coopers & Lybrand to audit the financial statements of
the Company for the year ended December 31, 1998. It is expected that
representatives of Coopers & Lybrand will be present at the Annual Meeting and
available to respond to questions. Such representatives will be given an
opportunity to make a statement if they desire to do so.
OTHER MATTERS
Solicitation
The cost of soliciting Proxies in the accompanying form will be borne
by the Company. In addition to the solicitation of Proxies by the use of the
mails, certain officers and associates (who will receive no compensation
therefor in addition to their regular salaries) may be used to solicit Proxies
personally and by telephone and telegraph. In addition, banks, brokers and other
custodians, nominees and fiduciaries will be requested to forward copies of the
Proxy material to their principals and to request authority for the execution of
Proxies. The Company will reimburse such persons for their expenses in so doing.
In addition, the Company has engaged MacKenzie Partners, New York, New York to
assist in soliciting Proxies for a fee of approximately $5,000 plus reasonable
out of pocket expenses.
Proposals of Stockholders
Proposals of stockholders intended to be considered at the 1999 annual
meeting of stockholders must be received by the Corporate Secretary of the
Company no earlier than November 15, 1998 and no later than December 15, 1998.
Stockholder List
A list of stockholders entitled to vote at the Annual Meeting, arranged
in alphabetical order, showing the address of and number of shares registered in
the name of each stockholder, will be open to the examination of any
stockholder, for any purpose germane to the Annual Meeting, during ordinary
business hours, for a period of at least ten days prior to the Annual Meeting
and continuing through the date of the Annual Meeting, at the principal offices
of Harris Trust & Savings Bank, 111 West Monroe Street, Chicago, Illinois 60603.
Annual Report on Form 10-K
The Company will furnish without charge to each person whose Proxy is
being solicited, upon request of any such person, a copy of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 as filed with
the Securities and Exchange, including the financial statements and the
schedules thereto. Such Form 10-K was filed with the Securities and Exchange
Commission on March 30, 1998. Requests for copies of such report should be
directed to Anicom, Inc., Attention: Corporate Secretary, 6133 North River Road,
Suite 1000, Rosemont, Illinois 60018-5171.
Incorporation by Reference
No documents are incorporated herein by reference.
30
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Please date, sign and return the enclosed Proxy at your earliest
convenience in the enclosed envelope. No postage is required for mailing in the
United States. A prompt return of your Proxy will be appreciated.
By Order of the Board of Directors,
/s/ DAVID R. SHEVITZ
David R. Shevitz, Corporate Secretary
31
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APPENDIX A
AMENDMENT TO THE
1996 STOCK INCENTIVE PLAN
RESOLVED, that the 1996 Stock Incentive Plan (the "Plan") be and hereby
is amended, subject to and effective upon stockholders' approval at the Annual
Meeting of Stockholders on May 20, 1998, as follows:
Section 4.1 of the Plan is amended to read as follows:
"4.1 Number of Shares. Subject to adjustment under Section
4.6, the total number of shares of Common Stock reserved and available
for distribution pursuant to Options under the Plan shall be 2,600,000
shares of Common Stock authorized for issuance on the Effective Date.
Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares."
Except as herein amended, the Plan shall remain in full force and effect.
ANICOM, INC.
By:/s/ SCOTT C. ANIXTER
------------------------------
Scott C. Anixter
Chief Executive Officer
32
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APPENDIX B
AMENDMENT TO THE AMENDED AND RESTATED ANICOM, INC.
1995 DIRECTORS STOCK OPTION PLAN
RESOLVED, that the Amended and Restated Anicom, Inc. 1995 Directors
Stock Option Plan (the "Plan") be and hereby is amended, subject to and
effective upon stockholders' approval at the Annual Meeting of Stockholders on
May 20, 1998, as follows:
Section 4.1 of the Plan is amended to read as follows:
"4.1 Number of Shares. Subject to adjustment under Section 4.6,
the total number of shares of Common Stock reserved and available for
distribution pursuant to Options under the Plan shall be 450,000 shares
of Common Stock authorized for issuance on the Effective Date. Such
shares may consist, in whole or in part, of authorized and unissued
shares or treasury shares."
Except as herein amended, the Plan shall remain in full force and effect.
ANICOM, INC.
By:/s/ SCOTT C. ANIXTER
------------------------------
Scott C. Anixter
Chief Executive Officer
33
<PAGE>
APPENDIX C
ANICOM, INC.
1998 ASSOCIATE
STOCK PURCHASE PLAN
(Adopted effective July 1, 1998)
34
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ANICOM, INC.
