UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: October 5, 1998
Anicom, Inc.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-25364 36-3885212
--------------------------- ----------- ----------------
(State or Other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.
6133 North River Road, Suite 1000, Rosemont, Illinois 60018
----------------------------------------------------- -------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 518-8700
--------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
(a) On September 21, 1998, the Registrant purchased substantially all of
the assets of Texcan Cables Inc., a Nevada corporation, Texcan Cables
International, Inc., a Nevada corporation and wholly owned subsidiary
of Texcan Cables Inc., and Texcan Cables Limited, a Canadian
corporation (collectively, the "Texcan Entities"). The assets acquired
include all property and assets used in the conduct of Texcan's
business, including inventory, accounts receivable, equipment, the name
"Texcan Cables" and the goodwill associated therewith.
Prior to this transaction, no material relationship existed between the
Registrant and the Texcan Entities, or between any affiliates of such
entities.
The Registrant paid the Texcan Entities at the closing an aggregate
purchase price consisting of 1,403,509 shares of the Registrant's
common stock, par value U.S.$.001 per share, 20,000 shares of the
Registrant's Series B convertible preferred stock, par value U.S.$.01
per share, which are convertible, in the aggregate, into an additional
1,403,509 shares of Registrant's common stock, and approximately
U.S.$27 million in cash. In addition, Anicom assumed approximately
U.S.$12 million of permitted bank indebtedness.
The cash portion of the purchase price in this transaction was paid out
of proceeds from Registrant's existing credit facility with Harris
Trust & Savings Bank, LaSalle National Bank, The First National Bank of
Chicago, and Bank of America National Trust & Savings Association, and
a new term loan facility with the Bank of Montreal dated September 21,
1998.
(b) Pursuant to this transaction, the Registrant acquired from the Texcan
Entities substantially all of the assets used by the Texcan Entities in
its business as a distributor of wire, cable and cable products. The
Registrant will continue to use these assets for the same purpose.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
Audited financial statements of the Texcan Entities required pursuant
to Regulation S-X cannot be provided at this time, but shall be filed
as soon as practicable and in no event later than 60 days after the
date by which this Report on Form 8-K is required to be filed.
(b) Pro Forma Financial Information
The pro forma financial information required pursuant to Article 11 of
Regulation S-X cannot be provided at this time, but shall be filed as
soon as practicable and in no event later than 60 days after the date
by which this Report on Form 8-K is required to be filed.
-2-
<PAGE>
(c) Exhibits
2.1 Asset Purchase Agreement by and among Anicom, Inc., Anicom
Multimedia Wiring Systems Incorporated, Texcan Cables Inc.,
Texcan Cables International, Inc., and Texcan Cables Limited,
dated as of September 21, 1998.
4.1 Certificate of Designations, Preferences and Rights of Series
B convertible preferred stock of Anicom, Inc.
4.2 Registration Rights Agreement by and between Anicom, Inc.,
Texcan Cables Inc., and Texcan Cables Limited, dated September
21, 1998.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Anicom, Inc.
Dated: October 5, 1998 By: /s/ DONALD C. WELCHKO
---------------------
Title: Chief Financial Officer
-----------------------
-4-
<PAGE>
Exhibit Index
Sequential
Page
Exhibit # Item Number
--------- ------------------------------------------- ----------
2.1 Asset Purchase Agreement by and 6
among Anicom, Inc., Anicom
Multimedia Wiring Systems
Incorporated, Texcan Cables Inc.,
Texcan Cables International, Inc.,
and Texcan Cables Limited,
dated as of September 21, 1998.
4.1 Certificate of Designations, Preferences 64
and Rights of Series B convertible
preferred stock of Anicom, Inc.
4.2 Registration Rights Agreement by and 77
between Anicom, Inc., Texcan Cables
Inc., and Texcan Cables Limited, dated
September 21, 1998.
-5-
Exhibit 2.1
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of September
21, 1998, is by and between ANICOM, INC., a Delaware corporation ("ANICOM"),
ANICOM MULTIMEDIA WIRING SYSTEMS INCORPORATED, a Nova Scotia company and a
wholly-owned subsidiary of ANICOM ("ANICOM ACQUISITION CN"; ANICOM and ANICOM
ACQUISITION CN are sometimes referred to herein collectively as the "ANICOM
ENTITIES" and each individually as an "ANICOM ENTITY"), TEXCAN CABLES INC., a
Nevada corporation ("TEXCAN CABLE"), TEXCAN CABLES INTERNATIONAL, INC., a Nevada
corporation and a wholly-owned subsidiary of TEXCAN CABLE ("TEXCAN
INTERNATIONAL" and, together with TEXCAN CABLE, "TEXCAN U.S."), and TEXCAN
CABLES LIMITED, a Canadian corporation ("TEXCAN CN"; TEXCAN CABLE, TEXCAN
INTERNATIONAL and TEXCAN CN are sometimes referred to herein collectively as the
"TEXCAN ENTITIES" and each individually as a "TEXCAN ENTITY"). Capitalized terms
used, but not otherwise defined, herein shall have the meanings set forth in
Section 11 hereof.
PRELIMINARY RECITALS:
WHEREAS, the TEXCAN ENTITIES are engaged in the business of
distributing wire, data and cable products (the "Business").
WHEREAS, the TEXCAN ENTITIES desire to sell to the ANICOM ENTITIES and
the ANICOM ENTITIES desire to purchase from the TEXCAN ENTITIES, substantially
all of the assets of the TEXCAN ENTITIES used in, or relating to the conduct of,
the Business as presently conducted, upon the terms and subject to the
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants of the parties
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Sale and Purchase of the Purchased Assets.
1.1 Purchased Assets. On the terms and subject to the conditions
hereinafter set forth, as of 5:00 p.m. (Vancouver time) on the Closing Date (the
"Closing Time"), the TEXCAN ENTITIES shall sell, convey, transfer, assign and
deliver to the ANICOM ENTITIES, free and
-6-
<PAGE>
clear of all Encumbrances other than Permitted Encumbrances, and the ANICOM
ENTITIES shall purchase from the TEXCAN ENTITIES, all of the TEXCAN ENTITIES'
right, title and interest in and to all property and assets used in the conduct
of the Business, as presently conducted by the Texcan Entities, wherever located
(collectively, the "Purchased Assets"), including, but not limited to, the
following:
(a) Tangible Personal Property. All fixed assets, fixtures,
equipment, machinery, tools, vehicles (whether or not registered under
motor vehicle registration laws), furniture, office furniture and
equipment, engineering and quality control drawings, plans,
specifications, packaging and weighing machines, leasehold improvements
which by the terms of the leases for the Business Real Estate (as
defined in Section 4.14) are removable from the property and other
similar personal property of one or more of the TEXCAN ENTITIES
(collectively, the "Tangible Personal Property");
(b) Inventories. All inventory of one or more of the TEXCAN
ENTITIES, including, but not limited to, raw materials,
work-in-process, finished goods, merchandise for resale and spare parts
(collectively, the "Inventory");
(c) Accounts Receivable. All accounts receivable, notes or
other evidences of indebtedness of any Person held by one or more of
the TEXCAN ENTITIES;
(d) Deposits, Prepaid Assets and Expenses and Supplies. All
deposits and other prepaid assets and expenses and all uniforms,
equipment, office, operating, factory, marketing and other supplies of
one or more of the TEXCAN ENTITIES;
(e) Contract and Franchise Rights. To the extent assignable or
transferable, all Assigned Contracts (as defined in Section 4.13)
(including, but not limited to, the TEXCAN ENTITIES' right, title,
interest and obligations under all real estate leases for the Business
Real Estate specified on Schedule 4.14(a) as being assigned to and
assumed by the ANICOM ENTITIES, but excluding all Scheduled Plans (as
defined in Section 4.23);
(f) Intellectual Property. Any and all Intellectual Property
owned, held or used by one or more of the TEXCAN ENTITIES;
(g) Records. All records, files, documents and papers of one
or more of the TEXCAN ENTITIES, including, but not limited to,
financial statements, journals, ledgers, correspondence, customer and
supplier records, employment records (for current employees only) and
books of account, but excluding all tax records, records maintained by
the TEXCAN ENTITIES' accountants and attorneys and records relating to
Excluded Assets (as defined in Section 1.2) and Excluded Liabilities
(as defined in Section 3.2), original copies of which will be
maintained by the TEXCAN ENTITIES (i) with respect to TEXCAN U.S. for
seven (7) years from the end of the year to which they relate and
-7-
<PAGE>
(ii) with respect to TEXCAN CN for six (6) years from the end of the
year to which they relate and made accessible to the ANICOM ENTITIES
during business hours upon reasonable notice.
(h) Licenses, Permits and Approvals. To the extent assignable,
all permits, licenses, approvals and authorizations by or of any
Government Entities held by one or more of the TEXCAN ENTITIES and
required for the conduct of the Business or in connection with the
ownership of the Purchased Assets;
(i) Claims. All causes of action, claims, rights of recovery
and set-off of every kind and character pertaining or relating to the
Business or the Purchased Assets (including, but not limited to, all
insurance, warranty and condemnation proceeds received after the
Closing Date with respect to damage, destruction or loss of any
Purchased Assets) and, to the extent assignable, the right to litigate
or pursue such causes of action, claims, rights or recovery and set-off
in the TEXCAN ENTITIES' names, at the ANICOM ENTITIES' cost;
(j) Non-Competition and Non-Solicitation Covenants. To the
extent permissible under applicable Legal Requirements, and subject to
the terms of Section 6.1 and 6.2, all non-competition and
non-solicitation covenants held by, or for the benefit of, one or more
of the TEXCAN ENTITIES restricting or binding the employees or sales
agents of one or more of the TEXCAN ENTITIES;
(k) Name and Goodwill. The name "TEXCAN" and all combinations
and variations thereof, and, any other names utilized in the Business,
together with all goodwill associated therewith and with the Business;
and
(l) Cash and Cash Equivalents. All cash and cash equivalents
of one or more of the TEXCAN ENTITIES.
1.2 Excluded Assets. All of the property and assets of one or more of
the TEXCAN ENTITIES which are not included in the Purchased Assets
(collectively, the "Excluded Assets") shall be retained by the TEXCAN ENTITIES
and shall not be sold and transferred to the ANICOM ENTITIES hereunder. The
Excluded Assets include, but are not limited to, the following:
(a) Organizational Records. The formal corporate records of
one or more of the TEXCAN ENTITIES, including any records having
exclusively to do with the corporate organization of the TEXCAN
ENTITIES;
(b) Rights Pursuant to or Under This Agreement. The rights of
the TEXCAN ENTITIES pursuant to or under this Agreement or any of the
Transaction Documents (as defined in Section 3.2)
-8-
<PAGE>
(c) Tax Records. The tax records, Tax Returns and all related
work papers of one or more of the TEXCAN ENTITIES;
(d) Contracts. All Contracts of one or more of the TEXCAN
ENTITIES other than the Assigned Contracts;
(e) Scheduled Plans. All Scheduled Plans of one or more of the
TEXCAN ENTITIES;
(f) Investments of TEXCAN ENTITIES. All investments made by
the TEXCAN ENTITIES including those described in the footnotes to the
TEXCAN Financial Statements or set forth on Schedule 1.2, including,
without limitation, all issued and outstanding capital stock of TEXCAN
CABLE owned by TEXCAN CN, all issued and outstanding capital stock of
TEXCAN INTERNATIONAL owned by TEXCAN CABLE and any investments in films
or software products;
(g) Intercompany Receivables. All amounts owing from one or
more TEXCAN ENTITIES or their respective Related Persons to another one
or more TEXCAN ENTITIES or their respective Related Persons.
(h) Income and Capital Tax Installments and Receivables. All
amounts owing to one or more of the TEXCAN ENTITIES from any Government
Entity in relation to income and capital taxes arising from installment
payments, assessments, reassessments or any other reason; and
(i) Rights or Claims. Any rights or claims of one or more of
the TEXCAN ENTITIES or their respective Related Persons against any
former shareholders or other securities holders thereof.
2. Purchase Price.
2.1 Purchase Price. The purchase price (the "Purchase Price") to be
paid by the ANICOM ENTITIES to the TEXCAN ENTITIES for the Business and the
Purchased Assets shall be as set forth below, subject to adjustment pursuant to
Section 2.2 below:
(a) an amount equal to (i) U.S.$39,000,000, minus (ii) the
Permitted Bank Indebtedness as of August 31, 1998 (the "Effective
Date"), stated in U.S. Dollars with Canadian Dollars converted at the
Bank of Canada exchange rate, as announced by the Bank of Canada at
noon on the Business Day immediately prior to the Closing Date (the
"Effective Date Permitted Bank Indebtedness"). At the Closing, the
ANICOM ENTITIES shall pay to the TEXCAN ENTITIES an amount (the "Cash
Payment") equal to (i) U.S.$39,000,000, minus U.S.$11,781,498, which
amount represents the parties estimate of the Effective Date Permitted
Bank Indebtedness (the "Estimated Permitted Bank Indebtedness"), by
wire transfer of immediately available funds to an account or
-9-
<PAGE>
accounts of the TEXCAN ENTITIES at a bank or banks specified by TEXCAN
CN in wire transfer instructions. To the extent that the Estimated
Permitted Bank Indebtedness exceeds the amount required to pay out the
net liability of the TEXCAN ENTITIES to CIBC according to the Payment
Letter delivered to Anicom pursuant to Section 8.2(h), such excess
shall be paid to TEXCAN to be used to honor and clear checks written by
the Texcan Entities on or prior to the Closing Date to pay obligations
which form part of the Assumed Liabilities (the "Outstanding Check
Funds"). On October 30, 1998, any amount of Outstanding Check Funds
remaining will be returned to Anicom.
(b) 1,403,509 shares of ANICOM common stock, par value
U.S.$.001 per share (the "Common Shares"), payable at the Closing.
(c) 20,000 shares of ANICOM Series B convertible preferred
stock, par value U.S.$.01 per share, bearing the terms and conditions
set forth in the Certificate of Designations, Rights and Preferences
attached hereto as Exhibit A (the "Preferred Shares" and, together with
the Common Shares, the "Purchase Shares"), payable at the Closing,
subject to the provisions of Section 2.1(d).
(d) Of the Purchase Price described in clause (c) above, the
parties agree that 5,000 Preferred Shares shall be delivered at the
Closing to Harris Trust and Savings Bank, as escrow agent ("Harris"),
pursuant to the terms of an Escrow Agreement in form and substance
substantially similar to Exhibit B hereto (the "Escrow Agreement").
2.2 Purchase Price Adjustment.
(a) Net Purchased Assets. The calculation of the Purchase
Price is based upon the assumption that, as calculated under Canadian
GAAP, the TEXCAN Notional Equity (as defined below) as of the Effective
Date will equal or exceed U.S.$20,458,000. The term "TEXCAN Notional
Equity" shall mean an amount stated in U.S. Dollars with Canadian
Dollars converted at the Bank of Canada exchange rate, as announced by
the Bank of Canada at noon on the Business Day immediately prior to the
Closing Date, equal to (i) the book value of the Purchased Assets of
the TEXCAN ENTITIES, on a combined basis, minus (ii) the book value of
the Assumed Liabilities, each as of the Effective Date and as
determined in accordance with Canadian GAAP (excluding any severance,
termination or other special costs arising as a result of the Closing).
For purposes of this determination, the parties agree that cash and
cash equivalents will constitute, and be deemed to constitute, a
contra-liability included in the Permitted Bank Indebtedness as of the
Effective Date and, therefore, an Assumed Liability and will not
constitute, or be deemed to constitute a Purchased Asset.
(b) Closing Statement and September Income Statement. As
promptly as practicable, but no later than sixty (60) days after the
Closing Date, TEXCAN CN shall, at the equally shared expense of the
-10-
<PAGE>
ANICOM ENTITIES, on the one hand, and the TEXCAN ENTITIES, on the other
hand, cause to be prepared and delivered to ANICOM (i) a combined
statement of the TEXCAN Notional Equity as of the Effective Date
(the "Closing Statement"), which Closing Statement shall be
complete and correct in all material respects, consistent with the
TEXCAN ENTITIES' books and records and past practices and fairly
present the Purchased Assets and Assumed Liabilities, on a combined
basis, as of the Effective Date, all in accordance with Canadian GAAP
and the definition of TEXCAN Notional Equity set forth above and
including any year-end adjustments or accruals with respect to that
portion of the TEXCAN ENTITIES' fiscal year ending on the Effective
Date as if the Effective Date were a fiscal year end, (ii) an audit
report of KPMG on the balance sheet of each of TEXCAN CN and TEXCAN
U.S. and an unqualified audit report of KPMG on the Closing Statement,
all as of the Effective Date, (iii) an unaudited, combined statement of
income for the month ended September 30, 1998 reflecting the results of
operations of the TEXCAN ENTITIES arising from or related to the
Purchased Assets through and including the Closing Date and the results
of operations of the ANICOM ENTITIES arising from or relating to the
Purchased Assets from the Closing Date through and including September
30, 1998 (excluding therefrom any costs or extraordinary or special
items incurred by the ANICOM ENTITIES in connection with or resulting
from this Agreement and the consummation of the Contemplated
Transactions, including, but not limited to, transaction costs and
severance and termination costs) (the "September Income Statement" and
(iv) a summary of receipts and disbursements related to the Excluded
Assets, the Excluded Liabilities, share capital and dividends and any
payments by or from any of the TEXCAN ENTITIES to or from any Related
Person for the period from September 1, 1998 through the Closing Date
(the "Summary of Excluded Receipts and Disbursements" and, together
with the Closing Statement and the September Income Statement, the
"Statements") and the unqualified audit report of KPMG thereon. If
ANICOM disagrees with the calculation of the TEXCAN Notional Equity,
the September Income Statement or the Summary of Excluded Receipts and
Disbursements contained in the Statements, ANICOM shall notify TEXCAN
CN in writing of such disagreement within thirty (30) days after the
date on which ANICOM received the Statements, which written notice
shall specify the nature of the dispute and shall provide in reasonable
detail the facts or accounting principles upon which such dispute is
based. Thereafter, ANICOM and TEXCAN CN shall attempt in good faith to
resolve such disagreement with respect to the Statements.