1998 ASSOCIATE
STOCK PURCHASE PLAN
(Adopted effective July 1, 1998)
TABLE OF CONTENTS
Page
----
ARTICLE I ESTABLISHMENT AND PURPOSE.................................... 1
1.1 Purpose.................................................... 1
ARTICLE II DEFINITIONS.................................................. 1
2.1 Account.................................................... 1
2.2 Agreement or Option Agreement.............................. 1
2.3 Board of Directors or Board................................ 2
2.4 Code or Internal Revenue Code.............................. 2
2.5 Committee.................................................. 2
2.6 Common Stock............................................... 2
2.7 Company.................................................... 2
2.8 Continuous Service......................................... 2
2.9 Contribution Rate.......................................... 2
2.10 Disability................................................. 2
2.11 Eligible Employee.......................................... 3
2.12 Exercise Date.............................................. 3
2.13 Exchange Act............................................... 3
2.14 Fair Market Value.......................................... 3
2.15 Grant Date................................................. 3
2.16 Option..................................................... 4
2.17 Option Period.............................................. 4
2.18 Option Price............................................... 4
2.19 Participant................................................ 4
2.20 Plan....................................................... 4
2.21 Plan Year.................................................. 4
2.22 Representative............................................. 4
2.23 Retirement................................................. 4
2.24 Securities Act............................................. 5
2.25 Subsidiary................................................. 5
2.26 Termination of Employment.................................. 5
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Article III ADMINISTRATION............................................... 5
3.1 Committee Structure and Authority.......................... 5
ARTICLE IV STOCK PROVISIONS............................................. 8
4.1 Number of Shares Subject to the Plan....................... 8
4.2 Release of Shares.......................................... 8
4.3 Restrictions on Shares..................................... 8
4.4 Stockholder Rights......................................... 9
4.5 Stock Valuation............................................ 9
4.6 Custodian.................................................. 9
ARTICLE V ELIGIBILITY; OPTION PROVISIONS.............................. 10
5.1 Eligibility............................................... 10
5.2 Grant of Options.......................................... 10
5.3 Option Period............................................. 10
5.4 Option Price.............................................. 11
5.5 Contribution Rate......................................... 11
5.6 Purchase of Shares........................................ 12
5.7 Cancellation of Options................................... 12
5.8 Terminated Employees...................................... 12
5.9 Deceased Employees........................................ 13
5.10 Disabled or Retired Employees............................. 13
5.11 Limitations............................................... 13
5.12 Nonassignability.......................................... 13
ARTICLE VI GENERAL PROVISIONS APPLICABLE
TO THE PLAN.............................................. 14
6.1 Termination of Plan....................................... 14
6.2 Investment Representation................................. 14
6.3 Effect of Certain Changes................................. 13
6.4 Withholding............................................... 18
6.5 No Company Obligation..................................... 19
6.6 Committee Discretion...................................... 19
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ARTICLE VII MISCELLANEOUS............................................... 19
7.1 Indemnification of the Board and
Committee............................................... 19
7.2 Mitigation of Excise Tax.................................. 20
7.3 Interpretation............................................ 20
7.4 Governing Law............................................. 20
7.5 Limitations on Liability.................................. 20
7.6 Validity.................................................. 20
7.7 Assignment................................................ 21
7.8 Captions.................................................. 21
7.9 Amendments................................................ 21
7.10 Entire Agreement.......................................... 21
7.11 Rights with Respect to Continuance of
Employment.............................................. 21
7.12 Options for Shares in Substitution for
Stock Options Granted by Other
Corporations............................................ 22
7.13 Procedure for Adoption.................................... 22
7.14 Procedure for Withdrawal.................................. 22
7.15 Expenses.................................................. 22
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ANICOM, INC.
1998 ASSOCIATE
STOCK PURCHASE PLAN
(Adopted effective July 1, 1998)
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Purpose. The Anicom, Inc. 1998 Associate Stock Purchase Plan (the
"Plan") is hereby established effective July 1, 1998 by Anicom, Inc. The
adoption of the Plan is expressly conditioned upon the Plan's approval by the
security holders of Anicom, Inc. within twelve (12) months after the date the
Plan is adopted. The purpose of the Plan is to promote the overall financial
objectives of the Company and its stockholders by motivating participants in the
Plan to achieve long-term growth in stockholder equity in the Company. The Plan
is intended as an "employee stock purchase plan" within the meaning of Section
423 of the Code, and Options granted hereunder are intended to constitute
options granted under such a plan, and the Plan document and all actions taken
in connection with the Plan shall be constructed consistently with such intent.
ARTICLE II
DEFINITIONS
The following sections of this Article II provide basic definitions of
terms used throughout the Plan, and whenever used therein in the capitalized
form, except as otherwise expressly provided, the terms shall be deemed to have
the following meanings:
2.1 "Account" shall mean the bookkeeping account established on behalf
of a Participant to which shall be credited all contributions paid for the
purpose of purchasing Common Stock under the Plan, and to which shall be charged
all purchases of Common Stock pursuant to the Plan. The Company shall have
custody of such Account.
2.2 "Agreement" or "Option Agreement" means, individually or
collectively, any enrollment and withholding agreement entered into pursuant to
the Plan. An Agreement shall be the right of the Company to withhold from
payroll amounts to be applied to purchase Common Stock.
<PAGE>
2.3 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.4 "Code" or "Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, and any subsequent Internal Revenue Code. If there is a
subsequent Internal Revenue Code, any references herein to Internal Revenue Code
sections shall be deemed to refer to comparable sections of any subsequent
Internal Revenue Code.
2.5 "Committee" means the person or persons appointed by the Board of
Directors to administer the Plan, as further described in the Plan.
2.6 "Common Stock" means the shares of the Common Stock of the Company,
$.001 par value per share, whether presently or hereafter issued, and any other
stock or security resulting from adjustment thereof as described in Section 6.3.
2.7 "Company" means Anicom, Inc. and includes any successor or assignee
corporation or corporations into which the Company may be merged, changed or
consolidated; any corporation for whose securities the securities of the Company
shall be exchanged; and any assignee of or successor to substantially all of the
assets of the Company.
2.8 "Continuous Service" shall mean, subject to modification by the
Committee, an Eligible Employee's number of full years and completed months of
continuous employment with the Company or a Subsidiary from his last hiring date
to his date of Termination of Employment for any reason. The Committee may
provide rules from time to time regarding the calculation of Continuous Service
and the method for crediting such service.
2.9 "Contribution Rate" means the rate determined under Section 5.5
2.10 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or a Subsidiary, or if the Participant is not covered by such plan, a
mental or physical illness that renders a Participant permanently and totally
incapable of performing his duties as an employee of the Company or a
Subsidiary. Notwithstanding the foregoing, a Disability shall not qualify under
this Plan if it is the result of (a) a willfully self-inflicted injury or
willfully self-induced sickness; or (b) an injury or disease contracted,
suffered, or incurred, while participating in a criminal offense. The
determination of Disability shall be made by the Committee. The determination of
Disability for purposes of this Plan shall not be construed to be an admission
of disability for any other purpose.
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2.11 "Eligible Employee" means each employee of the Company or a
Subsidiary (if the Subsidiary has adopted the Plan) on a Grant Date except that
the Committee in its sole discretion may exclude:
(a) any employee who has accrued less than a minimum period of Continuous
Service established by the Committee (but not to exceed 2 years).
(b) any employee whose customary employment is 20 hours or less per week;
(c) any employee whose customary employment is for not more than 5 months
in any calendar year;
(d) any employee who would directly or indirectly own or hold (applying
the rules of Section 424(d) of the Code to determine stock ownership)
immediately following the grant of an Option hereunder an aggregate of five
percent (5%) or more of the total combined voting power or value of all
outstanding shares of all classes of stock of the Company or any Subsidiary; and
(e) any employee who is a highly compensated employee of the Company or
Subsidiary within the meaning of Section 414(q) of the Code.
Any period of service described in the preceding sentence may be decreased in
the discretion of the Committee.
2.12 "Exercise Date" means such one or more dates determined by the
Committee on which the accumulated value of the Account shall be applied to
purchase Common Stock. The Committee may accelerate an Exercise Date in order to
satisfy the employment period requirement of Section 423(a)(2).
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.14 "Fair Market Value" means the value determined on the basis of the
good faith determination of the Committee pursuant to the applicable method
described in Section 4.5 and as adjusted, averaged or otherwise modified by the
Committee.
2.15 "Grant Date" means the date or dates established by the Committee on
which one or more Options are granted pursuant to the Plan. The Committee may
determine for any Plan Year that there shall be no Grant Date, in which case no
Options shall be granted for that Plan Year. The terms and conditions of any
Option granted on a particular Grant Date shall be
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<PAGE>
independent of and have no effect on the terms and conditions of any Option
granted on another Grant Date.
2.16 "Option" means the right to purchase Common Stock pursuant to the Plan
and any Agreement.
2.17 "Option Period" means the period beginning on the Grant Date and
expiring on the Exercise Date as determined by the Committee, subject to the
limitations of Section 5.3.
2.18 "Option Price" means the price at which the Company's Common Stock
granted as of a specific Grant Date may be purchased under an Option. The price
shall be subject to the limitation set forth in Section 5.4.
2.19 "Participant" means an Eligible Employee who satisfies the eligibility
conditions of the Plan and to whom an Option has been granted by the Committee
under the Plan, and in the event a Representative is appointed for a
Participant, then the term "Participant" shall mean such appointed
Representative, or successor Representative(s) appointed, as the case may be,
provided that "Termination of Employment" shall mean the Termination of
Employment of the Participant.
2.20 "Plan" means the Anicom, Inc. Stock Purchase Plan, as herein set forth
and as may be amended from time to time.
2.21 "Plan Year" means, for the first Plan Year, the period starting on
July 1, 1998, and ending on December 31, 1998; and for all subsequent Plan
Years, the twelve (12) consecutive month period starting on January 1 and ending
on the following December 31. The Committee may at any time in its discretion
designate another period as the Plan Year.
2.22 "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had his primary residence at the date of the Participant's
death; (b) the person or entity acting as the guardian or temporary guardian of
a Participant's estate; or (c) the person or entity which is the beneficiary of
the Participant upon or following the Participant's death. A Participant may
file a written designation of his Representative with the Committee. Such
designation of his Representative may be changed by the Participant at any time
by written notice given in accordance with rules and procedures established by
the Committee.
2.23 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as
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<PAGE>
determined by the Committee) tax-qualified plan of the Company or a Subsidiary,
if the Participant is covered by such plan, and if the Participant is not
covered by such a plan, then age 65, or age 55 with the accrual of 10 years of
service.
2.24 "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated pursuant thereto.
2.25 "Subsidiary" means any company, as currently defined in Section 424(f)
of the Code. Unless otherwise indicated the term "Company" shall hereinafter be
deemed to include all Subsidiaries of the Company which have adopted the Plan.
2.26 "Termination of Employment" means the latest date on which a person
ceases, for whatever reason, to be an employee of the Company. For determining
whether and when a Participant has incurred a Termination of Employment for
cause, "cause" shall mean any act or omission which permits the Company to
terminate the employment agreement or arrangement between the Participant and
the Company for cause as defined in such agreement or arrangement, or in the
event there is no such employment agreement or arrangement or the agreement or
arrangement does not define the term "cause," then "cause" shall mean (a) any
act or omission which the Company believes is of a criminal nature, and the
result of which the Company believes is detrimental to the interests of the
Company; (b) the material breach of a fiduciary duty owing to the Company,
including without limitation, fraud and embezzlement; or (c) conduct or the
omission of conduct on the part of the Participant which constitutes a material
breach of any statutory or common-law duty of loyalty to the Company.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be administered
by the Committee. The Committee shall be comprised of two or more disinterested
members of the Board of Directors selected by the Board. A majority of the
Committee shall constitute a quorum at any meeting thereof (including telephone
conference) and the acts of a majority of the members present, or acts
unanimously approved in writing by the entire Committee without a meeting, shall
be the acts of the Committee. A person shall be considered disinterested for
this purpose only if, at the time he exercises discretion in administering the
Plan, he is a "disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act. The Board shall have the authority to remove, replace or fill any
vacancy of any member of the Committee upon notice to the Committee and the
affected member. Any member of the Committee may resign upon notice to the
President of the Company or to the Board. The Committee may
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<PAGE>
allocate among one or more of its members, or may delegate to one or more of its
agents, such duties and responsibilities as it determines. Subject to the
provisions of this Plan, the Committee shall have full and final authority in
its discretion to:
(a) determine from time to time whether a person is
an Eligible Employee as of any Grant Date;
(b) determine the Option Price;
(c) determine the number of shares of Common Stock
available as of any Grant Date or subject to each Option;
(d) determine any Grant Date, Exercise Date and
Option Period, and provide for all aspects of payroll deduction,
suspension or withdrawal;
(e) determine, subject to the Plan, the time or times
and the manner when each Option shall be exercisable and the duration
of the Option Period;
(f) provide for the acceleration of the right to
exercise an Option (or portion thereof);
(g) prescribe additional terms, conditions and
restrictions in the Agreement and to provide for the forms of Agreement
to be utilized in connection with this Plan;
(h) determine whether a Participant has incurred a
Disability;
(i) determine what securities laws requirements are
applicable to the Plan, Options, and the issuance of shares of Common
Stock hereunder and request of a Participant that appropriate action be
taken;
(j) cancel, with the consent of the holder or as
otherwise provided in the Plan or an Agreement, outstanding Options;
(k) require as a condition of the exercise of an
Option or the issuance or transfer of a certificate of Common Stock,
the withholding from a Participant of the amount of any federal, state
or local taxes as may be necessary in order for the Company or
Subsidiary to obtain a deduction and as may be otherwise required by
law;
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<PAGE>
(l) determine whether and for what reason an
individual has incurred a Termination of Employment or an authorized
leave of absence;
(m) treat all or any portion of any period during
which a Participant is on an approved leave of absence as a period of
employment for purposes of accrual of his rights under an Option;
(n) determine whether the Company or any other person
has a right or obligation to purchase Common Stock from a Participant
and, if so, the terms and conditions on which such Common Stock is to
be purchased;
(o) determine the restrictions or limitations on the
transfer of Common Stock;
(p) determine whether an Option is to be adjusted,
modified or purchased, or become fully exercisable, under Section 6.3
of the Plan or the terms of an Agreement;
(q) adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the administration
of this Plan;
(r) appoint and compensate agents, counsel, auditors
or other specialists to aid it in the discharge of its duties;
(s) correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Agreement relating to
an Option, in such manner and to the extent the Committee shall
determine in order to carry out the purposes of the Plan; and
(t) construe and interpret this Plan, any Agreement,
and take all other actions, and make all other determinations and take
all other actions deemed necessary or advisable for the administration
of this Plan.