(c) Dispute Resolution. If TEXCAN CN and ANICOM are unable to
resolve any disagreement within twenty (20) days after TEXCAN CN's
receipt of such notice of disagreement, either TEXCAN CN or ANICOM may
give notice (an "Expert Notice") to the other party of an intent to
submit such disagreement to a certified independent public accounting
firm that is nationally recognized in Canada (the "Independent
Accounting Firm") and mutually agreeable to TEXCAN CN and ANICOM. If
TEXCAN CN and ANICOM cannot agree upon the Independent Accounting Firm
within twenty (20) days after delivery of the Expert Notice, the
Independent Accounting Firm shall be selected by lot from among Arthur
Andersen, Ernst & Young and Deloitte & Touche. The dispute shall be
immediately submitted by TEXCAN CN and ANICOM to the
-11-
<PAGE>
Independent Accounting Firm for resolution of such dispute within
twenty (20) days after submission to the Independent Accounting Firm.
At the time of the submission of such dispute to the Independent
Accounting Firm for resolution, ANICOM shall file with the Independent
Accounting Firm a written statement of its position with regard to any
matters in dispute, at which time TEXCAN CN shall have ten (10) days to
respond in writing to ANICOM's position. Upon receipt of such written
position statements from ANICOM and TEXCAN CN, the Independent
Accounting Firm shall resolve the dispute in accordance with Canadian
GAAP and the provisions of this Agreement, and neither ANICOM nor
TEXCAN CN shall have the right to submit, and the Independent
Accounting Firm shall not accept or review, additional written position
statements. The decision of the Independent Accounting Firm shall be
final and binding upon all parties hereto. Each party shall bear its
own expenses, including expenses of its accountants and attorneys in
connection with the resolution of any such dispute, and the fees and
expenses of the Independent Accounting Firm shall be shared equally by
the ANICOM ENTITIES, on the one hand, and the TEXCAN ENTITIES, on the
other hand.
(d) Adjustment to Purchase Price.
(i) If and to the extent that the TEXCAN Notional
Equity as of the Effective Date (as ultimately determined in
accordance with this Section 2.2) is less than
U.S.$20,458,000, then the ANICOM ENTITIES shall be entitled to
a corresponding dollar for dollar reduction in the Purchase
Price, and the TEXCAN ENTITIES shall, within five Business
Days after the final resolution of any dispute with respect to
the Statements, pay to the ANICOM ENTITIES by bank or
certified check or wire transfer an amount equal to the
difference between U.S.$20,458,000 and the TEXCAN Notional
Equity.
(ii) If and to the extent that the TEXCAN Notional
Equity as of the Effective Date (as ultimately determined in
accordance with this Section 2.2) exceeds U.S.$20,458,000,
then the TEXCAN ENTITIES shall be entitled to a corresponding
dollar for dollar increase in the Purchase Price, and the
ANICOM ENTITIES shall, within five Business Days after the
final resolution of any dispute with respect to the
Statements, pay to the TEXCAN ENTITIES by bank or certified
check or wire transfer an amount equal to the difference
between U.S.$20,458,000 and the TEXCAN Notional Equity.
(iii) If and to the extent that the September Income
Statement reflects any net income before tax, then the TEXCAN
ENTITIES shall be entitled to an increase in the Purchase
Price, and the ANICOM ENTITIES shall, within five Business
Days after the final resolution of any dispute with respect to
the Statements, pay to the TEXCAN ENTITIES by bank or
certified check or wire transfer an amount equal to the
product of such net income multiplied by a fraction equal to
the number of days from September 1, 1998 through and
including the Closing Date divided by 30.
-12-
<PAGE>
(iv) If and to the extent that the Summary of
Excluded Receipts and Disbursements reflects net disbursements
of cash for the period from September 1, 1998 through the
Closing Date, then the ANICOM ENTITIES shall be entitled to a
corresponding dollar for dollar decrease in the Purchase
Price, and the TEXCAN ENTITIES shall, within five Business
Days after the final resolution of any dispute with respect to
the Statements, pay to the ANICOM ENTITIES by bank or
certified check or wire transfer an amount equal to such net
disbursements of cash. Alternatively, if and to the extent
that the Summary of Excluded Receipts and Disbursements
reflects net receipts of cash for the period from September 1,
1998 through the Closing Date, then the TEXCAN ENTITIES shall
be entitled to a corresponding dollar for dollar increase in
the Purchase Price, and the ANICOM ENTITIES shall, within five
Business Days after the final resolution of any dispute with
respect to the Statements, pay to the TEXCAN ENTITIES by bank
or certified check or wire transfer an amount equal to such
net receipts of cash.
(v) Any adjustment in the Purchase Price under
Section 2.2(d) shall be allocated first to the Purchase Price
payable for the Purchased Assets sold by TEXCAN CN to ANICOM
ACQUISITION CN and second to the Purchase Price payable for
the Purchased Assets sold by TEXCAN U.S. to ANICOM.
2.3. Permitted Bank Indebtedness Adjustment. If and to the extent that
the Effective Date Permitted Bank Indebtedness, as set forth in the Closing
Statement, exceeds the Estimated Permitted Bank Indebtedness, then the TEXCAN
ENTITIES shall, within five business days after the ultimate determination of
the Effective Date Permitted Indebtedness, pay to the ANICOM ENTITIES by bank or
certified check or wire transfer an amount equal to such excess. Alternatively,
if and to the extent that the Estimated Permitted Bank Indebtedness exceeds the
Effective Date Permitted Bank Indebtedness, as set forth in the Closing
Statement, then the ANICOM ENTITIES shall, within five business days after the
ultimate determination of the Effective Date Permitted Indebtedness, pay to the
TEXCAN ENTITIES by bank or certified check or wire transfer an amount equal to
such excess.
2.4 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Purchased Assets and the TEXCAN ENTITIES in accordance with Schedule
2.4 and Section 2.2(d)(v). The parties hereby irrevocably agree to make all
filings under the U.S. Code (including, but not limited to, Section 1060
thereof) and the Canadian Tax Act consistent with such allocation of the
Purchase Price and to refrain at all times hereafter from taking any position,
either in relation to, or in dealings with, the United States Internal Revenue
Service (the "IRS"), Revenue Canada or any other Government Entity or otherwise,
which is inconsistent in any respect with such allocation of the Purchase Price.
-13-
<PAGE>
2.5 Canadian Federal and Provincial Taxes.
(a) GST Election. TEXCAN CN and ANICOM ACQUISITION CN will on
or before the Closing Date jointly execute elections, in the prescribed
form and containing the prescribed information, to have subsections
167(1.1) of the Excise Tax Act (Canada) and Section 75 of An Act
Respecting Quebec Sales Tax apply to the sale and purchase of the
Purchased Assets hereunder so that no tax is payable in respect of such
sale and purchase under Part IX of the Excise Tax Act (Canada) or under
An Act Respecting Quebec Sales Tax. ANICOM ACQUISITION CN will file
such elections with the appropriate authority within the time
prescribed for doing so by the particular statute and, for greater
certainty, such requirement constitutes an obligation for the purposes
of Section 10.3 of this Agreement.
(b) Accounts Receivable. TEXCAN CN and ANICOM ACQUISITION CN
agree to make a joint election in the prescribed form under Section 22
of the Canadian Tax Act as to the sale of the accounts receivable of
TEXCAN CN to ANICOM ACQUISITION CN hereunder and to designate in such
election an amount equal to the portion of the Purchase Price allocated
to such accounts receivable of TEXCAN CN pursuant to Section 2.4.
3. Limited Assumption of Liabilities and Contracts.
3.1 Assumed Liabilities. From and after the Closing Time, the ANICOM
ENTITIES will assume and agree to pay, defend, discharge and perform as and when
due according to their terms (i) any Permitted Bank Indebtedness as of the
Closing Time, (ii) any outstanding trade accounts payable of one or more of the
TEXCAN ENTITIES incurred in the ordinary course of business and payable to
Persons other than any of the TEXCAN ENTITIES or their respective Related
Persons (the "Accounts Payable"), (iii) any Assigned Contracts (including, but
not limited to, any real estate leases for the Business Real Estate and personal
property leases and intellectual property licenses used in the Business), (iv)
any Specified Liabilities (as hereinafter defined), (v) any Employment
Obligations, (vi) all other liabilities of one or more of the TEXCAN ENTITIES
incurred in the ordinary course of business with Persons, other than with any of
the TEXCAN ENTITIES or their respective Related Persons, and which are either
(A) accruable in the ordinary course of business in accordance with Canadian
GAAP (including, without limitation, Taxes on items other than income or capital
that arose in the ordinary course of business and are not yet due and payable,
customer deposits and accrued but unpaid wages, bonuses, benefits and vacation
and sick pay payable to all of the current employees of one or more of the
TEXCAN ENTITIES (other than Ronald Stern and Kevin Karr) or (B) executory or
contingent in nature (including outstanding purchase orders) and (vii) any other
liabilities expressly contemplated to be assumed by the ANICOM ENTITIES hereby.
For purposes of this Agreement, any liabilities and obligations to be assumed by
the ANICOM ENTITIES pursuant to this Section 3.1 are referred to collectively as
the "Assumed Liabilities."
-14-
<PAGE>
3.2 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement or any other agreement or certificate being
delivered pursuant to this Agreement (collectively, the "Transaction
Documents"), and regardless of whether such liability is disclosed in this
Agreement, in any of the Transaction Documents or on any Schedule or Exhibit
hereto or thereto, none of the ANICOM ENTITIES shall assume or agree to pay,
defend, discharge or perform or in any manner be responsible for any Excluded
Liabilities. As used herein, the term "Excluded Liabilities" means any and all
debts, liabilities or obligations of one or more of the TEXCAN ENTITIES other
than the Assumed Liabilities described in Section 3.1. The "Excluded
Liabilities" include, but are not limited to, (a) any income or capital Tax
liabilities or obligations, (b) except as otherwise contemplated herein, any
Claims arising out of or relating to the conduct of one or more of the TEXCAN
ENTITIES at any time after the Closing Time, (c) any liabilities whatsoever
relating, directly or indirectly, to any Excluded Assets, (d) any liabilities or
obligations of one or more of the TEXCAN ENTITIES or their respective Related
Persons to the other TEXCAN ENTITIES or their respective Related Persons (e) any
liabilities or obligations of one or more of the TEXCAN ENTITIES to any former
shareholders or other securities holders thereof and (f) any liabilities or
obligations of one or more of the TEXCAN ENTITIES with respect to indebtedness
or other obligations or liabilities of Related Persons including, without
limitation, any guaranties or security agreements (collectively, the "Third
Party Guaranties").
4. Representations and Warranties of the TEXCAN ENTITIES. Each of the TEXCAN
ENTITIES jointly and severally represents and warrants to and agrees with each
of the ANICOM ENTITIES, as follows:
4.1 Organization; Good Standing; Qualification. Each of the TEXCAN
ENTITIES is a corporation duly organized and in good standing under the laws of
its jurisdiction of incorporation and has all requisite corporate power and
authority to carry on the Business as now conducted and to own, hold under
lease, or otherwise possess or use the properties and assets that it purports to
own, hold under lease, or otherwise possess or use (including, but not limited
to, the Purchased Assets), and to perform all its obligations under the
Contracts to which it is a party or by which it is bound (including, but not
limited to, the Assigned Contracts). To the TEXCAN ENTITIES' Knowledge, each of
the TEXCAN ENTITIES is qualified or licensed to do business as a foreign
corporation or otherwise in the jurisdictions in which it conducts business. The
TEXCAN ENTITIES have delivered to the ANICOM ENTITIES complete copies of the
Organizational Documents of each of the TEXCAN ENTITIES, as currently in effect.
Schedule 4.1 contains a complete and accurate list of the current directors and
officers of each of the TEXCAN ENTITIES.
4.2 Corporate Authorization. Each of the TEXCAN ENTITIES has the
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and each of the other agreements contemplated
by this Agreement to which each such TEXCAN ENTITY is or will be a party (the
"Other TEXCAN Documents"). The execution, delivery and performance of this
Agreement and the Other TEXCAN Documents by each of the TEXCAN ENTITIES have
been duly authorized by all necessary corporate action and no other
-15-
<PAGE>
corporate act or proceeding on the part of any of the TEXCAN ENTITIES or their
shareholders or Boards of Directors is necessary to authorize the execution,
delivery or performance by each of the TEXCAN ENTITIES of this Agreement or the
Other TEXCAN Documents. This Agreement is, and upon execution and delivery
thereof at the Closing, the Other TEXCAN Documents will be, the legal, valid and
binding obligation of each of the TEXCAN ENTITIES, enforceable against each of
the TEXCAN ENTITIES in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization and other laws of general
application limiting the enforcement of creditors' rights generally and to the
fact that specific performance is an equitable remedy available only in the
discretion of the court.
4.3 No Violation. Except as set forth on Schedule 4.3, the execution,
delivery and performance by each of the TEXCAN ENTITIES of this Agreement and
the Other TEXCAN Documents, and the consummation of the transactions
contemplated hereby and thereby, do not and will not, directly or indirectly:
(a) contravene, conflict with or result in (with or without
notice or lapse of time) a material violation or breach of (i) any
provision of the Organizational Documents of any of the TEXCAN
ENTITIES; (ii) any resolution adopted by the shareholders or Boards of
Directors of any of the TEXCAN ENTITIES; (iii) any Legal Requirement or
any order to which any of the TEXCAN ENTITIES, or any of the assets
owned or used by any of the TEXCAN ENTITIES, may be subject, or give
any Government Entity or other Person the right (with or without notice
or lapse of time) to challenge any of the Contemplated Transactions or
to exercise any remedy or obtain any relief under any such Legal
Requirement or order; (iv) any of the terms or requirements of, or give
any Government Entity the right (with or without notice or lapse of
time) to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any of the TEXCAN ENTITIES
or that otherwise relates to the Business or any of the Purchased
Assets; or (v) other than the Assigned Contracts which require the
prior Consent of a third Person for their assignment and, to the TEXCAN
ENTITIES' Knowledge, any provision of, or give any Person the right
(with or without notice or lapse of time) to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Contract of any of the
TEXCAN ENTITIES, in each case for purposes of this clause (v) which
would have a TEXCAN MATERIAL ADVERSE EFFECT; or
(b) result in (with or without notice or lapse of time) the
imposition or creation of any Encumbrance (other than a Permitted
Encumbrance) upon or with respect to any of the Purchased Assets.
4.4 Consents. Except for filings under or with respect to
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the Canadian Competition Act (the "Competition Act") (collectively,
the "Government Filings") and other than any consent necessary to assign or
transfer any of the Purchased Assets (including, without limitation, the
-16-
<PAGE>
Assigned Contracts) (the "TEXCAN Consents"), no Consent of, or declaration,
notice, filing or registration with, any court, Government Entity or other
Person is required to be made or obtained by any of the TEXCAN ENTITIES in
connection with the execution, delivery and performance by the TEXCAN ENTITIES
of this Agreement, the Other TEXCAN Documents and the Contemplated Transactions
under the provisions of any Legal Requirement, court order or decree, or in
order to prevent a breach of, or a default under, or a termination or
modification of, any Assigned Contract or Permit (as defined in Section 4.16)
relating to the Business, to which any of the TEXCAN ENTITIES or the Purchased
Assets is subject or bound.
4.5 [Intentionally Omitted]
4.6 Books and Records. The books of account of the TEXCAN ENTITIES,
which have been made available to the ANICOM ENTITIES, are complete and correct
in all material respects.
4.7 Financial Statements. The TEXCAN ENTITIES have furnished the ANICOM
ENTITIES with the audited, consolidated balance sheets as at March 31, 1997 and
1998 and consolidated statements of earnings, retained earnings and changes in
financial position of, TEXCAN CN for the years ended March 31, 1996, 1997 and
1998 and the unaudited balance sheet, statement of income and statement of
changes in financial position of TEXCAN CN, as of and for the three months ended
June 30, 1998 (collectively, the "TEXCAN CN Financial Statements"). The TEXCAN
ENTITIES have furnished the ANICOM ENTITIES with the audited, consolidated
balance sheets as at March 31, 1997 and 1998 and consolidated statements of
earnings and deficit, and changes in financial position of TEXCAN U.S. for the
years ended March 31, 1996, 1997 and 1998 and the unaudited, consolidated
balance sheet, statement of income and statement of changes in financial
position of TEXCAN U.S. as of and for the three months ended June 30, 1998
(collectively, the "TEXCAN U.S. Financial Statements", and together with the
TEXCAN CN Financial Statements, the "TEXCAN Financial Statements"). The TEXCAN
Financial Statements are complete and correct in all material respects, are
consistent with the TEXCAN ENTITIES' books and records and fairly present the
financial condition and results of operations of each of the TEXCAN ENTITIES as
at the respective dates thereof and for the periods therein referred to, all in
accordance with Canadian GAAP, except that the TEXCAN Financial Statements as of
and for the three months ended June 30, 1998 do not include footnote disclosure
of the type associated with year-end financial statements and were or are
subject to normal and recurring year-end adjustments. No financial statements of
any other Person are required by Canadian GAAP to be consolidated with the
audited TEXCAN Financial Statements.
4.8 [Intentionally omitted]
4.9 Conduct of Business. Since March 31, 1998, the TEXCAN ENTITIES have
conducted the Business only in the ordinary course, consistent with past custom
and practices, and have incurred no liabilities other than in the ordinary
course of business, consistent with past custom and practices, which, in the
-17-
<PAGE>
aggregate, would have a TEXCAN Material Adverse Effect. Since March 31, 1998, in
respect of the Business there has not been any:
(a) Property Loss. damage, destruction or loss of any asset or
property of one or more of the TEXCAN ENTITIES, whether or not covered
by insurance, which would have a TEXCAN Material Adverse Effect;
(b) Property Transfer. voluntary or involuntary sale,
assignment, transfer, surrender, abandonment, distribution, dividend or
other disposition of any kind by one or more of the TEXCAN ENTITIES of
any material portion of the assets or property rights (tangible or
intangible) of one or more of the TEXCAN ENTITIES, except, in each
case, for the payment of cash distributions or dividends, the sale of
finished goods inventory, the collection of accounts and the payment of
liabilities and obligations in the ordinary course of business,
consistent with past custom and practices;
(c) Labor Activity. strike or picketing, or, to the TEXCAN
ENTITIES' Knowledge, boycott or work stoppage, union organizational
activity, charge or written complaint of employment discrimination or
other similar labor dispute which would have a TEXCAN Material Adverse
Effect;
(d) Compensation. increase in, or agreement or promise to
increase, the salary, bonus, benefits or perquisites payable to any
employee (other than customary salary, bonus, benefits or perquisites
raises consistent with past practices);
(e) Release. cancellation, waiver or release by one or more of
the TEXCAN ENTITIES of any material debts, rights or claims, except in
each case in the ordinary course of business, consistent with past
custom and practices;
(f) Relationships. to the TEXCAN ENTITIES' Knowledge, loss of
(i) any customer of one or more of the TEXCAN ENTITIES which accounted
for sales during 1997 in excess of U.S.$500,000, or (ii) any supplier
of one or more of the TEXCAN ENTITIES which accounted for inventory
purchases during 1997 in excess of U.S.$5,000,000;
(g) Accounting Change. a material change in accounting
principles, methods or practices (including, but not limited to, any
change in depreciation or amortization policies or rates) utilized by
one or more of the TEXCAN ENTITIES;
(h) Capital Expenditures. Capital expenditures or commitments
therefor by one or more of the TEXCAN ENTITIES in excess of
U.S.$100,000 individually or U.S.$1,000,000 in the aggregate; or
-18-
<PAGE>
(i) Other Developments. An occurrence or event not included in
clauses (a) through (h) that has resulted in a TEXCAN Material Adverse
Effect.
4.10 Purchased Assets.
(a) Title. The Purchased Assets constitute all of the property
and assets of the TEXCAN ENTITIES, other than Excluded Assets. The
TEXCAN ENTITIES have good and valid title to all of the property and
assets (whether tangible or intangible) included within subparagraphs
(a), (b) and (c) of the definition of Purchased Assets, in each case,
free and clear of all Encumbrances, other than Permitted Encumbrances.
The TEXCAN ENTITIES have the right to convey, and upon consummation of
the Contemplated Transactions, the ANICOM ENTITIES will, except as
expressly set forth in Section 4.11 or Section 4.12, be vested with
good and valid title to all of the property and assets (whether
tangible or intangible) included within subparagraphs (a), (b) and (c)
of the definition of Purchased Assets (or, pursuant to the terms of
Sections 6.1 and 6.2, will be afforded the benefit of, interest in or
the right to use) the Purchased Assets, free and clear of all
Encumbrances, other than Permitted Encumbrances.
(b) Condition and Sufficiency of Assets. To the TEXCAN
ENTITIES' Knowledge, the equipment and other tangible personal property
used by the TEXCAN ENTITIES in the conduct of the Business and being
transferred hereunder, are, in all material respects, in good operating
condition and repair and are adequate for the uses to which they are
being put.
4.11 Accounts Receivable. All accounts receivable of the TEXCAN
ENTITIES (collectively, the "Accounts Receivable") that will be reflected on the
Closing Statement or, to the TEXCAN ENTITIES' Knowledge, on TEXCAN CN's or
TEXCAN U.S.'s balance sheets as of June 30, 1998 (collectively, the "Interim
Balance Sheet") represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business.
To the TEXCAN ENTITIES' Knowledge, unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date collectible, net of
the respective reserves shown on the Interim Balance Sheet or on the Closing
Statement (which reserves are adequate), and the ANICOM ENTITIES will be vested
(a) with respect to the Canadian accounts receivable included in the Purchased
Assets, with good and valid title thereto and (b) with respect to the United
States accounts receivable included in the Purchased Assets, with good, valid
and marketable title thereto. To the TEXCAN ENTITIES' Knowledge, there is no
contest, claim, or right of set-off, other than immaterial returns, disputes and
damage claims in the ordinary course of business, with any maker of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. A
Credit Department Monthly Report at August, 1998 has been provided to the ANICOM
ENTITIES on or prior to the date hereof.
4.12 Inventory. To the TEXCAN ENTITIES' Knowledge, all inventory of the
TEXCAN ENTITIES, whether or not reflected on the Interim Balance Sheet, in the
-19-
<PAGE>
normal course of business, is located at the Business Real Estate or at
contracted warehouse locations or is in transit thereto or therefrom and
consists of a quality and quantity usable and saleable in the ordinary course of
business, consistent with past custom and practices, except for obsolete items
and items of below-standard quality (including scraps and lengths that are not
saleable in the ordinary course of business), all of which have been written off
or written down to net realizable value on the Interim Balance Sheet or on the
Closing Statement, as the case may be, consistent with past custom and practices
and in accordance with Canadian GAAP, and the ANICOM ENTITIES will be vested (a)
with respect to the Canadian inventory included in the Purchased Assets, with
good and valid title thereto and (b) with respect to the United States inventory
included in the Purchased Assets, with good, valid and marketable title thereto.
All inventories not written off have been reported on the Interim Balance Sheet
using the inventory valuation method consistent with past custom and practices
and in accordance with Canadian GAAP.
4.13 Contracts. Schedule 4.13 Part A identifies every written Contract
(including, without limitation, franchise agreements, indentures, mortgages,
loan agreements, leases, subleases, licenses, sublicenses, instruments and
agreements), to which one or more of the TEXCAN ENTITIES is a party or by which
one or more of the TEXCAN ENTITIES is bound or subject and that relates to the
Business and/or the Purchased Assets and that is material to the TEXCAN
ENTITIES, other than contracts and agreements with suppliers of products to the
TEXCAN ENTITIES and with purchasers of products from the TEXCAN ENTITIES (the
"Customer and Vendor Contracts") and other than contracts and agreements that
are not material to the TEXCAN ENTITIES (collectively, such immaterial contracts
and agreements, together with the foregoing material contracts and agreements
and the Customer and Vendor Contracts, the "Assigned Contracts" and each
individually an "Assigned Contract"). Except as disclosed on Schedule 4.13 Part
B (a) to the TEXCAN ENTITIES' Knowledge, all of the Assigned Contracts are in
full force and effect, (b) none of the TEXCAN ENTITIES has received any written
notice, or, to the TEXCAN ENTITIES' Knowledge, is aware, that it is in breach or
default of any Assigned Contracts which has not been remedied, and, to the
TEXCAN ENTITIES' Knowledge, no event has occurred which with notice or the
passage of time or both would constitute a material breach or default by any of
the TEXCAN ENTITIES under any Assigned Contract, nor, to the TEXCAN ENTITIES'
Knowledge, is any other party to any of the Assigned Contracts in default
thereunder, and, to the TEXCAN ENTITIES' Knowledge, no event has occurred which
with notice or the passage of time or both would constitute a material breach or
default by any of the TEXCAN ENTITIES under any Assigned Contract, other than as
a result of the consummation of the Contemplated Transactions, and (c) all of
the Assigned Contracts were entered into in the ordinary course of business.
None of the TEXCAN ENTITIES is a party to any Assigned Contract that (i) is a
requirement or output contract or otherwise imposes a cost on the TEXCAN
ENTITIES for failing to purchase a minimum amount of inventory, (ii) gives rise
to a material Encumbrance, (iii) prohibits or restricts any of the TEXCAN
ENTITIES from freely engaging in business or competing anywhere in the world,
(iv) is a distribution, supply, resale or sales representative agreement which
cannot be terminated upon less than 180 days notice without direct cost or
expense to the TEXCAN ENTITIES or (v) involves a sharing of profits, losses,
costs or liabilities by any of the TEXCAN ENTITIES with any other Person. None
-20-
<PAGE>
of the TEXCAN ENTITIES is a party to any Assigned Contract that has resulted or
would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the U.S. Code. On or
before thedate hereof, the TEXCAN ENTITIES have furnished to the ANICOM ENTITIES
copies of all of the written Assigned Contracts referred to in the first
sentence of this Section 4.13.
4.14 Real Property.
(a) Schedule 4.14(a) lists all premises leased by one or more of the
TEXCAN ENTITIES (the "Business Real Estate").
(b) To the TEXCAN ENTITIES' Knowledge, none of the Permitted
Encumbrances interferes with the current use or operations of the TEXCAN
ENTITIES at or on the Business Real Estate. No written or, to the TEXCAN
ENTITIES' Knowledge, oral notice has been received by any of the TEXCAN ENTITIES
or, to the TEXCAN ENTITIES' Knowledge, has been served upon the Business Real
Estate stating that the buildings on the Business Real Estate, or the business
presently conducted thereon by one or more of the TEXCAN ENTITIES, are not in
compliance with any applicable Legal Requirements (including, but not limited
to, applicable building and zoning and other land use restrictions and
Environmental Legal Requirements).
4.15 Intellectual Property. Schedule 4.15 lists all registered
trademarks and tradenames included in the Purchased Assets. To the TEXCAN
ENTITIES' Knowledge, the TEXCAN ENTITIES have good and valid title to all the
Intellectual Property. To the TEXCAN ENTITIES' Knowledge, the use of the
Intellectual Property by the TEXCAN ENTITIES does not infringe on the rights of
any Person, and no Person has asserted any such claim.
4.16 Licenses and Permits. To the TEXCAN ENTITIES' Knowledge, the
TEXCAN ENTITIES hold all permits, licenses, franchises, and approvals and
authorizations by or of any Government Entity necessary for the current conduct
of the Business and the ownership of the Purchased Assets and the use and
occupancy of Business Real Estate and that are material to the TEXCAN ENTITIES
(the "Permits"). To the TEXCAN ENTITIES' Knowledge, the TEXCAN ENTITIES are in
compliance with all such Permits in all material respects and none of the TEXCAN
ENTITIES has received any written or, to the TEXCAN ENTITIES' Knowledge, oral
notices to the contrary.
4.17 Compliance with Legal Requirements. To the TEXCAN ENTITIES'
Knowledge, the Business as conducted by the TEXCAN ENTITIES and the Purchased
Assets are in compliance with, and do not violate, any applicable Legal
Requirement (including, but not limited to, occupational health and safety laws
and regulations and laws relating to employment and employment practices, terms
and conditions of employment, pay equity and wages and hours of work), except
for such non-compliance or violations which have not had, and could not
reasonably be expected to have, a TEXCAN Material Adverse Effect. To the TEXCAN
ENTITIES' Knowledge, none of the TEXCAN ENTITIES has received any written
notices of, or any correspondence from any Government Entity relating to, any
such violation or alleged violation.
-21-
<PAGE>
4.18 Litigation. Except as described in Schedule 4.18, to the TEXCAN
ENTITIES' Knowledge, there is no material claim, counter-claim, action, suit,
proceeding or, to the TEXCAN ENTITIES' Knowledge, governmental investigation
pending or, to the TEXCAN ENTITIES' Knowledge, threatened against or involving
any of the TEXCAN ENTITIES with respect to or affecting the Business, or
relating to the Contemplated Transactions, before any court, agency, commission,
board, bureau or other Government Entity. To the TEXCAN ENTITIES' Knowledge,
there is no basis for any such claim, action, suit, proceeding or investigation.
None of the TEXCAN ENTITIES, nor the Business as conducted by the TEXCAN
ENTITIES, nor any of the Purchased Assets is directly subject to or affected by
any order, judgment, decree or ruling of any court or Government Entity issued
against it specifically, and not of general application.
4.19 Personnel Agreements and Labor Relations. Except as listed in
Schedule 4.19, none of the TEXCAN ENTITIES is a party to, or obligated with
respect to, any (a) to the TEXCAN ENTITIES' Knowledge, outstanding Contracts
with any employees (including, without limitation and for greater certainty,
sales representatives and sales personnel) as of the date hereof, agents,
consultants, independent contractors, advisers, distributors or dealers, other
than Contracts with sales personnel substantially in the form attached hereto as
Exhibit C attached hereto and Contracts entered into in the ordinary course of
business of the TEXCAN ENTITIES; (b) to the TEXCAN ENTITIES' Knowledge,
outstanding Contracts with employees (including, without limitation and for
greater certainty, sales representatives and sales personnel) as of the date
hereof pursuant to which any such employee is entitled by its terms to more than
90 days' notice of termination or severance payments unless otherwise required
by law, or (c) collective bargaining agreements or Contracts with any labor
union, employee association or other representative of employees or any employee
benefits provided for by any such agreement, and since January 1, 1993, no trade
union has applied for certification in respect of any of the TEXCAN ENTITIES or
to have any of the TEXCAN ENTITIES declared a related employer pursuant to the
Labor Relations Act 1995 (Ontario) or any similar legislation in any
jurisdiction in which the TEXCAN ENTITIES conduct the Business. The TEXCAN
ENTITIES have furnished the ANICOM ENTITIES with a true and complete copy of
each document required to be listed in Schedule 4.19. To the TEXCAN ENTITIES'
Knowledge, no strike, union organizational activity, allegation, charge or
complaint of employment discrimination or other similar occurrence has occurred
since January 1, 1993, or is pending or, to the TEXCAN ENTITIES' Knowledge,
threatened against any of the TEXCAN ENTITIES or otherwise might have a TEXCAN
Material Adverse Effect; nor to the TEXCAN ENTITIES' Knowledge, does any of the
TEXCAN ENTITIES know any basis for any such allegation, charge, or complaint.
4.20 Employees. The TEXCAN ENTITIES have, on or prior to the date
hereof, delivered to the ANICOM ENTITIES a correct and complete list setting
forth the employee number, current salary range and hire date for each employee
(including, without limitation and for greater certainty, sales representatives
-22-
<PAGE>
and sales personnel) of each of the TEXCAN ENTITIES. To the TEXCAN ENTITIES'
Knowledge, no employee (including, without limitation and for greater certainty,
sales representatives and sales personnel) as of the date hereof or officer or
director as of the date hereof of any of the TEXCAN ENTITIES is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee, officer or director and any other Person that in any way adversely
affected or affects (x) the performance of his or her duties as an employee,
officer or director of the TEXCAN ENTITIES, or (y) the ability of the TEXCAN
ENTITIES to conduct the Business.
4.21 Taxes. None of the Purchased Assets are subject to any
Encumbrances resulting from a failure by the TEXCAN ENTITIES to meet any Tax
liability, when due. All Taxes that any of the TEXCAN ENTITIES is or was
required by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Government
Entity or other Person. All sales, franchise and customs Taxes that any of the
TEXCAN ENTITIES was required by Legal Requirements to pay on or before the date
hereof have been duly paid to the proper Government Entity or other Person.
Other than Canada or the United States, none of the TEXCAN ENTITIES has a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States or Canada and any foreign
country. TEXCAN CN is a registrant for purposes of the Tax imposed under Part IX
of the Excise Tax Act (Canada).
4.22 Environmental Matters. Notwithstanding anything to the contrary
contained in this Agreement or in any other Transaction Document (other than the
officer's certificate to be delivered at the Closing pursuant to Section 8.2
(e)), the representations and warranties with respect to environmental matters
are contained solely in this Section 4.22:
(a) Compliance with Environmental Legal Requirements. To the
TEXCAN ENTITIES' Knowledge, each of the TEXCAN ENTITIES is in material
compliance with all Environmental Legal Requirements, and none of the
TEXCAN ENTITIES has received written or, to the TEXCAN ENTITIES'
Knowledge, oral notice of any violation or alleged violation of any
such Environmental Legal Requirements. To the TEXCAN ENTITIES'
Knowledge, each of the TEXCAN ENTITIES possesses all required Permits
relating to the protection of the environment which, if not possessed,
could result or have resulted in any TEXCAN Material Adverse Effect or
a material violation of any applicable Environmental Legal
Requirements.
(b) No Hazardous Substances. To the TEXCAN ENTITIES'
Knowledge, none of the TEXCAN ENTITIES has generated, transported,
treated, stored, disposed of or released any Hazardous Substances in,
under, upon or from any real property, equipment or other personal
property owned, leased, used or operated by any of the TEXCAN ENTITIES
(including, but not limited to, the Business Real Estate), except in
compliance with all applicable Environmental Legal Requirements. To the
TEXCAN ENTITIES' Knowledge, there are currently no aboveground or
underground storage tanks under or upon any real property owned,
leased, used or operated by any of the TEXCAN ENTITIES (including, but
not limited to, the Business Real Estate).
-23-
<PAGE>
(c) No Actions or Proceedings. To the TEXCAN ENTITIES'
Knowledge, none of the TEXCAN ENTITIES is subject to, nor has any of
the TEXCAN ENTITIES received any written or, to the TEXCAN ENTITIES'
Knowledge, oral notice of, any private, administrative or judicial
action, order, injunction or decree, or written or, to the TEXCAN
ENTITIES' Knowledge, oral notice of any intended private,
administrative, or judicial action, order, injunction or decree,
relating to the presence or alleged presence of Hazardous Substances
in, under or upon any real property, equipment or other personal
property owned or leased by any of the TEXCAN ENTITIES (including, but
not limited to, the Business Real Estate) and, to the TEXCAN ENTITIES'
Knowledge, there is no basis for any such notice or action.
(d) To the TEXCAN ENTITIES' Knowledge, no material
environmental reports and documents have been prepared within the past
five years relating to any of the TEXCAN ENTITIES or any of the
Business Real Estate .
4.23 Employee Benefit Plans.
(a) U.S. Employee Benefit Plans.