In the absence of the appointment of a Committee, the two or more
members of the Board who have served the longest period of time as members of
the Board and who are disinterested persons within the meaning of Rule 16b-3 of
the Exchange Act shall be the Committee. No member of the Committee, while
serving as such, shall be eligible to receive any Option hereunder, although
membership on the Committee shall not affect or impair any such member's rights
under any Option granted to him at a time when he was not a member of
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<PAGE>
the Committee. A member of the Committee shall not exercise any discretion
respecting himself under the Plan.
ARTICLE IV
STOCK PROVISIONS
4.1 Number of Shares Subject to the Plan. The stock subject to the
Options granted under this Plan shall be the Company's Common Stock. Unless
otherwise amended by the Board and approved by the stockholders of the Company
to the extent required by law, a maximum number of 200,000 shares of Common
Stock of the Company (or such number as may result following any adjustment
pursuant to Section 6.3) shall be reserved and available for Options granted
under the Plan. The shares issued with respect to Options under the Plan may be
authorized and unissued shares, or shares issued and reacquired by the Company.
4.2 Release of Shares. If any shares of Common Stock available for
subscription are unsubscribed, or if any Option granted hereunder shall be
cancelled, forfeited, expire or terminate for any reason without having been
exercised or realized in full, any shares of Common Stock subject to
subscription or subject to such Option shall again be available and may
thereafter be granted or otherwise applied under this Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Option shall be subject to the terms and conditions specified herein and
to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to (1) the listing of such shares on any stock exchange (or other public market)
on which the Common Stock may then be listed (or regularly traded), (2) the
completion of any registration or qualification of such shares under federal or
state law, or any ruling or regulation of any governmental body which the
Committee, in its sole discretion, determines to be necessary or advisable, and
(3) the tendering to the Company of such documents and/or payments as the
Committee may deem necessary, including documents the Committee deems necessary
to satisfy any applicable withholding obligation in order for the Company or
another entity to obtain a deduction on its federal, state or local tax return
with respect to the exercise of an Option. The Company may cause any certificate
for any share of Common Stock to be delivered to be properly marked with a
legend or other notation reflecting the limitations on transfer of such Common
Stock as provided in this Plan or as the Committee may otherwise require. The
Company has no obligation to register shares of Common Stock issued pursuant to
the Plan. Fractional shares shall not be delivered, but shall be rounded to the
next lower whole number of shares.
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<PAGE>
4.4 Stockholder Rights. No person shall have any rights of a
stockholder as to shares of Common Stock subject to an Option until, after
proper exercise of the Option or other action required, such shares shall have
been recorded on the Company's official stockholder records as having been
issued or transferred. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date such shares are recorded
as issued or transferred in the Company's official stockholder records, except
as provided in Section 6.3.
4.5 Stock Valuation. If and when the value of Common Stock shall be
required to be determined, it shall be determined in accordance with the
following provisions by the Committee, as applicable:
(a) if the Common Stock is listed on a national securities
exchange or quoted on the NASDAQ National Market System ("NASDAQ/NMS"),
the closing price of the Common Stock on the relevant date, as reported
on the composite tape or by the NASDAQ/NMS, as the case may be;
(b) if the Common Stock is not listed on a national securities
exchange or quoted on the NASDAQ/NMS, but is traded in the
over-the-counter market, the average of the closing bid and asked
prices for the Common Stock on the relevant date, or the most recent
preceding day for which such quotations are reported by NASDAQ/NMS; and
(c) if, on the relevant date, the Common Stock is not publicly
traded or reported as described in (i) or (ii), on the basis of the
good faith determination of the Committee.
4.6 Custodian. Shares of Common Stock purchased pursuant to the Plan
may be delivered to and held in the custody of such investment or financial firm
as shall be appointed by the Committee. The custodian may hold in nominee or
street name certificates for shares purchased pursuant to the Plan, and may
commingle shares in its custody pursuant to the Plan in a single account without
identification as to individual Participants. By appropriate instructions to the
custodian on forms to be provided for the purpose, a Participant may from time
to time obtain (a) transfer into the Participant's own name or into the name of
the Participant and another individual as joint tenants with the right of
survivorship of all or part of the whole shares held by the custodian for the
Participant's account and delivery of such shares to the Participant; (b)
transfer of all or part of the whole shares held for the Participant's account
by the custodian to a regular individual brokerage account in the Participant's
own name or in the name of the Participant and another individual as joint
tenants with the right of survivorship, either with the firm then acting as
custodian or with another firm, or (c) sale of all or part of the whole shares
held by the custodian for the Participant's account at the market price at the
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<PAGE>
time the order is executed and remittance of the net proceeds of the sale to the
Participant. Upon termination of participation in the Plan, and upon receipt of
instructions from the Participant, the shares held by the custodian for the
account of the Participant will be transferred and delivered to the Participant
in accordance with (a) above, transferred to a brokerage account in accordance
with (b), or sold in accordance with (c), above.
ARTICLE V
ELIGIBILITY; OPTION PROVISIONS
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan as of any Grant Date shall be those persons
(and only those persons) who are Eligible Employees of the Company (including a
Subsidiary that has adopted the Plan) on a Grant Date.