(i) To the TEXCAN ENTITIES' Knowledge,
except as is described in Schedule 4.23(a)(i),
neither TEXCAN nor one or more of the TEXCAN ENTITIES
has at any time maintained, adopted, made
contributions to or had any other liability with
respect to any U.S. Employee Benefit Plan (all such
plans, policies, programs, arrangements, agreements
and contracts, including those that are set forth in
Schedule 4.23(a)(i), are referred to in this
Agreement as "Scheduled U.S. Plans").
(ii) The TEXCAN ENTITIES have delivered to
the ANICOM ENTITIES a complete and accurate copy, as
of the Closing, of each written Scheduled U.S. Plan
and a copy or description of each other general
explanation or communication which describes a
material term of a Scheduled U.S. Plan that has not
previously been disclosed to the ANICOM ENTITIES
pursuant to this Section 4.23(a) upon which one or
more of the TEXCAN ENTITIES can rely.
(iii) To the TEXCAN ENTITIES' Knowledge,
each Scheduled U.S. Plan (i) has been and currently
complies in form and in operation in all material
respects with all applicable requirements of ERISA,
the U.S. Code and any other applicable Legal
Requirements, and so as not to give rise to a
-24-
<PAGE>
nonexempt prohibited transaction (as such term is
defined under ERISA and the U.S. Code) or liability
for any other Taxes, penalties or fines; (ii) has
been and is operated and administered in material
compliance with its terms (except as otherwise
required by law) and with applicable Legal
Requirements in such a manner as to qualify, where
appropriate, for both federal and state purposes, for
income tax exclusions to its participants, tax-exempt
income for its funding vehicle, and the allowance of
deductions and credits with respect to contributions
thereto; and (iii) where appropriate, has received a
favorable determination letter or recognition of
exemption from the IRS.
(iv) To the TEXCAN ENTITIES' Knowledge, the
TEXCAN ENTITIES have not at any time since January 1,
1991 participated in, made contributions to or had
any other liability with respect to any Scheduled
U.S. Plan (i) which is a "multi-employer plan" as
defined in Section 4001 of ERISA, a "multi-employer
plan" within the meaning of Section 3(37) of ERISA, a
"multiple employer plan" within the meaning of
Section 413(c) of the U.S. Code or a "multiple
employer welfare arrangement" within the meaning of
Section 3(40) of ERISA, (ii) which provides
post-retirement or post-employment medical, health,
life insurance or other welfare-type benefits, for
current or future retirees or current or future
former employees, their spouses or dependents or any
other Persons (except for limited continued medical
benefit coverage, if any, required to be provided
under state continuation coverage laws), or (iii)
which is subject to Title IV of ERISA or the minimum
funding standards of the U.S. Code.
(v) All contributions, payments, premiums,
expenses, reimbursements or accruals for each
Scheduled U.S. Plan as of the Closing (including
periods from the first day of the then current plan
year to the Closing) shall have been made or accrued,
where material, on the TEXCAN Financial Statements
and each such plan otherwise does not have nor
reasonably could have any unfunded liability which is
not reflected on the TEXCAN Financial Statements.
(b) Canadian Employee Benefit Plans.
(i) Except as is described in Schedule
4.23(b)(i), none of the TEXCAN ENTITIES participates
in, or provides its employees (including, without
limitation and for greater certainty, sales
representatives and sales personnel) as of the date
hereof with benefits under or with respect to, any
Canadian Employee Benefit Plan (all such plans,
policies, programs, arrangements, agreements and
contracts, including those that are set forth in
Schedule 4.23(b)(i), are referred to in this
Agreement as the "Scheduled Canadian Plans"; the
Scheduled U.S. Plans and the Scheduled Canadian Plans
are sometimes referred to collectively herein as the
"Scheduled Plans").
-25-
<PAGE>
(ii) True, correct and complete copies of
all written Scheduled Canadian Plans and related
documentation have been provided to the ANICOM
ENTITIES and all Scheduled Canadian Plans are
accurately described on Schedule 4.23(b)(ii). The
Scheduled Canadian Plans are duly registered where
required by, and are in good standing under, all
applicable Legal Requirements including the Income
Tax Act (Canada), and, if applicable, the Pension
Benefits Act (Ontario). All required employer and
employee contributions and premiums under the
Scheduled Canadian Plans have been made and, with
respect to any Scheduled Canadian Plans which are not
pension plans, no past service funding liabilities
exist. To the TEXCAN ENTITIES' Knowledge, there are
no actions, claims or proceedings pending or
threatened against any of the TEXCAN ENTITIES (other
than routine claims for benefits) relating to any of
the Scheduled Canadian Plans. There is no requirement
under the Scheduled Canadian Plans to provide
post-retirement profit sharing, medical or health
benefits to employees of the TEXCAN ENTITIES.
4.24 Customers and Suppliers. The TEXCAN ENTITIES have provided to
ANICOM on an anonymous basis an accurate and complete list of the TEXCAN
ENTITIES' 100 largest customers (based upon total sales revenues) for the
twelve-month period ending March 31, 1998 and an accurate and complete list of
the TEXCAN ENTITIES' 10 largest suppliers (based upon total expenditures) for
the twelve-month period ending March 31, 1998.
4.25 Sales Representatives. To the TEXCAN ENTITIES' Knowledge, Schedule
4.25 is an accurate and complete list of the TEXCAN ENTITIES' independent sales
representatives (excluding sales personnel employed by any of the TEXCAN
ENTITIES). To the TEXCAN ENTITIES' Knowledge, during the last twelve months,
none of such sales representatives has canceled or otherwise terminated or
materially modified its relationship with any of the TEXCAN ENTITIES, nor have
any of the TEXCAN ENTITIES canceled or otherwise terminated or materially
modified their relationship with such sales representatives.
4.26 Insurance Policies. Except as set forth on Schedule 4.26, no
material claims have been made with respect to the Business during the past
three years under any insurance policies maintained by any of the TEXCAN
ENTITIES.
4.27 Brokers. None of the TEXCAN ENTITIES nor any of their respective
Related Persons has employed or used the services of any finder or broker in
connection with the Contemplated Transactions.
-26-
<PAGE>
4.28 Interest of TEXCAN in Customers, etc. Except as provided in
Schedule 4.28, none of the TEXCAN ENTITIES nor any of their respective Related
Persons has any direct or indirect interest in any competitor, supplier or
customer of any of the TEXCAN ENTITIES or in any Person from whom or to whom any
of the TEXCAN ENTITIES leases any real or personal property. None of the
entities described on either of the lists referenced in Section 4.24 would be
required to be listed on Schedule 4.28.
4.29 Residency. TEXCAN CN is a resident of Canada for purposes of the
Canadian Tax Act, and none of the Purchased Assets to be transferred by TEXCAN
U.S. hereunder constitutes taxable Canadian property as such term is defined in
the Canadian Tax Act.
5. Representations and Warranties of the ANICOM ENTITIES.
Each of the ANICOM ENTITIES jointly and severally represents and
warrants to each of the TEXCAN ENTITIES as follows:
5.1 Organization and Good Standing. Each of the ANICOM ENTITIES is a
corporation or unlimited liability company, as the case may be, duly organized,
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, as the case may be.
5.2 Corporate Authorization. Each of the ANICOM ENTITIES has the
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and each of the other agreements contemplated
by this Agreement to which it is or will be a party (the "Other ANICOM
Documents"). The execution, delivery and performance of this Agreement and the
Other ANICOM Documents by each of the ANICOM ENTITIES has been duly authorized
by all necessary corporate action and no other corporate act or proceeding on
the part of such ANICOM ENTITY, its Board of Directors or stockholders is
necessary to authorize the execution, delivery or performance by such ANICOM
ENTITY of this Agreement or the Other ANICOM Documents. This Agreement is, and
upon execution and delivery thereof at the Closing, the Other ANICOM Documents
will be, the legal, valid and binding obligation of each of the ANICOM ENTITIES,
enforceable against each of the ANICOM ENTITIES in accordance with their
respective terms subject to applicable bankruptcy, insolvency, reorganization
and other laws of general application limiting the enforcement of creditors'
rights generally and to the fact that specific performance is an equitable
remedy available only in the discretion of the court.
5.3 No Violation. The execution, delivery and performance by each of
the ANICOM ENTITIES of this Agreement and the Other ANICOM Documents, and the
consummation of the transactions contemplated hereby or thereby do not and will
not, directly or indirectly, (a) contravene, conflict with or result in (with or
without notice or lapse of time) a material violation or breach of any provision
of the Organizational Documents of any of the ANICOM ENTITIES, or any provision
of, or give any Person the right (with or without notice or lapse of time) to
declare a default or exercise any remedy under, or to accelerate the maturity or
-27-
<PAGE>
performance of, or to cancel, terminate or modify, any Contract of any of the
ANICOM ENTITIES which would have an ANICOM MATERIAL ADVERSE EFFECT, or (b)
result in the creation or imposition of any Encumbrance, upon any of the assets
of any of the ANICOM ENTITIES.
5.4 Capitalization. The authorized capital stock of ANICOM consists of
60,000,000 shares of common stock, par value U.S.$.001 per share, and 1,000,000
shares of preferred stock, par value U.S.$.01 per share, of which 20,000 shares
have been designated Series B convertible preferred stock. As of the date
hereof, there are issued and outstanding 23,623,346 shares of such common stock.
Additionally, there are outstanding warrants to purchase 81,364 shares of ANICOM
common stock. As of the date hereof, 2,725,095 shares of ANICOM common stock are
issuable upon exercise of options to purchase such stock, which options were
issued pursuant to ANICOM's stock option plan, 20,000 shares of ANICOM Series B
convertible preferred stock are reserved for issuance pursuant to this Agreement
and 1,403,509 shares of ANICOM common stock are reserved for issuance upon
conversion of the Preferred Shares. No outstanding options, warrants or other
securities exercisable for or convertible into shares of capital stock of ANICOM
require anti-dilution adjustments by reason of the consummation of the
Contemplated Transactions.
5.5 Purchase Shares. The Purchase Shares (and the shares of ANICOM
common stock, par value U.S.$.01 per share, issuable upon conversion of the
Preferred Shares) are duly authorized and, when issued at the Closing in
consideration for the Purchased Assets (or upon conversion of the Preferred
Shares in accordance with the conversion provisions thereof), will be validly
issued, fully paid and non-assessable, and will be delivered to the TEXCAN
ENTITIES, free and clear of any Encumbrances, other than pursuant to the Escrow
Agreement and as required with respect to transferability pursuant to applicable
Securities Legal Requirements.
5.6 SEC Filings. Since its initial public offering in February, 1995,
ANICOM has filed all forms, reports and documents required to be filed with the
U.S. Securities and Exchange Commission (the "SEC") (the "ANICOM SEC Reports").
As of their respective dates, the ANICOM SEC Reports (i) were prepared in
accordance with the requirements of the U.S. Securities Act or the United States
Securities Exchange Act of 1934, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such ANICOM SEC Reports and (ii)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
5.7 Financial Statements. Each of the audited consolidated financial
statements of ANICOM (including any related notes and schedules thereto)
included (or incorporated by reference) in its Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, is accurate and complete and fairly
presents, in conformity with U.S. GAAP applied on a consistent basis through the
periods involved (except as may be noted therein), and in conformity with the
SEC's Regulation S-X, the consolidated financial position of ANICOM and its
consolidated subsidiaries as of its date and the consolidated results of
operations and changes in financial position for the period then ended.
-28-
<PAGE>
5.8 Litigation. There is no claim, counterclaim, action, suit,
proceeding or governmental investigation pending or, to ANICOM's knowledge,
threatened against or involving any of the ANICOM ENTITIES, with respect to or
affecting the securities, business, properties, services or operations of any of
the ANICOM ENTITIES, except to the extent such matter is not expected to have an
ANICOM Material Adverse Effect, or relating to the Contemplated Transactions,
before any court, agency, commission, board, bureau or other Government Entity.
None of the ANICOM ENTITIES knows of or has any reasonable grounds to know of
any basis for any such claim, action, suit, proceeding or investigation. None of
the ANICOM ENTITIES is directly subject to or affected by any order, judgment,
decree or ruling of any court or Government Entity that has had, or is expected
to have, an ANICOM Material Adverse Effect.
5.9 Consents. Except for the Government Filings and except with respect
to the assignment of the TEXCAN ENTITIES' interests in the Assigned Contracts,
no Consent of, or declaration, notice, filing or registration with, any court,
Government Entity or other Person is required to be made or obtained by any of
the ANICOM ENTITIES in connection with the execution, delivery and performance
of this Agreement, the Other ANICOM Documents and the Contemplated Transactions
under the provisions of any Legal Requirements, court order or decree, or in
order to prevent a breach of, or a default under, or a termination or
modification of, any Contract to which any of the ANICOM ENTITIES, or any of
their assets, are subject or bound.
5.10 Brokers. Other than Robert W. Baird & Co. Incorporated, none of
the ANICOM ENTITIES has employed or used the services of any finder or broker in
connection with the Contemplated Transactions.
5.11 Taxes.
(a) GST Registration. ANICOM ACQUISITION CN is, or will be as
of the Closing Date, registered under Subdivision d of Division V of
Part IX to the Excise Tax Act (Canada).
(b) Retail Sales Tax Purchase Exemption Certificates. On or
before the Closing Date ANICOM ACQUISITION CN shall provide TEXCAN CN
with retail sales tax purchase exemption certificates in respect of all
assets to be purchased by it from TEXCAN CN for which it claims
exemption from retail sales taxes and in respect of which such purchase
exemption certificates are required under the applicable Legal
Requirements.
-29-
<PAGE>
6. Other Agreements and Covenants.
6.1 Agreement to Obtain TEXCAN Consents and Approvals. To the extent
that any of the Purchased Assets, or any claim, right or benefit arising under
or resulting from such Purchased Assets (collectively, the "Rights"), is not
capable of being transferred to the appropriate ANICOM ENTITY at the Closing
without the Consent of any third Person, or without delivery of any particular
document or the payment of funds to a third Person, or if the transfer of a
Right would constitute a breach of any obligation under, or a violation of, any
Assigned Contracts or applicable Legal Requirements unless the Consent of such
third Person is obtained, in accordance with the terms of such Purchased Assets,
including the Assigned Contracts, then unless and until such Consent is obtained
and all such particular documents are delivered or required funds paid to the
appropriate third Person, the TEXCAN ENTITIES shall hold the benefit of such
Rights in trust for such ANICOM ENTITY as the ANICOM ENTITIES may direct in
writing, and after the Closing Date, the ANICOM ENTITIES shall bear the
obligations of such Rights and shall indemnify and hold the TEXCAN ENTITIES
harmless from all costs, expenses, claims, damages and liabilities under or in
respect of such Rights which arise from and after the Closing Time. From and
after the Closing, the ANICOM ENTITIES and the TEXCAN ENTITIES each hereby agree
to cooperate with one another and to use all reasonable efforts, provided that
the TEXCAN ENTITIES shall not be required to expend funds, to obtain all
governmental and third party Consents to the transfer and assignment of the
Purchased Assets to the appropriate ANICOM ENTITY and as otherwise necessary to
complete the Contemplated Transactions. For greater certainty, any payment
required to be made to the landlords of the Business Real Estate leases shall be
payable by the ANICOM ENTITIES after the Closing Date. Without limitation of the
foregoing, the TEXCAN ENTITIES agree to use all reasonable efforts, but without
the requirement to expend funds, to obtain such Consents necessary to assign or
transfer to the appropriate ANICOM ENTITY all rights and incidents of interest
of one or more of the TEXCAN ENTITIES under the Assigned Contracts which may not
have been obtained and delivered as of the Closing Date. The parties hereto
agree that requests for such Consents shall include a request that the TEXCAN
ENTITIES be released from liability under the particular contract from and after
the Closing Date, provided, however, that the ANICOM ENTITIES shall not be
required to expend funds to procure any such release.
6.2 Further Assurances. The TEXCAN ENTITIES shall, from time to time
after the Closing, upon the request of ANICOM, but without the requirement to
expend funds, do, execute, acknowledge and deliver, or cause to be done,
executed, acknowledged and delivered, all such further acts, assignments,
transfers, assurances and instruments as may be reasonably required for the
absolute and complete assignment, transfer, grant and conveyance to the
appropriate ANICOM ENTITY of the Purchased Assets, including any letters of
assurance or confirmation thereof.
6.3 Access to Information. After the Closing Date, each of the TEXCAN
ENTITIES agrees to give and cause to be given to the ANICOM ENTITIES and their
representatives, upon reasonable notice and during normal business hours, such
reasonable access to the properties, books, records and affairs retained by such
TEXCAN ENTITY pursuant to the terms of this Agreement as is reasonably necessary
-30-
<PAGE>
to allow the ANICOM ENTITIES to conduct the Business and fulfill their
obligations under this Agreement, and to confirm the calculations set forth in
the Statements. After the Closing Date, the ANICOM ENTITIES will give or cause
to be given to the TEXCAN ENTITIES and their representatives, upon reasonable
notice and during normal business hours, such reasonable access to the
personnel, books, records and files relating to theBusiness or the Purchased
Assets as is reasonably necessary to allow the TEXCAN ENTITIES to obtain
information in connection with the preparation of the TEXCAN ENTITIES' financial
statements, the calculation of the TEXCAN Notional Equity, the statement of
income, the Summary of Excluded Receipts and Disbursements and preparation of
the Statements, preparation and any audit of the TEXCAN ENTITIES' Tax Returns or
the defense of any claims, demands, other audits, suits, actions or proceedings
by or against the TEXCAN ENTITIES as the previous owner and operator of the
Purchased Assets. Each of the ANICOM ENTITIES agrees to cooperate with the
TEXCAN ENTITIES after the Closing Date, at the TEXCAN ENTITIES' expense, with
respect to any claims, demands, Tax or other audits, suits, actions and
proceedings by or against the TEXCAN ENTITIES as the previous owner and operator
of the Purchased Assets.
6.4 Employee and Related Matters.
(a) The appropriate ANICOM ENTITY shall make a written offer
of employment, on or as soon as practicable after the Closing Date and
as of the Closing Date, to all non-union employees of the TEXCAN
ENTITIES engaged in the Business as of the Closing Date (other than
Ronald Stern and Kevin Karr), whether or not such employees are
actively at work on the Closing Date (the "Non-Union Employees"), on
terms and conditions which are substantially similar to, and in the
aggregate no less favorable than, those in effect on the Closing Date.
(b) ANICOM ACQUISITION CN shall confirm to all union employees
of TEXCAN CN engaged in the Business as of the Closing Date, whether or
not such employees are actively at work on the Closing Date (the "Union
Employees"), that ANICOM ACQUISITION CN will continue their employment,
as of the Closing Date. The ANICOM ENTITIES hereby confirm that, to the
extent any collective bargaining agreement set forth on Schedule 4.19
applies to the Union Employees, ANICOM ACQUISITION CN will, on and
after the Closing Date, be the successor to TEXCAN CN thereunder
pursuant to applicable labor legislation and will, on and after the
Closing Date, be bound by and observe all of the terms, conditions,
rights and obligations of TEXCAN CN thereunder to the extent such
legislation applies to the Union Employees.
(c) On and after the Closing Date, the TEXCAN ENTITIES shall
take all actions reasonably requested by the ANICOM ENTITIES to assist
the ANICOM ENTITIES in effecting the transition of the workforce. Each
employee of the TEXCAN ENTITIES who accepts such offer of employment
and commences employment with an ANICOM ENTITY (each, a "Continued
Employee" and, collectively, the "Continued Employees") shall, for all
-31-
<PAGE>
purposes, including eligibility, vesting and level of benefits under
the appropriate ANICOM ENTITY'S Employee Benefit Plans, receive credit
for such Continued Employee's service with the TEXCAN ENTITIES or for
any other purposes as required by any applicable provincial or state
employment standards legislation, and the ANICOM ENTITIES covenant and
agree that the level of benefits afforded to each such Continued
Employee will be, in the aggregate, no less favorable to such Continued
Employee than the benefits provided to him or her by the TEXCAN
ENTITIES immediately prior to Closing.
(d) Each employee of the TEXCAN ENTITIES who does not accept
such offer of employment or does not commence employment with an ANICOM
ENTITY or who is not considered under applicable Legal Requirements to
be an employee of the ANICOM ENTITIES (each, a "Discontinued Employee"
and, collectively, the "Discontinued Employees") shall remain an
employee of the appropriate TEXCAN ENTITY, and the appropriate TEXCAN
ENTITY shall promptly deliver to such employee the statutory
termination notice required by the applicable Legal Requirements,
specifying the date upon which such employee's employment with the
appropriate TEXCAN ENTITY will terminate in accordance with the
applicable Legal Requirements (each, a "Statutory Termination Date").
During the period between the Closing and the applicable Statutory
Termination Date (each, a "Statutory Notice Period"), the appropriate
TEXCAN ENTITY will direct each such Discontinued Employee to make
himself or herself available for work with the appropriate ANICOM
ENTITY, and the appropriate ANICOM ENTITY will promptly reimburse the
appropriate TEXCAN ENTITY for all salary and other compensation payable
or benefits provided to each such Discontinued Employee during such
Discontinued Employee's Statutory Notice Period in accordance with such
Discontinued Employee's terms and conditions of employment in effect on
the Closing Date.
(e) The ANICOM ENTITIES will bear and discharge all
obligations and liabilities of the TEXCAN ENTITIES with respect to
Employment Obligations. For greater certainty, but without limiting the
generality of the foregoing, it is agreed that the Anicom Entities
shall bear and discharge all claims and Employment Obligations that
arise out of or relate to: (i) the continued employment under Section
6.4(d) or the termination by the Texcan Entities of the employment of
any Discontinued Employees; or (ii) any group termination obligations
that the Texcan Entities may incur under applicable statutory Legal
Requirements, including any obligations incurred as a result of the
failure of the Texcan Entities to give notice of termination of
employment to the Union Employees or Non-Union Employees or to any
applicable government body; or (iii) any termination by the Anicom
Entities of the employment of any such Continued Employees after the
Closing, including any Claims or Employment Obligations that arise out
of or relate to the Continued Employees' period(s) of employment with
the Texcan Entities.
-32-
<PAGE>
(f) From and after the Closing Date through October 31, 1998,
the TEXCAN ENTITIES shall take all actions reasonably necessary, at the
sole expense of the ANICOM ENTITIES, to continue to provide coverage to
all Continued Employees and Discontinued Employees under the Scheduled
Plans through such date, and the ANICOM ENTITIES shall promptly
reimburse the TEXAN ENTITIES for all actual out-of-pocket costs and
expenses incurred by the TEXCAN ENTITIES in providing such continued
coverage, as such costs and expenses are incurred. ANICOM will
indemnify the TEXCAN ENTITIES from and against all Losses arising from
or relating to the provision of such coverage to the Continued
Employees, other than those Losses arising directly as a result of the
negligent actions of the TEXCAN ENTITIES.
(g) Effective as of the Closing Date, all Continued Employees
of TEXCAN U.S. shall be 100% vested in their account balances under the
TEXCAN 401(k) Savings Plan. Effective as of the Closing Date, to the
extent permitted by law, TEXCAN U.S. shall permit its Continued
Employees to receive the distribution of their account balances under
the TEXCAN 401(k) Savings Plan, and, to the extent permitted by law,
ANICOM shall permit direct rollovers of such Continued Employees' cash
balances in the TEXCAN 401(K) Savings Plan to ANICOM's 401(k) Savings
Plan.
6.5 Restrictive Covenants.
(a) TEXCAN ENTITIES Acknowledgements. Each of the TEXCAN
ENTITIES acknowledges and agrees that:
(i) included in the Purchased Assets that the ANICOM
ENTITIES are purchasing hereunder is the goodwill associated
with the Business;
(ii) through its conduct of the Business, each of the
TEXCAN ENTITIES has a special and unique understanding of the
Business, its customers, suppliers and the employees of the
Business;
(iii) in order to assure that the Business will
retain its value as a going concern, it is necessary that each
of the TEXCAN ENTITIES undertake not to utilize its special
knowledge of the Business and its relationships with third
parties (including suppliers, customers and employees of the
Business) to compete with the Business;
(iv) the agreements and covenants contained in this
Section 6.5 are essential to protect the Business and its
goodwill;
(v) the scope and duration of the restrictive
covenants contained in this Section 6.5 are reasonably
designed to protect a protectable interest of the Business and
are not excessive in light of the circumstances;
-33-
<PAGE>
(vi) any violation by any of the TEXCAN ENTITIES of
the provisions of this Section 6.5 would irreparably damage
the ANICOM ENTITIES and the Business, the restrictions imposed
hereunder are equitable and reasonable, and the ANICOM
ENTITIES have no adequate remedy at law to redress a violation
hereof;
(vii) the ANICOM ENTITIES have informed the TEXCAN
ENTITIES that the ANICOM ENTITIES' decision to enter into this
Agreement has been materially induced because of the covenants
and assurances of each of the TEXCAN ENTITIES contained in
this Section 6.5, and the restrictive covenants set forth in
this Section 6.5 are necessary to ensure the continuation of
the Business; and
(viii) the covenants of this Section 6.5 shall be
construed as an agreement ancillary to the other provisions of
this Agreement, and the existence of any claim or cause of
action of any of the TEXCAN ENTITIES against any of the ANICOM
ENTITIES, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the
ANICOM ENTITIES of the covenants in this Section 6.5.
(b) Non-Competition. During the Restricted Period (as defined
below), within the United States and Canada (the "Restricted Area"),
none of the TEXCAN ENTITIES nor their respective Related Persons
(collectively the "TEXCAN PARTIES") shall, directly or indirectly, as
an employer, contractor, agent, principal, shareholder or partner
engage in the business of the wholesale distribution of Competitive
Products (as defined below) (either financially as a holder of equity
securities of such a business or of the Person that controls such a
business, or as creditor of such a business or of the Person that
controls such a business if any related Indebtedness is convertible
into equity of such business or Person, including in any capacity that
calls for the rendering of any acts of management, operation or control
of any such business).
(c) During the Restricted Period, within the Restricted Area,
none of the TEXCAN PARTIES shall act as a consultant or other
representative to or of any of the Persons listed on Schedule 6.5(c).
(d) Interference with Customer and Supplier Relationships.
During the Restricted Period, none of the TEXCAN PARTIES will, directly
or indirectly, as agent, consultant, stockholder, co-partner, or in any
other representative capacity, seek to influence or alter in any
materially adverse respect any ANICOM ENTITY's relationship with any
Person who is or was a customer, supplier or vendor of the Business (or
a successor-in-interest to such Person) during the Restricted Period.
-34-
<PAGE>
(e) Non-Hire of Employees. During the Restricted Period, none
of the TEXCAN PARTIES will, directly or indirectly, as agent,
consultant, stockholder, co- partner, or in any other representative
capacity, employ or engage any Person who is an employee of one or more
of the TEXCAN ENTITIES on the Closing Date unless, with respect to any
such employee who had entered into an employment Contract with an
ANICOM ENTITY having a stipulated term, such Contract has terminated or
expired or, unless, in the case of Norm Drewlo, such employment or
engagement commences at any time after the first anniversary of the
date hereof.
(f) Confidential Information. During the Restricted Period,
the TEXCAN PARTIES shall keep secret and retain in strictest
confidence, and shall not, without the prior written consent of ANICOM,
furnish or make available or disclose to any third party or use for the
benefit of one or more of the TEXCAN PARTIES or any third party, any
Confidential Information (as defined below). As used in this Section
6.5(f), "Confidential Information" means any information relating to
the Business as conducted by the TEXCAN ENTITIES or the business or
affairs of one or more of the ANICOM ENTITIES that may have been
disclosed by the ANICOM ENTITIES to the TEXCAN ENTITIES on or prior to
the date hereof, including, but not limited to, information relating to
the financial statements, business plans, forecasts, purchasing plans,
customer identities, potential customers, employees, suppliers,
equipment, programs, strategies and information, analyses, profit
margins or other proprietary information of the Business or one or more
of the ANICOM ENTITIES; provided, however, that Confidential
Information shall not include any information which is in the public
domain or becomes known in the industry through no wrongful act of any
of the TEXCAN PARTIES.
(g) Enforcement.
(i) The ANICOM ENTITIES shall be authorized and
entitled to obtain from any court of competent jurisdiction
temporary, preliminary and permanent injunctive relief as well
as other equitable relief without posting a bond, cash or
other security, which rights and remedies shall be cumulative
and in addition to any other rights or remedies to which the
ANICOM ENTITIES may be entitled.
(ii) If any court of competent jurisdiction shall
deem any of the foregoing restrictive covenants or
confidentiality agreements, or portion of any such covenant or
agreement, too extensive or unenforceable, the other
provisions of this Section 6.5 shall nevertheless stand and
remain enforceable according to its terms. In such
circumstance, the parties expressly authorize the court to
modify that covenant or agreement, or offending portion
thereof, so that the restrictions, limitations and scope of
the restrictive covenants and confidentiality agreements
extend for the longest period, comprise the largest territory
and are enforceable to the maximum permissible extent by law
under the circumstances, if so ordered by the court.
-35-
<PAGE>
(iii) In addition to any other damages or other
relief sought, the prevailing party in any enforcement action
pursuant to this Section 6.5 shall be entitled to its costs,
expenses and reasonable attorneys' fees incurred in the
enforcement of the provisions of this Section 6.5 from the
non-prevailing party, if so ordered by the court.
(h) Definitions. As used in Section 6.5 hereof, the following
terms shall have the following meanings:
"Restricted Period" shall mean the period of time commencing on the
Closing Date and ending on the date thirty (30) months after the
Closing Date.
"directly or indirectly, engage in" includes any direct or indirect
ownership, profit participation or other interest by any of the TEXCAN
PARTIES, whether as owner, stockholder, partner, joint venturer,
beneficiary or otherwise, in any Person; provided, however, that the
foregoing provisions shall not prevent any of the TEXCAN PARTIES from
(A) investing in businesses that engage in the wholesale distribution
of Competitive Products where such investments are incidental
investments in companies and constitute, in the aggregate, less than 5%
of the outstanding securities or voting interest of each of such
companies, (B) being involved in, owning or acquiring businesses an
incidental portion (such portion being deemed to be incidental if the
wholesale distribution of Competitive Products represents less than 5%
of the total assets or total revenues of the business involved in,
owned or being acquired by any of the TEXCAN PARTIES) of which is
derived from sales of the Competitive Products or (C) investing in
investment funds or investment partnerships which in turn invest in
companies or entities which may be engaged in the wholesale
distribution of Competitive Products so long as none of the TEXCAN
PARTIES nor any of their respective Related Persons exercise control
over such investment decision.
"Competitive Products" means the following products: (i) voice and data
communications wire, cable and connectivity products, (ii) wire, cable,
fiber optics and related computer network and connectivity products
used in sound, security, alarm and energy management systems and
signaling equipment for fire and life-safety systems, (iii) wire, cable
and connectivity products for use in electrical and electronic systems,
(iv) industrial cable, wiring and connectors for automation, computers
and robotics, and (v) cable television wire, cable, connectors and
safety products.
6.6 Waiver of Bulk Sales Compliance. The ANICOM ENTITIES hereby waive
compliance with the provisions of the Bulk Sales Act (Ontario), and any other
similar applicable bulk sales Legal Requirements in connection with the purchase
and sale of the Purchased Assets.
6.7 Retention of Records. With respect to the records, files, documents
and papers of the TEXCAN ENTITIES purchased by the ANICOM ENTITIES under Section
1.1(g), the ANICOM ENTITIES shall exert reasonable care to maintain such
records, files, documents and papers (i) with respect to TEXCAN U.S. for seven
(7) years from the end of the year to which they relate and (ii) with respect to
TEXCAN CN for six (6) years from the end of the year to which they relate, and
the ANICOM ENTITIES shall make such records, files, documents and papers
reasonably accessible to the TEXCAN ENTITIES in accordance with Section 6.3
hereof.
-36-
<PAGE>
6.8 Transfer Taxes. The ANICOM ENTITIES will be liable for and will pay
all sales and transfer taxes, federal taxes and all other taxes, duties or other
like charges properly payable upon and in connection with the conveyance and
transfer of the Purchased Assets by the TEXCAN ENTITIES to the ANICOM ENTITIES
save and except any income or capital taxes payable by the TEXCAN ENTITIES.
6.9 Investment Canada Act. The ANICOM ENTITIES shall give notice of the
acquisition of the Purchased Assets and the Business to the Director under the
Investment Canada Act in accordance with Section 12 thereof.
6.10 Circulation of Specified Liabilities Questionnaire. On the Closing
Date, the TEXCAN ENTITIES and the ANICOM ENTITIES shall circulate, or caused to
be circulated, to those employees of the TEXCAN ENTITIES who are branch
managers, vice presidents or corporate officers a questionnaire with respect to
the Specified Liabilities, in the form of Exhibit D attached hereto (the
"Manager Questionnaire"), and direct each such person to answer and return the
Manager Questionnaire to the ANICOM ENTITIES within twenty-one (21) days after
the Closing Date. Within five (5) days after the ANICOM ENTITIES' receipt of all
such Manager Questionnaires, the ANICOM ENTITIES shall deliver copies of all
such Manager Questionnaires, certified by an officer of ANICOM to be true and
complete copies of all Manager Questionnaires returned to the Anicom Entities.
6.11 Maintenance of Insurance. Effective as of the Closing Date, the
TEXCAN ENTITIES shall cause the ANICOM ENTITIES to be named as an additional
insured with respect to all of the insurance policies maintained by the TEXCAN
ENTITIES in relation to the Specified Liabilities as of the Closing Date arising
from the operations and business of the TEXCAN ENTITIES prior to the Closing
Date and shall take any and all actions reasonably necessary to maintain such
liability and umbrella liability insurance in respect thereof in full force and
effect after the Closing Date for a period of two (2) years therefrom.
6.12 Press Release. Each of the parties hereto hereby agrees that
except for the press release, in substantially the form of Exhibit E attached
hereto, such party will not disclose the Contemplated Transactions without the
other parties' consent.
7. Closing Conditions.
7.1 Conditions Precedent to the ANICOM ENTITIES' Obligations. The
performance of the obligations of the ANICOM ENTITIES under this Agreement to be
performed at the Closing is subject to the fulfillment on or prior to the
Closing Date of the following conditions (any of which may be waived by the
ANICOM ENTITIES in whole or in part):
-37-
<PAGE>
(a) Representations and Warranties. The representations and
warranties of the TEXCAN ENTITIES contained in this Agreement shall be
true and correct in all material respects when made and as of and as if
made on the Closing Date.
(b) Performance. All obligations and covenants required by
this Agreement to be performed or to be complied with by the TEXCAN
ENTITIES on or prior to the Closing Date shall have been duly performed
or complied with in all material respects.
(c) Delivery of Closing Documents. The TEXCAN ENTITIES shall
have delivered to the ANICOM ENTITIES on or prior to the Closing Date
the closing documents required to be delivered by the TEXCAN ENTITIES
pursuant to Section 8.2 of this Agreement, all in form and substance
reasonably satisfactory to the ANICOM ENTITIES.
(d) Absence of Proceedings. No suit, action, investigation or
other proceeding shall be pending or threatened before any court or
Government Entity which (i) seeks (or, in the case of an investigation,
may lead to a suit, action or proceeding which seeks) to restrain,
prohibit or obtain damages or other relief in connection with this
Agreement or the consummation of the Contemplated Transactions, (ii)
questions the validity or legality of such transactions, or (iii) could
reasonably be expected to have a TEXCAN Material Adverse Effect if
resolved adverse to the TEXCAN ENTITIES' interest.
(e) No Material Adverse Effect. There shall not have been a
TEXCAN Material Adverse Effect.
(f) HSR Act. Any applicable waiting period under the HSR Act
relating to the Contemplated Transactions shall have expired or been
terminated.