5.2 Grant of Options. The Committee shall have authority to grant
Options under the Plan at any time or from time to time to all Eligible
Employees as of a Grant Date. (To the extent an Option is granted to any
Eligible Employee of an entity on a relevant date, all Eligible Employees of the
entity shall be granted an Option to the extent required by law.) An Option
shall entitle the Participant to receive shares of Common Stock at the
conclusion of the Option Period, subject to the Participant's satisfaction in
full of any conditions, restrictions or limitations imposed in accordance with
the Plan or an Agreement, including without limitation, payment of the Option
Price. Each Option granted under this Plan shall be evidenced by an Agreement,
in a form approved by the Committee, which shall embody the terms and conditions
of such Option and which shall be subject to the express terms and conditions
set forth in this Plan and to such other terms and conditions as the Committee
may deem appropriate. The grant and exercise of Options hereunder shall be
subject to all applicable federal, state and local laws, rules and regulations
and to such approvals by any governmental or regulatory agency as may be
required. As of any Grant Date, each Eligible Employee shall be granted Options
with the same rights and privileges as any other Eligible Employee on that Grant
Date, except the amount of the Common Stock which may be purchased by any
Participant under any Option may bear a uniform relationship to the total
compensation, or the basic or regular rate of compensation, (as determined by
the Committee) of all Eligible Employees on that Grant Date, and the Option may
establish a maximum amount of Common Stock which may be purchased.
5.3 Option Period. Each Agreement shall specify the period for which
the Option thereunder is granted, which shall be determined by the Committee. In
no event shall the Option Period extend beyond the period permitted under
Section 423(b)(7) of the Code.
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5.4 Option Price. Subject to the limits stated herein, the Option Price
per share at which shares of Common Stock may be acquired upon exercise of an
Option shall be determined by the Committee. Unless otherwise specified by the
Committee, with respect to any Exercise Date, the Option Price shall not be less
than the lesser of eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock (averaged over such period as the Committee may determine and as
permitted by law) on the applicable Grant Date and eighty-five percent (85%) of
the Fair Market Value of a share of Common Stock (averaged over such period as
the Committee may determine and as permitted by law) on the applicable Exercise
Date. The Committee reserves the right to increase the Option Price by the value
of any accretion to the amounts credited to an Account if the Participant is
credited with such accretion regardless of the method of accounting for such
accretion.
5.5 Contribution Rate. If an Eligible Employee elects to participate,
the Participant shall file an Agreement with the Committee within the time
period designated by the Committee. The Committee may provide that the Agreement
shall specify either a percentage of the Participant's compensation (as defined
by the Committee) or a dollar amount determined by the Participant to be
deducted each pay period, or the Committee may permit only a specified
percentage or a specified amount. Such amount shall be credited to the Account
and shall be the Participant's Contribution Rate. Such deductions shall begin as
of the first regularly scheduled payroll date on or after the later of the Grant
Date and the date specified by the Committee. The Committee may establish
minimum and maximum percentages or amounts to be contributed and a date by when
such Agreement must be filed with the Committee. Notwithstanding the foregoing,
in no event may more than $8,000 be deducted from the Participant's compensation
(as defined by the Committee) for each Option Period and the maximum number of
shares which can be purchased by a Participant during the Option Period shall
not exceed such amount divided by eighty-five percent of the Fair Market Value
of a share of Common Stock on the applicable grant date (as determined under
Section 5.4). Such contributions will be held in the general funds of the
Company, and no interest shall accrue on any amounts held under this Plan,
unless expressly determined by the Committee. If payroll deductions are made by
a Subsidiary, that corporation will promptly remit the amount of the deduction
to the Company. A Participant's Contribution Rate, once established, shall
remain in effect during the Option Period unless and until contributions are
suspended or fully discontinued in order to comply with Section 401(k) of the
Code or for such other reasons as the Committee in its sole discretion may
determine, or if the Participant shall request suspension or discontinuance. If
a Participant requests to suspend payroll deductions the Participant may do so
at such times and in such manner as the Committee may permit, and previously
deducted amounts shall be retained until the earlier of the Exercise Date and
the date the Participant totally discontinues payroll deductions and requests a
distribution of the Account. A Participant who has suspended contributions may
recommence payroll deductions at such time, if at all, as determined by the
Committee. If a Participant requests to totally discontinue payroll deductions,
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the Participant may do so by providing written notice to the Committee. There
shall be paid to the Participant the value of the Participant's Account as soon
as administratively possible and the Participant shall not receive any shares as
of the Exercise Date.
5.6 Purchase of Shares. Subject to Sections 5.7, 5.8, 5.9, 5.10 and
5.11 on each Exercise Date, a Participant who has previously executed an
Agreement with respect to a specific Grant Date and made one or more payments
described in Section 5.5 shall be deemed to have exercised the Option to the
extent of the value of the Account, subject to the $8,000 limit set forth in
Section 5.5 with respect to the Option being exercised, and shall be deemed to
have purchased such number of full shares of Common Stock as equals the value of
the Account, subject to the limits of Sections 423(b)(3) and 423(b)(8) of the
Code and the number of shares available as of the Exercise Date and
proportionably allocable to other Participants for that Grant Date. The number
of shares of Common Stock to be purchased as of any Exercise Date shall be
determined by dividing the Option Price per share of the Common Stock into the
Account value and the value of the shares so purchased shall be charged to the
Account. Any value remaining in an Account of the Participant shall be returned
to the Participant and not applied to purchase Common Stock. Certificates of
Common Stock purchased hereunder may be held by the custodian as provided in
Section 4.6. Any Common Stock issued to the Participant who is subject to
reporting under Section 16 of the Exchange Act must be held for six (6) months
to the extent required by law to avoid liability under the Exchange Act. The
Committee may amend the Plan or any Agreement or provide in operation for
Participants to dispose of shares of Common Stock received upon the Exercise
Date on or immediately thereafter (which time may include any period during
which the Option is held) to the extent such change would not result in
liability under Section 16 of the Exchange Act. If the total number of shares to
be purchased as of any Exercise Date by all Participants exceeds the number of
shares authorized under this Plan or made available by the Committee as to any
Exercise Date, a pro rata allocation of the available shares will be made among
all Participants authorizing such payroll deductions based on the amount of
their respective payroll deductions through the Exercise Date.