(g) Canadian Competition Act. The TEXCAN ENTITIES and the
ANICOM ENTITIES shall have filed all notices and information required
under Part IX of the Competition Act and satisfied any request for
additional information thereunder and the applicable waiting periods
and any extensions thereof shall have expired without the threat of
restraint or challenge or the TEXCAN ENTITIES and the ANICOM ENTITIES
shall have received an Advance Ruling Certificate pursuant to Section
102 of the Competition Act stating that the Director of Investigation
and Research of the Competition Bureau is satisfied that he would not
have sufficient grounds on which to apply for an order in respect of
the Contemplated Transactions.
(h) Accounting Matters. The ANICOM ENTITIES shall have
received a copy of a letter from KPMG addressed to TEXCAN CN, in the
form of Exhibit F attached hereto. The ANICOM ENTITIES shall have also
received a certificate, in the form of Exhibit G attached hereto,
executed by each of Ronald Stern, Norm Drewlo, J. Keith Vancoughnett
and Kevin Karr.
-38-
<PAGE>
7.2 Conditions Precedent to the TEXCAN ENTITIES' Obligations. The
performance of the obligations of the TEXCAN ENTITIES under this Agreement to be
performed at the Closing is subject to the fulfillment on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the ANICOM ENTITIES contained in this Agreement shall be
true and correct in all material respects when made and as of and as if
made on the Closing Date.
(b) Performance. All obligations and covenants required by
this Agreement to be performed or complied with by the ANICOM ENTITIES
on or prior to the Closing Date shall have been duly performed or
complied with in all material respects.
(c) Delivery of Closing Documents. The ANICOM ENTITIES shall
have delivered to the TEXCAN ENTITIES on or prior to the Closing Date
the closing documents required to be delivered by the ANICOM ENTITIES
pursuant to Section 8.3 of this Agreement, all in form and substance
reasonably satisfactory to the TEXCAN ENTITIES.
(d) Absence of Proceedings. No suit, action, investigation or
other proceeding shall be pending or threatened before any court or
Government Entity which (i) seeks (or, in the case of an investigation,
may lead to a suit, action or proceeding which seeks) to restrain,
prohibit or obtain damages or other relief in connection with this
Agreement or the consummation of the Contemplated Transactions, (ii)
questions the validity or legality of the Contemplated Transactions or
(iii) could reasonably be expected to have an ANICOM MATERIAL ADVERSE
EFFECT if resolved adverse to the ANICOM ENTITIES' interest.
(e) No Material Adverse Effect. There shall not have been an
ANICOM MATERIAL ADVERSE EFFECT.
(f) HSR Act. Any applicable waiting period under the HSR Act
relating to the Contemplated Transactions shall have expired or been
terminated.
(g) Canadian Competition Act. The TEXCAN ENTITIES and the
ANICOM ENTITIES shall have filed all notices and information required
under Part IX of the Competition Act and satisfied any request for
additional information thereunder and the applicable waiting periods
and any extensions thereof shall have expired without the threat of
restraint or challenge or the TEXCAN ENTITIES and the ANICOM ENTITIES
shall have received an Advance Ruling Certificate pursuant to Section
102 of the Competition Act stating that the Director of Investigation
and Research of the Competition Bureau is satisfied that he would not
have sufficient grounds on which to apply for an order in respect of
the Contemplated Transactions.
-39-
<PAGE>
8. Closing.
8.1 Closing Date. The closing of the Contemplated Transactions (the
"Closing") will take place at 2:00 p.m., local time, at the offices of Katten
Muchin & Zavis, on September 21, 1998 or at such other time and place as may be
mutually agreed upon by the parties hereto (such time and date being hereinafter
referred to as the "Closing Date").
8.2 Closing Deliveries By the TEXCAN ENTITIES. At the Closing, the
TEXCAN ENTITIES shall deliver to the ANICOM ENTITIES (or the ANICOM ENTITIES
shall have received):
(a) Bills of Sale and Assignment. Bills of Sale and
Assignment, substantially in the form attached hereto as Exhibit H-1,
H-2 and H-3 hereto, duly executed by TEXCAN CABLE, TEXCAN INTERNATIONAL
and TEXCAN CN, respectively, pursuant to which (i) each of TEXCAN CABLE
and TEXCAN INTERNATIONAL shall sell, transfer and convey the Purchased
Assets held thereby to ANICOM and (ii) TEXCAN CN shall sell, transfer
and convey the Purchased Assets held thereby to ANICOM ACQUISITION CN.
(b) Assignment and Assumption Agreements. Assignment and
Assumption Agreements, substantially in the form attached hereto as
Exhibit I-1, I-2 and I-3 hereto (the "Assignment and Assumption
Agreements"), duly executed by TEXCAN CABLE, TEXCAN INTERNATIONAL and
TEXCAN CN, respectively, pursuant to which (i) each of TEXCAN CABLE and
TEXCAN INTERNATIONAL shall assign the Assumed Liabilities thereof to
ANICOM and ANICOM shall assume such Assumed Liabilities and (ii) TEXCAN
CN shall assign the Assumed Liabilities thereof to ANICOM ACQUISITION
CN and ANICOM ACQUISITION CN shall assume such Assumed Liabilities.
(c) Escrow Agreement. The Escrow Agreement, duly executed by
the TEXCAN ENTITIES.
(d) Registration Rights Agreement. The Registration Rights
Agreement, in form and substance substantially similar to Exhibit J
hereto (the "Registration Rights Agreement"), duly executed by the
TEXCAN ENTITIES.
(e) Officer's Certificate. A certificate of an officer of each
of the TEXCAN ENTITIES dated the Closing Date certifying that the
conditions contained in Section 7.1 have been satisfied.
-40-
<PAGE>
(f) Opinion of TEXCAN ENTITIES' Counsel. Opinions of William
M. Curtis, United States counsel for the TEXCAN ENTITIES, McCarthy
Tetrault, Ontario counsel for the TEXCAN ENTITIES, and Bull, Houser &
Tupper, British Columbia counsel for the TEXCAN ENTITIES, each in form
and substance reasonably satisfactory to counsel for the ANICOM
ENTITIES.
(g) Resolutions. Certified copies of resolutions adopted by
the shareholders and the Board of Directors of each of the TEXCAN
ENTITIES authorizing the execution and delivery of this Agreement and
the Other TEXCAN Documents and consummation of the Contemplated
Transactions.
(h) Evidence of No Encumbrances. Lien searches dated prior to
the Closing Date showing that there are no financing statements,
registered security interests, writs of execution, taxes or other
Encumbrances (other than Permitted Encumbrances, all of which are
listed on Schedule 8.2(h)(1)) outstanding against any of the TEXCAN
ENTITIES or any of the Purchased Assets. The ANICOM ENTITIES shall have
received at Closing a pay-off letter, in form and substance
satisfactory to the ANICOM ENTITIES, from CIBC with respect to the Bank
Indebtedness such that all of CIBC's interests in the Purchased Assets
(including, but not limited to, the Permitted Encumbrances) will be
released upon payment in full of the amount set forth in such payoff
letter. The TEXCAN ENTITIES hereby acknowledge and agree (i) to take
all actions necessary after the Closing to cause all of the items
listed on Schedule 8.2(h)(2) Part A to be released promptly after the
Closing and (ii) that all of the items listed on Schedule 8.2(h)(2)
Part B shall, notwithstanding anything herein to the contrary,
constitute "Excluded Liabilities" for all purposes of this Agreement.
(i) Certificates of Good Standing or Similar Certificates.
Certificates of Good Standing or similar certificates with respect to
each of the TEXCAN ENTITIES issued by the jurisdiction of its
incorporation, dated not more than ten calendar days prior to the
Closing Date.
(j) Certificate or Articles of Incorporation or other Charter
Documents. A copy of the certificate or articles of incorporation or
other charter documents, and all amendments thereto, of each of the
TEXCAN ENTITIES, and a copy of the Bylaws of each of the TEXCAN
ENTITIES, and all amendments thereto, in each case, certified by an
officer of such TEXCAN ENTITY.
(k) Further Instruments. Such further instruments of
assignment, conveyance or transfer or other documents of further
assurance as the ANICOM ENTITIES may reasonably request.
-41-
<PAGE>
All documents and instruments delivered to the ANICOM ENTITIES shall be
in form and substance reasonably satisfactory to Katten Muchin & Zavis, counsel
for the ANICOM ENTITIES.
8.3 Closing Deliveries By the ANICOM ENTITIES. On the Closing Date, the
ANICOM ENTITIES shall deliver to the TEXCAN ENTITIES:
(a) Cash Portion of the Purchase Price. A confirmation of wire
transfer of the Cash Payment to, and receipt by, the TEXCAN ENTITIES.
(b) Purchase Shares. Stock certificate(s) representing the
Purchase Shares, subject to Section 2.1(d).
(c) Assignment and Assumption Agreements. Counterparts of the
Assignment and Assumption Agreements, duly executed by the appropriate
ANICOM ENTITIES.
(d) Escrow Agreement. A counterpart of the Escrow Agreement,
duly executed by the ANICOM ENTITIES and Harris.
(e) Registration Rights Agreement. A counterpart of the
Registration Rights Agreement, duly executed by ANICOM.
(f) Certificate of Incorporation. A copy of Anicom's
Certificate of Incorporation, including the Certificate of
Designations, Rights and Preferences setting forth the rights and
preferences of the Preferred Shares, certified by the Secretary of
Anicom.
(g) Officer's Certificate. A certificate of an officer of each
of the ANICOM ENTITIES dated the Closing Date certifying that the
conditions contained in Section 7.2 have been satisfied.
(h) Opinion of Counsel. An opinion of Katten Muchin & Zavis,
United States counsel for the ANICOM ENTITIES, and Stikeman, Elliott,
Canadian counsel for the ANICOM ENTITIES, each in form and substance
reasonably satisfactory to counsel for the TEXCAN ENTITIES.
(i) Certificates of Good Standing or Similar Certificates.
Certificates of Good Standing or similar certificates with respect to
each of the ANICOM ENTITIES issued by the jurisdiction of its
incorporation or formation, dated not more than ten calendar days prior
to the Closing Date.
-42-
<PAGE>
(j) Resolutions. Certified copies of resolutions adopted by
the Board of Directors of each of the ANICOM ENTITIES authorizing the
execution of this Agreement and consummation of the Contemplated
Transactions.
(k) Further Instruments. Such further instruments of
assignment, conveyance or transfer or other documents of further
assurance as the TEXCAN ENTITIES may reasonably request.
All documents and instruments delivered to the TEXCAN ENTITIES shall
be in form and substance reasonably satisfactory to McCarthy Tetrault, counsel
for the TEXCAN ENTITIES.
9. [Intentionally omitted]
10. Indemnification; Remedies.
10.1 Survival. All representations and warranties in this Agreement and
any certificate or document delivered pursuant to this Agreement will survive
the Closing until the second anniversary of the Closing Date, except that the
representations and warranties in Sections 4.21 and 4.22 will survive until the
fifth anniversary of the Closing Date. The right to indemnification,
reimbursement, or other remedy based on such representations and warranties by
the TEXCAN ENTITIES or the ANICOM ENTITIES will not be affected or limited by
any investigation conducted by the ANICOM ENTITIES or the TEXCAN ENTITIES.
10.2 Indemnification and Reimbursement by the TEXCAN ENTITIES . Subject
to the limitations set forth in this Section 10, the TEXCAN ENTITIES shall
jointly and severally indemnify and hold harmless the ANICOM ENTITIES and their
respective Related Persons (collectively, the "ANICOM PARTIES") and shall
reimburse the ANICOM PARTIES for any Losses arising from or in connection with:
(a) any breach of any representation or warranty made by the
TEXCAN ENTITIES in or pursuant to this Agreement, or any certificate or
document delivered by the TEXCAN ENTITIES pursuant to this Agreement;
(b) any breach by the TEXCAN ENTITIES of any covenant or
obligation of the TEXCAN ENTITIES in this Agreement;
(c) subject, for greater certainty, to Section 10.7(b) and
Section 10.9, any Specified Liabilities; and
(d) any Excluded Liabilities.
-43-
<PAGE>
10.3 Indemnification and Reimbursement by the ANICOM ENTITIES. Subject
to the limitations set forth in this Section 10, the ANICOM ENTITIES shall
jointly and severally indemnify and hold harmless the TEXCAN PARTIES, and shall
reimburse the TEXCAN PARTIES, for any Losses arising from or in connection with
(a) any breach of any representation or warranty made by the ANICOM ENTITIES in
or pursuant to this Agreement or in any certificate or document delivered by the
ANICOM ENTITIES pursuant to this Agreement, (b) any breach by the ANICOM
ENTITIES of any covenant or obligation of the ANICOM ENTITIES in this Agreement,
(c) any Assumed Liability including, without limitation, the Specified
Liabilities and (d) operation of the Business by the ANICOM ENTITIES after the
Closing.
10.4 Procedure for Indemnification -- Third Party Claims.
(a) Promptly after receipt by an indemnified party under Section 10.2
or 10.3 of a written assertion by a third party of a claim to which Section 10.2
or Section 10.3 applies (a "Claim"), such indemnified party shall, if a claim is
to be made against an indemnifying party under such Section, give notice to the
indemnifying party of such Claim with reasonable particularity, but the failure
to timely notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnified party's failure to give such notice in a timely
manner.
(b) If any Claim referred to in Section 10.4(a) is made against an
indemnified party and it gives notice to the indemnifying party of such Claim,
the indemnifying party will, unless the Claim involves Taxes, be entitled to
participate in the defense of such Claim and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Claim and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Claim and provide indemnification with respect to such Claim), to assume the
defense of such Claim with counsel satisfactory to the indemnified party and,
after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Claim, the indemnifying party will not,
as long as it diligently conducts such defense, be liable to the indemnified
party under such Section for any fees of other counsel or any other expenses
with respect to the defense of such Claim in each case subsequently incurred by
the indemnified party in connection with the defense of such Claim, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Claim, (a) it will be conclusively established for purposes of this
Agreement that the claims made in that Claim are within the scope of and subject
to indemnification; (b) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (i) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other Claims that may be made against the indemnified party; and (ii) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (c) the indemnifying party and, except as set forth in foregoing
clause (b), the indemnified party will have no liability with respect to any
compromise or settlement of such Claims effected without its consent. If notice
-44-
<PAGE>
is given to an indemnifying party of a Claim and the indemnifying party does
not, within thirty days after the indemnified party's notice is given (or such
shorter time period as is necessary to respond thereto), give notice to the
indemnified party of its election to assume the defense of such Claim, the
indemnifying party will be bound by any determination with respect to said Claim
or any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Claim may adversely
affect it or its respective Related Persons other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Claim, but the
indemnifying party will not be bound by any determination of a Claim so defended
or any compromise or settlement effected without its consent (which may not be
unreasonably withheld).
10.5 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
10.6 Escrow. Without limiting the ANICOM PARTIES' right after the term
of the Escrow Agreement or after the depletion of the full amount of the escrow
proceeds thereunder, any amounts owed by the TEXCAN ENTITIES to the ANICOM
PARTIES pursuant to this Section 10 and subject to the terms hereof shall be
first paid from the escrow pursuant to the terms of the Escrow Agreement.
10.7 Basket.
(a) The TEXCAN ENTITIES shall not be required to indemnify and
hold harmless the ANICOM PARTIES pursuant to this Agreement for any
Losses under Section 10.2(a) until such Losses have a value, in the
aggregate, of U.S.$250,000, at which time the full amount of any such
Losses shall then be owed.
(b) The TEXCAN ENTITIES shall not be required to indemnify and
hold harmless the ANICOM PARTIES pursuant to this Agreement for any
Losses under Section 10.2(c) except and to the extent set forth below:
(i) with respect to Claims relating to Specified Liabilities (A) in
connection with that certain products liability claim involving
Northland Forest Products and the fire at its plant or (B) described in
the Managers' Questionnaires, of which none of Ronald Stern, Norm
Drewlo, J. Keith Vancoughnett or Kevin Karr had actual current
knowledge as of the date hereof but if such persons had actual current
knowledge of such matter as of the date hereof, such knowledge would
have made the applicable one or more representations or warranties of
the TEXCAN ENTITIES herein untrue or incorrect, 80% of the full amount
of any such Losses) shall be owed; and (ii) with respect to Claims
relating to Specified Liabilities of which none of Ronald Stern, Norm
Drewlo, J. Keith Vancoughnett or Kevin Karr had actual current
-45-
<PAGE>
knowledge as of the date hereof and which were not expressly disclosed
in the Schedules hereto or in the Managers' Questionnaire (the "Unknown
Liabilities") no amount shall be owed until such Losses have a value,
in the aggregate, of U.S.$750,000, at which time 50% of the full amount
of any such Losses then be owed, and 50% of the full amount of any
Losses thereafter shall be owed.
(c) The ANICOM ENTITIES shall not be required to indemnify and
hold harmless the TEXCAN PARTIES pursuant to this Agreement for any
Losses under Section 10.3(a) until such Losses have a value, in the
aggregate, of U.S.$250,000, at which time the full amount of any such
Losses shall then be owed.
10.8 Cap. Neither the ANICOM ENTITIES nor the TEXCAN ENTITIES shall be
required to indemnify and hold harmless the other party pursuant to this
Agreement for any Losses if and to the extent such Losses, together with all
other Losses previously paid by such party, exceed U.S.$7,500,000 in the
aggregate (the "Cap"); provided however, that the obligations of (a) the TEXCAN
ENTITIES with respect to Section 10.2(b), Section 10.2(c) and Section 10.2(d)
and (b) the ANICOM ENTITIES with respect to Section 10.3(b), Section 10.3(c) and
Section 10.3(d) and under Section 10.3(a) solely with respect to Section 5.5,
shall not be subject to the Cap.