5.7 Cancellation of Options. Except as otherwise provided in an
Agreement, an Option shall cease to be exercisable and shall be cancelled on or
after the expiration of the Option Period.
5.8 Terminated Employees. Except as otherwise provided by the Committee
or in an Agreement, any Participant who incurs a Termination of Employment for
any reason, except death, Disability or Retirement, during the Option Period
shall cease to be a Participant, the Option shall be null and void on the date
of the Termination of Employment without notice to the Participant and the
balance of the Account of the Participant shall be distributed to him as soon as
administratively possible.
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5.9 Deceased Employees. If a Participant shall die during an Option
Period while an Eligible Employee, no further contributions by deduction from
regularly scheduled payments on behalf of the deceased Participant shall be
made, except that the Representative may make a single sum payment with respect
to the Option at any time on or before the Exercise Date equal to the amount the
Participant would have contributed as determined by the Committee for the
payroll periods remaining to the Exercise Date. The Representative may at any
time prior to the Exercise Date request a distribution of the Account. If the
Representative does not request a distribution, the balance accumulated in the
deceased Participant's Account shall be used to purchase shares of the Common
Stock on the previously mentioned Exercise Date.
5.10 Disabled or Retired Employees. If a Participant incurs a
Termination of Employment due to Disability, or if a Participant incurs a
Termination of Employment due to Retirement, during an Option Period, no further
contributions by deduction from regularly scheduled payments on behalf of the
disabled or retired Participant shall be made, except that the Participant may
make a single sum payment with respect to the Option at any time on or before
the Exercise Date equal to the amount the Participant would have contributed as
determined by the Committee for the payroll periods remaining to the Exercise
Date. The Participant may at any time prior to the Exercise Date request a
distribution of the Account. If the Participant does not request a distribution
of the Account, the balance accumulated in the disabled or retired Participant's
Account shall be used to purchase shares of the Common Stock on the previously
mentioned Exercise Date.
5.11 Limitations. Notwithstanding any other provision of this Plan, in
no event may a Participant (i) purchase under the Plan during a calendar year
Common Stock having a fair market value (determined at Grant Date) of more than
$25,000 or (ii) receive any rights to purchase stock hereunder if he or she
beneficially owns, immediately after such receipt, five percent (5%) or more of
the total voting power or value of all classes of stock of the Company.
5.12 Nonassignability. Neither the Option nor the Account shall be
assigned, transferred (except as herein provided), pledged, or hypothecated in
any way (whether by operation of law or otherwise), other than by will or the
laws of descent and distribution or pursuant to a domestic relations order which
would be a qualified domestic relations order as defined in the Code or ERISA
(if the Plan were described in the relevant Sections) but only to the extent
consistent with Section 423 of the Code. Except as provided herein, the Option
is exercisable during a Participant's lifetime only by the Participant or the
appointed guardian or legal representative of the Participant, and neither the
Option nor the Account shall be subject to execution, attachment, or similar
process. Any attempted assignment, transfer, pledge, hypothecation, or other
disposition contrary to the provisions hereof, and the levy of any attachment or
similar process upon the Option or the Account shall be null and void and
without effect. The Company shall have the right to terminate the Option or the
Account in the event
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of any such assignment, transfer, pledge, hypothecation, other disposition of
the Option or the Account, or levy of attachment or similar process, by notice
to that effect to the person then entitled to exercise the Option; provided,
however, that termination of the Option hereunder shall not prejudice any rights
or remedies which the Company may have under an Agreement or otherwise.
ARTICLE VI
GENERAL PROVISIONS APPLICABLE TO THE PLAN
6.1 Termination of Plan. To the extent required by law, this Plan shall
terminate on the last day of the ten (10) year period commencing with the
effective date or at such earlier time as the Board may determine, and no
Options shall be granted under the Plan after that date. Any Options outstanding
under the Plan at the time of its termination shall remain in effect until they
shall have been exercised, expired or otherwise cancelled, settled or terminated
as provided herein or in an Agreement, and such outstanding Options shall not be
affected by such termination of the Plan. The provisions of the Plan in respect
to the full and final authority of the Committee under the Plan, other than the
authority to grant Options, and in respect of a Participant's obligations
respecting shares of Common Stock received pursuant to the exercise of an Option
shall continue notwithstanding the termination of the Plan.
6.2 Investment Representation. In the event the disposition of Common
Stock acquired upon the exercise of any Option is not covered by a then current
registration statement under the Securities Act and is not otherwise exempt from
such registration, the Common Stock so acquired shall be restricted against
transfer to the extent required by the Securities Act or regulations thereunder,
and each Agreement shall contain a requirement that, upon demand by the Company
for such representation, the individual exercising an Option shall state in
writing, as a condition precedent to each exercise of the Option, in whole or in
part, that the Common Stock acquired by such exercise is acquired for investment
purposes only and not for resale or with a view to distribution. The Committee
may set forth in an Agreement such other terms and conditions relating to the
registration or qualification of the Common Stock under federal or state
securities laws as it desires, including, in its discretion, the imposition of
an obligation on the Company to cause the Common Stock issued to a Participant
to be registered under the Securities Act.
6.3 Effect of Certain Changes.
(a) Anti-Dilution. In the event of any Company stock dividend,
stock split, combination or exchange of shares, recapitalization or
other change in the capital
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structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off
or distribution to Company shareholders other than a normal cash
dividend), sale by the Company of all or a substantial portion of its
assets (as measured on either a stand-alone or consolidated basis),
reorganization, rights offering, partial or complete liquidation, or
any other corporate transaction or event involving the Company and
having an effect similar to any of the foregoing, then the Committee
may adjust or substitute, as the case may be, the number of shares of
Common Stock available for Options under the Plan, the number of shares
of Common Stock covered by outstanding Options, the exercise price per
share of outstanding Options, and any other characteristics or terms of
the Options as the Committee shall deem necessary or appropriate to
reflect equitably the effects of such changes to the Participants;
provided, however, that any fractional shares resulting from such
adjustment shall be eliminated by rounding to the next lower whole
number of shares with appropriate payment for such fractional share as
shall reasonably be determined by the Committee.
(b) Change in Control. If there is a Change in Control of the
Company (as defined herein) or the Committee reasonably anticipates a
Change in Control is likely to occur then (1) the Committee may cause
each Option to be immediately exercisable; (2) the Committee may
provide that any Option exercisable on the date of any such Change in
Control may be purchased by the Company in an amount equal to the
excess, if any, of the aggregate fair market value per share of Common
Stock subject to the Option (or portion thereof) over the aggregate
Option Price of the shares subject to the Option (or portion thereof)
which the Committee determines to purchase; or (3) the Company may
provide for any combination of (1) and (2) above. For purposes of this
Section 6.3(b), the aggregate fair market value per share of Common
Stock subject to the Option that the Committee determines to purchase
shall be determined by the Committee by reference to the cash or fair
market value, determined by the Committee, of the securities, property
or other consideration receivable pursuant to the Change in Control
described in this Section 6.3(b). The aggregate Option Price of the
Common Stock shall be determined by multiplying the number of such
shares by the Option Price. If the event of a Change in Control
described in Section 6(c)(iii), and if the Option is unexercised and
the Committee does not exercise its discretion hereunder to purchase
the Option, then the Option shall be regarded as the right to receive
the securities, property, cash or other consideration receivable by
shareholders of the Company immediately prior to the Change in Control
described in Section 6(c)(iii). The provisions of this Section 6.3(b)
shall be construed consistently with the terms or conditions of any
regulation or ruling respecting the status of Options under Section 423
of the Code and the receipt of cash or other consideration coincident
with the cancellation of such Options, and in order
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to provide the Participant the economic benefit of the Option without
incurring liability under Section 16(b) of the Exchange Act.
(c) "Change in Control" shall be deemed to have occurred on
the first to occur of any of the following events:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of twenty-five percent 25% or more of either (A) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however,
that the following acquisitions shall not constitute a Change
in Control of the Company: (1) any acquisition directly from
the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (2) any acquisition by
the Company, (3) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company, or (4) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses
(A), (B) and (C) of subsection (iii) of this Section are
satisfied; or
(ii) Individuals who, as of the effective date of this
Plan, constitute the Board of Directors of the Company (the
"Incumbent Board of the Company") cease for any reason to
constitute at least a majority of the Board of Directors of
the Company; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board of the Company shall be
considered as though such individual were a member of the
Incumbent Board of the Company, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as contemplated by Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board of Directors of the Company;
or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or
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consolidation, (A) more than seventy-five percent (75%) of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B)
no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company or such corporation
resulting from such reorganization, merger or consolidation
and any Person beneficially owning immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, twenty-five percent (25%) or more of the
Outstanding Company Common Stock or Outstanding Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, twenty-five percent (25%) or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (C) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board of the
Company at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(iv) Approval by the shareholders of the Company of
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition, (A)
more than seventy-five percent (75%) of, respectively, the
then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B)
no Person
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(excluding the Company, any employee benefit plan (or related
trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, twenty-five percent (25%)
or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, twenty-five percent (25%) or
more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(3) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board of the Company at the time of the execution of the
initial agreement or action of the Board providing for such
sale or other disposition of assets of the Company.
(d) The Committee may, in its discretion, grant to the
Participant, in exchange for the surrender and cancellation of the
Option, a new Option on such terms and conditions as may be determined
by the Committee in accordance with the Plan.
6.4 Withholding. Notwithstanding any other provision hereof, as a
condition of delivery or transfer of shares of Common Stock, the Committee in
its sole discretion may require the Participant to pay to the Company, or the
Committee may at its election withhold from any wages, salary, or stock to be
issued to a Participant pursuant to the exercise of an Option, or other payment
due to the Participant, an amount sufficient to satisfy all present or estimated
future federal, state and local withholding tax requirements related thereto. A
Participant or former Participant shall notify the Company immediately of such
disposition in writing and make all necessary arrangements in order for the
Company or a Subsidiary to obtain any and all deductions, as determined by the
Committee. The Participant may satisfy any requirement under the Plan or an
Agreement with respect to the Company's federal, state or local tax withholding
obligation by requesting that the Committee withhold and not transfer or issue
shares of Common Stock with a Fair Market Value equal to such withholding
obligation, otherwise issuable or transferable to him pursuant to the exercise
of that portion of the Option. An Agreement may provide for shares of Common
Stock to be delivered or withheld having a Fair Market Value in excess of the
minimum amount required to be withheld, but not in excess of the amount
determined by applying the Participant's maximum marginal tax rate. Any right or
election of the Participant under this Section 6.4 shall be subject to the
approval of the Committee and shall be in compliance with Section 16 of the
Exchange Act. The amount of required withholding shall, at the election of the
Participant, be at a specified rate not less than the statutory minimum federal
and state withholding rate and not greater than the maximum federal, state and
local marginal tax rate applicable to the Participant and to the particular
option exercise transaction.
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6.5 No Company Obligation. The Company shall have no duty or obligation
to affirmatively disclose to a record or beneficial holder of an Option, and
such holder shall have no right to be advised of, any material information
regarding the Company at any time prior to, upon or in connection with the
exercise of an Option.
6.6 Committee Discretion. The Committee may in its sole discretion
include in any Agreement an obligation that the Company purchase a Participant's
shares of Common Stock received upon the exercise of an Option (including the
repurchase of any unexercised Options which have not expired), or may obligate a
Participant to sell shares of Common Stock to the Company upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article VI shall be construed by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee may from time to time determine.
ARTICLE VII
MISCELLANEOUS
7.1 Indemnification of the Board and Committee. In addition to such
other rights of indemnification as they may have and to the extent permitted by
law, the Company shall indemnify, defend and hold harmless the Board, the
Committee, the members of the Committee, the officers of the Company, and any
agent or representative selected by the Board or Committee (collectively
"indemnified party") against the reasonable expenses, including, without
limitation, attorneys' fees, actually and necessarily incurred in connection
with the defense of any action, suit or proceeding, or any threat thereof, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any act or omission in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by legal counsel selected by the Company)
or paid by them in satisfaction of a judgment in any action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such indemnified party is liable for gross negligence or
gross misconduct in the performance of his duties; provided that within sixty
(60) days after institution of any such action, suit or proceeding the
indemnified party may in writing elect to defend the same at its sole expense,
and if such election is made, the Company shall have no further liability or
obligations to the indemnified party under this Section. The provisions of this
Section 7.1 shall in no way limit any other obligation or arrangements the
Company may have with regard to indemnifying an indemnified party.