10.9 Other Limitations. The amount of any Losses shall be calculated
net of any resulting net insurance recovery (including net of any increase in
insurance premiums which may arise therefrom) actually received by the
indemnified party on account of such Losses, and, with respect to Losses
relating to Specified Liabilities, the TEXCAN ENTITIES' indemnification
obligation hereunder shall not apply to Claims which have not been asserted by
written notice delivered to the TEXCAN ENTITIES on or prior to September 21,
2000.
11. Certain Definitions. For purposes of this Agreement, the following terms
have the meanings set forth below:
"ANICOM Material Adverse Effect" means any event, change or effect that
is materially adverse to the condition (financial or otherwise), properties,
assets, liabilities, businesses, operations, results of operations or prospects
of the ANICOM ENTITIES, taken as a whole.
"Bank Indebtedness" means the aggregate liability of all of the TEXCAN
ENTITIES to CIBC, net of positive cash balances, including deposits in transit,
checks or other items or disbursements issued but not yet cleared and properly
accrued interest payable (net of interest due) all as accurately and completely
recorded in the accounts of the TEXCAN ENTITIES.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which either United States or Canadian federally chartered commercial banks
are required or authorized by applicable law or executive order to close.
.
-46-
<PAGE>
"Canadian Employee Benefit Plans" means any written employee benefit
plans, programs, agreements or arrangements for employees of TEXCAN CN in Canada
of any kind or nature whatsoever, including, but not limited to, all health or
other medical, life, disability or other insurance (whether insured or
self-insured), supplementary unemployment benefit, pension, retirement and
supplementary retirement plan, program, agreement or arrangement, but excluding
any plans, programs or arrangements maintained, contributed to or provided
pursuant to any applicable Legal Requirement or any Government Entity in Canada.
"Canadian GAAP" means Canadian generally accepted accounting
principles, consistently applied.
"Canadian Tax Act" means the Income Tax Act (Canada).
"CIBC" means the Canadian Imperial Bank of Commerce.
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" means all of the transactions contemplated
by this Agreement, including, but not limited to:
(a) the purchase of all of the Purchased Assets by the
ANICOM ENTITIES and the payment of the Purchase Price therefor,
including issuance of the Purchase Shares;
(b) the execution, delivery, and performance of the Other
TEXCAN Documents and the Other ANICOM Documents; and
(c) the performance by the ANICOM ENTITIES and the TEXCAN
ENTITIES of their respective covenants and obligations under this
Agreement.
"Contract" means any written agreement, contract, obligation, promise,
understanding, arrangement or undertaking (whether express or implied) that is
legally binding.
"Effective Date" has the meaning ascribed to such term in Section
2.1(a).
"Employee Benefit Plans" means U.S. Employee Benefit Plans and/or
Canadian Employee Benefit Plans, as the context requires.
"Employment Obligations" shall mean, with respect to the TEXCAN
ENTITIES, (i) accrued but unpaid wages, salary, bonuses, benefits and vacation
and sick pay payable to current employees (other than Ronald Stern or Kevin
Karr), to the extent included in the Assumed Liabilities and (ii) severance pay,
termination pay, reasonable notice of termination of employment or pay in lieu
of such notice, damages for wrongful dismissal or other employee benefits or
-47-
<PAGE>
Claims, including overtime pay, public holiday pay and vacation pay, payable to
any Continued Employee or any Discontinued Employee, whether arising or accruing
prior to or after the Closing, and (ii) any applicable obligation to give
advance notice of the Contemplated Transactions to any employee of the TEXCAN
ENTITIES.
"Encumbrance" means any claim, encumbrance, pledge, charge, security
interest, equitable interest, collateral assignments, bonds for deed, mortgages,
hypothecations, assessments, option, right of first refusal or preemptive right,
condition, or other restriction of any kind, including any restriction on use,
voting (in the case of any security), transfer, receipt of income, or exercise
of any other attribute of ownership.
"Environmental Legal Requirements" means, with respect to a Person, all
applicable Legal Requirements existing as of the Closing Date relating to public
health and safety, and pollution and protection of human health and the
environment, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss.9601 et seq.,
the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss.6901
et seq., the Emergency Planning and Community Right-to-Know Act ("Right- to-Know
Act"), 42 U.S.C. ss.11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss.7401
et seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33 U.S.C.
ss.1251 et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss.2601 et
seq., the Safe Drinking Water Act, 42 U.S.C. ss.300f et seq., and the Hazardous
Materials Transportation Act, 49 U.S.C. ss.1801, and similar Canadian federal,
provincial or other Legal Requirements, all as amended, and any regulations,
binding and enforceable rules, ordinances adopted promulgated pursuant thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"First Person", as used in the definitions set forth in this Article
11, means the Person as to whom the subject term is being defined.
"Governmental Authorization" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Government Entity or pursuant to any
Legal Requirement.
"Government Entity" means any governmental authority, body or agency
(whether federal, state, provincial, county, city, municipal, local or
otherwise, including, but not limited to, any instrumentality, division, agency
or department thereof).
"Hazardous Substances" means any pollutant or contaminant (as that term
is defined in 42 U.S.C. ss.9601(33) or another applicable Environmental Legal
Requirement), toxic pollutant (as that term is defined in 33 U.S.C. ss.1362(13)
or another applicable Environmental Legal Requirement), hazardous substance (as
that term is defined in 42 U.S.C. ss.ss.9601 et seq. and the regulations
promulgated thereunder or another applicable Environmental Legal Requirement),
hazardous chemical (as that term is defined by 29 C.F.R. ss.1910.1200(c) or
-48-
<PAGE>
another applicable Environmental Legal Requirement), hazardous waste (as that
term is defined in 42 U.S.C. ss.6903(5)), radioactive material, including, but
not limited to, any naturally occurring radioactive material, any source,
special nuclear or by-product material as defined in 42 U.S.C. ss.ss.2011 et
seq. or another applicable Environmental Legal Requirement, friable asbestos and
asbestos containing material, polychlorinated biphenyls over 50 parts per
million, petroleum and petroleum waste, including crude oil or any petroleum
derived substance, waste or breakdown or decomposition product thereof, or any
constituent of any such petroleum substance or waste, or any substance or
material which because of its toxicity, corrosiveness, ignitability, reactivity
or infectious characteristics poses a threat to human health or the environment
and which is subject to any Environmental Legal Requirements.
"Intellectual Property" means all proprietary information, all
trademarks, service marks, trade dress, trade names and corporate names; all
registered and unregistered statutory and common law copyrights; all
registrations, applications and renewals for any of the foregoing and all other
proprietary rights relating to the production, sale or service of products and
the conduct of the Business.
"Legal Requirement" means, with respect to a Person, any federal,
state, provincial, local, municipal, foreign, or other constitution, ordinance,
regulation, statute, treaty, or other law adopted, enacted, implemented, or
promulgated by or under the authority of any Government Entity or by the
eligible voters of any jurisdiction, and any written and enforceable agreement,
approval, consent, condition, injunction, judgment, license, order, or permit by
or with any Government Entity and to which the Person is a party or by which the
Person is bound.
"Losses" means any and all liabilities, obligations, duties, demands,
claims, actions, causes of action, assessments, losses, costs, damages,
deficiencies, taxes, fines or expenses, including, but not limited to, interest,
penalties, reasonable attorneys' fees and all amounts paid in investigation,
defense or settlement of any of the foregoing, but expressly excluding
consequential damages.
"Organizational Documents" means, (i) the articles or certificate of
incorporation and the bylaws of a corporation; (ii) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (iii) any amendment to any of the foregoing.
"Permitted Bank Indebtedness" means, at the date as of which any
determination is being made, the Bank Indebtedness outstanding as of such date,
which amount shall not exceed U.S.$39,000,000 in the aggregate.
-49-
<PAGE>
"Permitted Encumbrance" means the following Encumbrances:
(a) Encumbrances relating to the Permitted Bank Indebtedness
as of the Closing Time;
(b) Encumbrances for Taxes, assessments and other governmental
charges not yet due and payable or due but not delinquent, and in each
case, to be accrued on the Closing Statement;
(c) mechanics', workmen's, repairmen's, warehousemen's,
carriers' or other like Encumbrances arising or incurred in the
ordinary course of business and relating to obligations to be accrued
on the Closing Statement;
(d) reservations, limitations, provisos and conditions
expressed in any original grant of land and other minor imperfections
of title that do not affect the use thereof as contemplated by the
Business;
(e) the provisions of governing municipal by-laws, including
those relating to zoning;
(f) any rights of expropriation, access or use, or any other
similar rights conferred or reserved by or in any federal, state or
provincial statutes; and
(g) the Encumbrances set forth on Schedule 8.2(h)(1).
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, limited liability
company, unlimited liability company or other entity or any Government Entity.
"Related Person" with respect to a particular individual means:
(a) each other member of such individual's Family; and
(b) any Person that is, directly or indirectly, controlled by
any one or more members of such individual's Family.
With respect to a specified Person, other than an individual, any
Person that, directly or indirectly, controls, is controlled by, or is
under common control with such specified Person.
For purposes of this definition, the "Family" of an individual includes
(i) such individual, (ii) the individual's spouse and former spouses, (iii) any
lineal ancestor or lineal descendant of the individual, or (iv) a trust for the
benefit of the foregoing. A Person will be deemed to control another Person, for
-50-
<PAGE>
purposes of this definition, if the first Person possesses, directly or
indirectly, the power to direct, or cause the direction of, the management
policies of the second Person, (x) through the ownership of voting securities,
(y) through common directors, trustees or officers, or (z) by contract or
otherwise.
"Securities Legal Requirements" means, with respect to a Person, all
applicable Legal Requirements relating to the issuance, ownership or sale or
transfer of securities including, but not limited to, the U.S. Securities Act,
the Securities Exchange Act of 1934, as amended, and any state or provincial
securities or "blue sky" Legal Requirements.
"Specified Liabilities" shall mean Losses arising from or with respect
to (A) any patent, trademark, copyright or other Intellectual Property claims,
(B) any labor or employment claims (including, without limitation, sexual
harassment claims and age, sex and other discrimination claims but excluding any
severance or termination costs arising as a result of the Closing), (C) any
claims involving the pollution or contamination of the environment, including
air, land and water or health and safety claims (including, without limitation,
occupational health and safety claims) of any employee of TEXCAN ENTITIES, (D)
any product liability claims, (E) any other pending action, suit, proceeding or
governmental investigation, whether existing at the Closing Date or not, in each
case arising out of or relating to the conduct of one or more of the TEXCAN
ENTITIES in the ordinary course of business at any time on or prior to the
Closing Date and (F) a U.S. Employee Benefit Plan (other than a plan listed on
Schedule 4.23(a)(i)) which Loss is not accrued for in the Closing Statement.
"Tax" or "Taxes" means all taxes, charges, withholdings, fees, levies
or other assessments, including, but not limited to, all net income, gross
income, gross receipts, real or personal property, tollgate, capital, net worth,
sales, use, ad valorem, goods and services, transfer, franchise, profits,
license, leasing, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp, occupation, services,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, including, but not limited to, any liquidated damages assessed
pursuant to a customs bond, together with any interest and any penalties,
additions to tax or additional amounts imposed by any federal, state,
provincial, local or other taxing authority, domestic or foreign, whether paid
directly thereto or to any other Person.
"Tax Returns" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
taxing authority or other Government Entity in connection with the
determination, assessment, collection, or payment of any Tax or in connection
with the administration, implementation, or enforcement of or compliance with
any Legal Requirement relating to any Tax.
"TEXCAN ENTITIES' Knowledge" means, at all times prior to the date
hereof, the actual current knowledge of Ronald Stern, Norm Drewlo, J. Keith
Vancoughnett and Kevin Karr.
-51-
<PAGE>
"TEXCAN Material Adverse Effect" means any event, change or effect that
is materially adverse to the financial condition or results of operations of the
TEXCAN ENTITIES, determined on a combined basis.
"U.S. Code" means the United States Internal Revenue Code of 1986, as
amended.
"U.S. Employee Benefit Plans" means any written employee benefit plans,
programs or arrangements for employees of TEXCAN U.S. in the United States of
any kind or nature whatsoever, whether or not pursuant to any applicable Legal
Requirement of any Government Entity in the United States or otherwise,
including, but not limited to, any personnel plan (including vacation time,
holiday pay and sick leave); material fringe benefit plan; medical, life,
health, dental or disability benefit plan, excess benefit plan, top hat benefit
plan; or pension and employment benefit plan.
"U.S. GAAP" means United States generally accepted accounting
principles, consistently applied.
"U.S. Securities Act" means the United States Securities Act of 1933,
as amended.
12. Miscellaneous
12.1 Assignment. This Agreement shall not be assigned by any party
without the prior written consent of the other party, provided, however, that
(a) the TEXCAN ENTITIES hereby consent to the assignment by the ANICOM ENTITIES
of their benefits hereunder (i) to the lenders of the ANICOM ENTITIES as
security for borrowings, (ii) to any Related Persons of one or more of the
ANICOM ENTITIES, and (iii) to any successor in interest or purchaser of all or
substantially all of the Business from the ANICOM ENTITIES and (b) the ANICOM
ENTITIES hereby consent to the assignment by the TEXCAN ENTITIES of their
benefits hereunder (i) to the lenders of TEXCAN ENTITIES as security for
borrowings, (ii) to any Related Persons of one or more of the TEXCAN ENTITIES
and (iii) to any successor in interest or purchaser of all or substantially all
of the assets of the TEXCAN ENTITIES, provided, that in each such case under
clauses (a) and (b) of this Section 12.1 any such assignee assumes all of the
obligations of the assignor hereof. Such assignments, however, shall not release
any party from its duties and obligations under this Agreement. Subject to the
foregoing, this Agreement shall be for the benefit of and shall be binding upon
the parties hereto and their respective successors and assigns.
12.2 Choice of Law; Consent to Jurisdiction; Attornment. This Agreement
shall be construed in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this Agreement shall
be governed by, the law of the Province of Ontario and of Canada applicable
therein, and the parties hereto irrevocably consent to the personal jurisdiction
of the Province of Ontario with respect thereto. For the purpose of all legal
proceedings, this Agreement will be deemed to have been performed in the
Province of Ontario and the courts of the Province of Ontario will have
jurisdiction to entertain any action arising under this Agreement. Each of the
ANICOM ENTITIES and of the TEXCAN ENTITIES hereby attorns to the jurisdiction of
the courts of the Province of Ontario.
-52-
<PAGE>
12.3 Appointment of Agent for Service.
(a) Each of the ANICOM ENTITIES hereby nominates, constitutes and
appoints Stikeman, Elliott (the "ANICOM Agent"), Barristers and Solicitors, of
the City of Toronto its true and lawful agent to accept service of process and
to receive all lawful notices in respect of any action arising under this
Agreement (other than any notice that is to be given by one party hereto to
another pursuant to Section 12.4). Until due and lawful notice of the
appointment of another and subsequent agent in the Province of Ontario has been
given to and accepted by the ANICOM Agent, service of process or of papers and
such notices upon the ANICOM Agent will be accepted by each of the ANICOM
ENTITIES as sufficient service.
(b) Each of the TEXCAN ENTITIES hereby nominates, constitutes and
appoints McCarthy Tetrault (the "TEXCAN Agent"), Barristers and Solicitors, of
the City of Toronto its true and lawful agent to accept service of process and
to receive all lawful notices in respect of any action arising under this
Agreement (other than any notice that is to be given by one party hereto to
another pursuant to Section 12.4). Until due and lawful notice of the
appointment of another and subsequent agent in the Province of Ontario has been
given to and accepted by the TEXCAN Agent, service of process or of papers and
such notices upon the TEXCAN Agent will be accepted by each of the TEXCAN
ENTITIES as sufficient service.
12.4 Notices. All notices, demands and requests required or permitted
to be given hereunder shall in every case be in writing and shall be deemed duly
given when (a) delivered personally, (b) when sent by telecopier, provided that
a copy is sent by means described in clause (c) or (d) hereof, (c) five (5)
Business Days after being deposited in the United States or Canadian mail,
registered or certified mail, return receipt requested, or (d) one (1) Business
Day after being dispatched by an overnight courier service nationally recognized
in both U.S. and Canada (such as Federal Express), to the parties at the
addresses as set forth below or at such other addresses as may be furnished in
writing:
If to the ANICOM ENTITIES:
Anicom, Inc.
6133 N. River Road
Suite 1000
Rosemont, Illinois 60018
Attention: Gregory E. Fix
Telecopy No.: 847/518-8777
-53-
<PAGE>
With a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Jeffrey R. Patt, Esq.
Telecopy No.: 312/902-1061
If to the TEXCAN ENTITIES:
Tricontinental Industries, Ltd.
Suite 650
375 Water Street
Vancouver, British Columbia
Canada V6B 5C6
Attention: Ronald Stern
Telecopy No.: 604/681-8861
With a copy to:
McCarthy Tetrault
TD Bank Tower
Toronto-Dominion Center
Suite 4700
Toronto, Ontario M5K 1E6
Attention: W. Iain Scott, Esq.
Telecopy No.: 416-868-0673
12.5 Post-Closing. As soon as practicable after the Closing, the TEXCAN
ENTITIES shall deliver to the ANICOM ENTITIES certificates of payment issued by
the provinces in which the TEXCAN ENTITIES conduct business, other than Ontario,
to the effect that all requisite sales taxes have been paid by the TEXCAN
ENTITIES.
12.6 Headings; Context. The headings of the sections and paragraphs
contained in this Agreement are for convenience of reference only and do not
form a part hereof and in no way modify, interpret or construe the meaning of
this Agreement.
12.7 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
hereto and delivered to the other.
12.8 Expenses With Respect to Transaction. Except as expressly set
forth herein, each of the ANICOM ENTITIES and the TEXCAN ENTITIES shall pay all
fees, costs and expenses incurred by it in connection with this Agreement and
the Contemplated Transactions, including, but not limited to, the fees and
expenses of their attorneys, accountants and other consultants and agents.