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7.2 Mitigation of Excise Tax. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 7.2),
either alone or together with other payments or rights accruing to the
Participant from the Company ("Total Payments") would constitute a "parachute
payment" (as defined in Section 280G of the Code and regulations thereunder),
such payment or right shall be reduced to the largest amount or greatest right
that will result in no portion of the amount payable or right accruing under the
Plan being subject to an excise tax under Section 4999 of the Code or being
disallowed as a deduction under Section 280G of the Code. The determination of
whether any reduction in the rights or payments under this Plan is to apply
shall be made by the Committee in good faith after consultation with the
Participant, and such determination shall be conclusive and binding on the
Participant. The Participant shall cooperate in good faith with the Committee in
making such determination and providing the necessary information for this
purpose. The foregoing provisions of this Section 7.2 shall apply with respect
to any person only if after reduction for any applicable federal excise tax
imposed by Section 4999 of the Code and federal income tax imposed by the Code,
the Total Payments accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of the
Plan and after reduction for only federal income taxes.
7.3 Interpretation. Whenever necessary or appropriate in this Plan and
where the context so requires, the singular term and the related pronouns shall
include the plural and the masculine and feminine gender.
7.4 Governing Law. The Plan and any Agreement shall be governed by the
laws of the State of Delaware (other than its laws respecting choice of law).
7.5 Limitations on Liability. No liability whatever shall attach to or
be incurred by any past, present or future stockholders, officers or directors,
merely as such, of the Company under or by reason of any of the terms,
conditions or agreements contained in this Plan, in an Agreement or implied from
either thereof, and any and all liabilities of, and any and all rights and
claims against the Company, or any shareholder, officer or director, merely as
such, whether arising at common law or in equity or created by statute or
constitution or otherwise, pertaining to this Plan or to an Agreement, are
hereby expressly waived and released by every Participant as a part of the
consideration for any benefits provided by the Company under this Plan. A person
who shall claim a right or benefit under this Plan shall be entitled only to
claim against the Company for such benefit.
7.6 Validity. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
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7.7 Assignment. This Plan shall inure to the benefit of and be binding
upon the parties hereof and their respective successors and permitted assigns.
7.8 Captions. The captions and headings to this Plan are for
convenience of reference only and in no way define, limit or describe the scope
or the intent of this Plan or any part hereof, nor in any way affect this Plan
or any part hereof.
7.9 Amendments. The Board of Directors may at any time amend, waive,
discharge or terminate the Plan even with prejudice to a Participant. The Board
or the Committee may amend, waive, discharge, terminate, modify, extend, replace
or renew an outstanding Option Agreement even with prejudice to a Participant;
provided such a change does not cause the Plan to fail to be a plan as described
in Section 423 of the Code.
7.10 Entire Agreement. This Plan and the Agreement constitute the
entire agreement with respect to the subject matter hereof and thereof, provided
that in the event of any inconsistency between the Plan and the Agreement, the
terms and conditions of this Plan shall control.
7.11 Rights with Respect to Continuance of Employment. Nothing
contained herein or in an Agreement shall be deemed to alter the at-will
employment relationship between the Company or a Subsidiary and a Participant.
Nothing contained herein or in an Agreement shall be construed to constitute a
contract of employment between the Company or a Subsidiary and a Participant.
The Company or, as applicable, the Subsidiary and the Participant each continue
to have the right to terminate the employment relationship at any time for any
reason. The company or Subsidiary shall have no obligation to retain the
Participant in its employ as a result of this Plan. There shall be no inference
as to the length of employment hereby, and the Company or Subsidiary reserves
the same rights to terminate the Participant's employment as existed prior to
the individual becoming a Participant in this Plan.
7.12 Options for Shares in Substitution for Stock Options Granted by
Other Corporations. Options may be granted under the Plan from time to time in
substitution for stock options or stock appreciation rights held by employees,
directors or service providers of other corporations who are about to become
employees of the Company as the result of a merger or consolidation of the
employing corporation with the Company, or the acquisition by the Company of the
assets of the employing corporation, or the acquisition by the Company of the
stock of the employing corporation, as the result of which it becomes a
designated employer under the Plan. The terms and conditions of the Options so
granted may vary from the terms and conditions set forth in this Plan at the
time of such grant as the majority of the members of the Committee may deem
appropriate to conform, in whole or in part, to the provisions of the Options in
substitution for which they are granted.
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7.13 Procedure for Adoption. Any Subsidiary of the Company may by
resolution of such Subsidiary's board of directors, with the consent of the
Board of Directors and subject to such conditions as may be imposed by the Board
of Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution. The Board shall have the power to make such
designation before or after the Plan is approved by stockholders.
7.14 Procedure for Withdrawal. Any Subsidiary which has adopted the
Plan may, by resolution of the board of directors of such Subsidiary, with the
consent of the Board of Directors and subject to such conditions as may be
imposed by the Board of Directors, terminate its adoption of the Plan; provided
such termination of adoption does not cause the Plan to fail to be a plan
described in Section 423 of the Code.
7.15 Expenses. Expenses of the Plan, including the fees or expenses
incurred by the transfer agent in connection with the transfer of Common Stock
and brokerage fees or expenses incurred in connection with the acquisition of
Common Stock in connection with the Plan or transfer to the Participant, shall
be charged to the Accounts of affected Participants or charged to the accretion
to the amounts credited to any Account if the Participant is credited with such
accretion regardless of the method of accounting for such accretion, except to
the extent paid by the Company or otherwise accounted for by the Company. Any
expense or fee associated with the Common Stock, including, for example,
custodian or brokerage fees after the Common Stock is transferred to the
Participant or for his account, or fees or commissions in connection with the
disposition of shares, shall be borne by the Participant.
Executed and effective as of the _____ day of ____________, 1998.
ANICOM, INC.
By: _____________________________
Title: _____________________________
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