-54-
<PAGE>
12.9 Completeness of Agreement. This Agreement, and the Schedules
hereto and the other documents referred to or provided for herein represent the
entire contract among the parties with respect to the subject matter hereof,
supersede all prior agreements between the parties including, without
limitation, the Letter of Intent, dated August 6, 1998, between ANICOM and the
TEXCAN ENTITIES, and shall not be modified or affected by any offer, proposal,
statement or representation, oral or written, made by or for any party in
connection with the negotiation of the terms hereof.
12.10 Amendment and Waiver. This Agreement may be amended, or any
provision of this Agreement may be waived, provided that any such amendment or
waiver will be binding on a party hereto only if such amendment or waiver is set
forth in writing executed by such party. The waiver of any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any other breach.
12.11 Preamble; Preliminary Recitals. The Preliminary Recitals set
forth in the Preamble hereto are hereby incorporated and made a part of this
Agreement.
12.12 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party hereto.
12.13 Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any Person, other than the parties
hereto and their respective permitted successors and assigns, any rights or
remedies under or by reason of this Agreement, such third parties specifically
including, but not limited to, any employees of any of the TEXCAN ENTITIES.
12.14 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
-55-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed and delivered in its name and on its behalf, all as of the
day and year first above written.
ANICOM, INC.
By: /s/ DONALD C. WELCHKO
---------------------
Title: Vice President and Chief Financial Officer
------------------------------------------
ANICOM MULTIMEDIA WIRING SYSTEMS
INCORPORATED
By: /s/ DONALD C. WELCHKO
---------------------
Title: Vice President and Chief Financial Officer
------------------------------------------
TEXCAN CABLES INC.
By: /s/ KEVIN D. KARR
-----------------
Title: Vice President - Finance
------------------------
TEXCAN CABLES INTERNATIONAL, INC.
By: /s/ KEVIN D. KARR
-----------------
Title: Vice President - Finance
------------------------
TEXCAN CABLES LIMITED
By: /s/ KEVIN D. KARR
-----------------
Title: Vice President - Finance
------------------------
-56-
<PAGE>
GLOSSARY OF DEFINED TERMS
Page
----
Agreement..........................................................-6-
ANICOM ..........................................................-6-
ANICOM ACQUISITION CN..............................................-6-
ANICOM ENTITIES....................................................-6-
ANICOM ENTITY......................................................-6-
TEXCAN CABLE.......................................................-6-
TEXCAN INTERNATIONAL...............................................-6-
TEXCAN U.S.........................................................-6-
TEXCAN CN..........................................................-6-
TEXCAN ENTITIES....................................................-6-
TEXCAN ENTITY......................................................-6-
Business ..........................................................-6-
Purchased Assets...................................................-7-
Tangible Personal Property.........................................-7-
Inventory..........................................................-7-
Excluded Assets....................................................-8-
Purchase Price.....................................................-9-
Outstanding Check Funds...........................................-10-
Common Shares.....................................................-10-
Preferred Shares..................................................-10-
Purchase Shares...................................................-10-
Harris .........................................................-10-
Escrow Agreement..................................................-10-
TEXCAN Notional Equity............................................-10-
Closing Statement.................................................-11-
September Income Statement........................................-11-
Expert Notice.....................................................-11-
Independent Accounting Firm.......................................-11-
IRS .........................................................-13-
Accounts Payable..................................................-14-
Assumed Liabilities...............................................-14-
Transaction Documents.............................................-15-
Excluded Liabilities..............................................-15-
Third Party Guaranties............................................-15-
Other TEXCAN Documents............................................-15-
HSR Act .........................................................-16-
Competition Act...................................................-16-
Government Filings................................................-16-
TEXCAN Consents...................................................-16-
TEXCAN CN Financial Statements....................................-17-
TEXCAN U.S. Financial Statements..................................-17-
-57-
<PAGE>
Page
----
Interim Balance Sheet.............................................-19-
Permits .........................................................-21-
Scheduled U.S. Plans..............................................-24-
Scheduled Canadian Plans..........................................-25-
Scheduled Plans...................................................-25-
Other ANICOM Documents............................................-27-
SEC .........................................................-28-
ANICOM SEC Reports................................................-28-
Rights .........................................................-29-
Non-Union Employees...............................................-31-
Union Employees...................................................-31-
Continued Employee................................................-31-
Continued Employees...............................................-31-
Discontinued Employee.............................................-32-
Discontinued Employees............................................-32-
Statutory Termination Date........................................-32-
Statutory Notice Period...........................................-32-
Restricted Area...................................................-34-
TEXCAN PARTIES....................................................-34-
Confidential Information..........................................-35-
Manager Questionnaire.............................................-37-
Closing .........................................................-40-
Closing Date......................................................-40-
Assignment and Assumption Agreements..............................-40-
Registration Rights Agreement.....................................-40-
ANICOM PARTIES....................................................-43-
Unknown Liabilities...............................................-45-
Cap .........................................................-46-
ANICOM Material Adverse Effect....................................-46-
Bank Indebtedness.................................................-46-
Business Day......................................................-46-
Canadian Employee Benefit Plans...................................-46-
Canadian GAAP.....................................................-47-
Canadian Tax Act..................................................-47-
CIBC .........................................................-47-
Consent .........................................................-47-
Contemplated Transactions.........................................-47-
Contract .........................................................-47-
Effective Date....................................................-47-
Employee Benefit Plans............................................-47-
Employment Obligations............................................-47-
Encumbrance.......................................................-47-
-58-
<PAGE>
Page
----
Environmental Legal Requirements..................................-48-
ERISA .........................................................-48-
First Person......................................................-48-
Governmental Authorization........................................-48-
Government Entity.................................................-48-
Hazardous Substances..............................................-48-
Intellectual Property.............................................-49-
Legal Requirement.................................................-49-
Losses .........................................................-49-
Organizational Documents..........................................-49-
Permitted Bank Indebtedness.......................................-49-
Permitted Encumbrance.............................................-49-
Person .........................................................-50-
Related Person....................................................-50-
Securities Legal Requirements.....................................-50-
Specified Liabilities.............................................-50-
Tax .........................................................-51-
Taxes .........................................................-51-
Tax Returns.......................................................-51-
TEXCAN ENTITIES' Knowledge........................................-51-
TEXCAN Material Adverse Effect....................................-51-
U.S. Code.........................................................-51-
U.S. Employee Benefit Plans.......................................-51-
U.S. GAAP.........................................................-52-
U.S. Securities Act...............................................-52-
ANICOM Agent......................................................-52-
TEXCAN Agent......................................................-53-
Accounts Payable................................................... 7
Accounts Receivable................................................ 12
Agreement.......................................................... 1
ANICOM............................................................. 1
ANICOM PARTIES..................................................... 35
ANICOM ACQUISITION CN.............................................. 1
ANICOM ENTITY...................................................... 1
ANICOM ENTITIES.................................................... 1
ANICOM SEC Reports................................................. 21
ANICOM Material Adverse Effect..................................... 38
Assigned Contract.................................................. 13
Assigned Contracts................................................. 13
Assignment and Assumption Agreements............................... 32
Assumed Liabilities................................................ 8
-59-
<PAGE>
Page
----
Bank Indebtedness.................................................. 38
Business Day....................................................... 38
Business Real Estate............................................... 14
Business........................................................... 1
Canadian Employee Benefit Plans.................................... 38
Canadian Tax Act................................................... 39
Canadian GAAP...................................................... 39
Cap................................................................ 38
Cash Payment....................................................... 4
Claim.............................................................. 39
Closing............................................................ 31
Closing Date....................................................... 31
Closing Statement.................................................. 5
Common Shares...................................................... 4
Competition Act.................................................... 9
Confidential Information........................................... 27
Consent............................................................ 39
Contemplated Transactions.......................................... 39
Continued Employees................................................ 24
Continued Employee................................................. 24
Contract........................................................... 39
Discontinued Employees............................................. 24
Discontinued Employee.............................................. 24
Effective Date..................................................... 4
Effective Date..................................................... 39
Employee Benefit Plans............................................. 39
Employment Obligations............................................. 39
Encumbrance........................................................ 40
Environmental Legal Requirements................................... 40
ERISA.............................................................. 40
Escrow Agreement................................................... 4
Excluded Assets.................................................... 3
Excluded Liabilities............................................... 8
Expert Notice...................................................... 5
First Person....................................................... 40
Government Filings................................................. 9
Government Entity.................................................. 40
Governmental Authorization......................................... 40
Harris............................................................. 4
Hazardous Substances............................................... 40
HSR Act............................................................ 9
Independent Accounting Firm........................................ 5
-60-
<PAGE>
Page
----
Intellectual Property.............................................. 41
Interim Balance Sheet.............................................. 12
Inventory.......................................................... 2
IRS................................................................ 7
Legal Requirement.................................................. 41
Lender............................................................. 33
Losses............................................................. 41
Manager Questionnaire.............................................. 29
Non-Union Employees................................................ 24
Organizational Documents........................................... 41
Other TEXCAN Documents............................................. 9
Other ANICOM Documents............................................. 20
Permits............................................................ 14
Permitted Bank Indebtedness........................................ 41
Permitted Termination.............................................. 34
Permitted Encumbrance.............................................. 41
Person............................................................. 42
Plan Affiliate..................................................... 42
Preferred Shares................................................... 4
Purchase Price..................................................... 4
Purchase Shares.................................................... 4
Purchased Assets................................................... 1
Registration Rights Agreement...................................... 32
Related Person..................................................... 42
Restricted Area.................................................... 26
Rights............................................................. 22
Scheduled U.S. Plans............................................... 17
Scheduled Canadian Plans........................................... 18
Scheduled Plans.................................................... 18
SEC................................................................ 21
Securities Legal Requirements...................................... 43
September Income Statement......................................... 5
Specified Liabilities.............................................. 43
Statements......................................................... 5
Statutory Termination Date......................................... 24
Statutory Notice Period............................................ 24
Tangible Personal Property......................................... 2
Tax Returns........................................................ 43
Tax................................................................ 43
Taxes.............................................................. 43
TEXCAN Consents.................................................... 9
TEXCAN Financial Statements........................................ 10
-61-
<PAGE>
Page
----
TEXCAN Notional Equity............................................. 4
TEXCAN CABLE....................................................... 1
TEXCAN ENTITIES.................................................... 1
TEXCAN U.S......................................................... 1
TEXCAN CN.......................................................... 1
TEXCAN Material Adverse Effect..................................... 43
TEXCAN ENTITY...................................................... 1
TEXCAN INTERNATIONAL............................................... 1
TEXCAN ENTITIES' Knowledge......................................... 43
TEXCAN PARTIES..................................................... 26
Transaction Documents.............................................. 8
U.S. Code.......................................................... 43
U.S. Securities Act................................................ 44
U.S. GAAP.......................................................... 44
U.S. Employee Benefit Plans........................................ 44
Uncleared Checks................................................... 8
Union Employees.................................................... 24
Unknown Liabilities................................................ 37
-62-
<PAGE>
List of Schedules
-----------------
The following is a list describing the contents of the omitted
Schedules. The Registrant hereby agrees to furnish supplementally a copy of any
omitted Schedule to the Commission upon request.
Schedule 1.2 Investments of the Texcan Entities
Schedule 2.4 Allocation of Purchase Price
Schedule 4.1 Directors and Officers of the Texcan Entities
Schedule 4.3 Conflicts
Schedule 4.13 Contracts
Schedule 4.14(a) Business Real Estate
Schedule 4.15 Intellectual Property
Schedule 4.18 Litigation
Schedule 4.19 Collective Bargaining Agreement
Schedule 4.23(a)(i) U.S. Employee Benefit Plans
Schedule 4.23(b)(i) Canadian Employee Benefit Plans
Schedule 4.23(b)(ii) Description of Scheduled Canadian Plans
Schedule 4.25 Independent Sales Representative of Texcan Cables
International, Inc.
Schedule 4.26 Insurance Claims
Schedule 4.28 Interests of the Texcan Entities in Competitors,
Suppliers or Customers
Schedule 6.5(c) Restricted Persons under Non-Competition Clause
Schedule 8.2(h)(1) Permitted Encumbrances
Schedule 8.2(h)(2) Certain Encumbrances
-63-
Exhibit 4.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK
OF
ANICOM, INC.
Anicom, Inc. (the "Company"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that, pursuant to authority conferred upon the Board of Directors of the Company
by the Certificate of Incorporation, as amended, of the Company, and pursuant to
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Company at a meeting duly held, adopted resolutions
providing for the designations, preferences and relative, participating,
optional or other rights, and the qualifications, limitations or restrictions
thereof, of Twenty Thousand (20,000) shares of Series B Convertible Preferred
Stock, of the Company, as follows:
RESOLVED, that the Company is authorized to issue 20,000
shares of Series B Convertible Preferred Stock (the "Series B Preferred
Stock"), $.01 par value (the "Series B Preferred Shares"), which shall
have the following powers, designations, preferences and other special
rights:
(1) Dividends and Liquidation Preference. The holders of the
Series B Preferred Shares shall be entitled to receive on each share
issued and outstanding, out of assets legally available for such
purpose, cumulative preferential dividends which shall accrue and
compound quarterly on each March 1, June 1, September 1 and December 1
(each, a "Dividend Reference Date"), commencing to accrue on the date
of issuance of such Series B Preferred Share (the "Issuance Date") at
the rate of three percent (3%) per annum of the Liquidation Preference
(as defined below); such dividends shall be cumulative, and accrue
daily, whether or not earned, declared, or legally available for
payment, from and after the Issuance Date up to and including the date
the Series B Preferred Shares shall no longer be outstanding. Accrued
dividends shall be payable, in arrears, in cash on each March 1 and
September 1, beginning March 1, 1999 (each, a "Dividend Payment Date").
The liquidation preference of the Series B Preferred Shares shall be
-64-
<PAGE>
$1,000.00 per share plus any accrued and unpaid dividends through the
date of payment (in the case of a redemption or Liquidation) or
conversion, as the case may be (the "Liquidation Preference").
(2) Voting Rights. The Series B Preferred Shares will not be
entitled to any voting rights of any kind, whether as a separate class
or together with other classes or series of securities, except that the
holders of the Series B Preferred Shares shall be entitled to the
following rights: (i) the Series B Preferred Shares shall vote as a
separate class with respect to any proposed amendments to the terms and
conditions of the Series B Preferred Shares that would be adverse to
the holders of the Series B Preferred Shares; (ii) so long as the
Initial Holder or its Permitted Transferees own any of the then
outstanding Series B Preferred Shares, following the occurrence of an
Event of Noncompliance and until such Event of Noncompliance is cured,
the Initial Holder or its Permitted Transferees shall, collectively, be
entitled to vote together with the holders of Common Stock, as one
class, on an as converted basis at the then applicable Conversion Ratio
(as defined below) all Series B Preferred Shares beneficially owned
thereby (as if such Series B Preferred Shares had been fully converted
immediately prior to the date on which a date of record is taken for
such vote, or, if no record is taken, the date as of which the record
holders of Common Stock entitled to vote are to be determined); (iii)
the right to elect the Series B Directors to the extent provided for in
Section 3(e) hereof; (iv) so long as the Initial Holder or its
Permitted Transferees own any of the then outstanding Series B
Preferred Shares, the affirmative vote of the holders of a majority of
the then outstanding Series B Preferred Shares, voting as a separate
class and as a single voting group, shall be necessary for authorizing,
effectuating or validating any Adverse Organic Change; (v) so long as
the Initial Holder or its Permitted Transferees own any of the then
outstanding Series B Preferred Shares, in the event that the Company
desires to purchase or redeem in excess of 5% of the outstanding shares
of any class of Junior Securities in one or more transactions during
any twelve (12) consecutive month period (the "5% Threshold"), before
purchasing or redeeming any Junior Securities in excess of such 5%
Threshold during any such calendar quarter, the Company shall first
offer to purchase or redeem from the Initial Holder and its Permitted
Transferees all of the outstanding Series B Preferred Shares owned by
the Initial Holder and its Permitted Transferees at a price equal to
the Liquidation Preference as of such date; and (vi) such other voting
rights as may be provided by law.
(3) Redemption.
(a) Mandatory Redemption. On the fifth anniversary of
the Issuance Date (the "Mandatory Redemption Date"), the Company shall
redeem all (but, subject to Section 3(e) hereof, not less than all) of
the then outstanding Series B Preferred Shares for a price per share
(the "Redemption Price") equal to the Liquidation Preference as of such
date. The Redemption Price shall be paid in cash to the holders of the
Series B Preferred Shares on the Mandatory Redemption Date, provided
that if any holder has not delivered to the Company certificates
representing the Series B Preferred Shares on or prior to the Mandatory
Redemption Date, the Company shall send written notice to each such
holder that the Mandatory Redemption Date has occurred and shall pay
the Redemption Price to each such holder within ten (10) business days
of receipt of its share certificate(s).
-65-
<PAGE>
(b) Redemption at Company's Option. At any time after
the third anniversary of the Issuance Date, the Company, at its option,
may redeem all (but not less than all), of the then outstanding Series
B Preferred Shares for a price per share equal to the Redemption Price
as of the Company Redemption Date by giving notice (a "Call Notice") to
each holder of Series B Preferred Shares not less than sixty (60) days
prior to the Company Redemption Date. Such Call Notice shall indicate
(A) the date that such redemption is to become effective (the "Company
Redemption Date"), (B) the applicable Redemption Price, (C) where
payment of the Redemption Price will be made, and (D) the then current
Conversion Price. Notwithstanding the foregoing, the Series B Preferred
Shares may be converted in accordance with Section 4 hereof at any time
after a Call Notice has been given, but prior to the Company Redemption
Date. On and after the Company Redemption Date, the holder of any
Series B Preferred Shares shall have no further rights except to
receive, upon surrender of the certificate(s) representing the Series B
Preferred Shares, the Redemption Price; provided, however, that if the
holder of any Series B Preferred Shares delivers the certificate(s)
representing the Series B Preferred Shares held by such holder to the
Company on the Company Redemption Date or within three (3) business
days thereafter and the Company fails to pay to such holder the
Redemption Price with respect to such Series B Preferred Shares within
thirty (30) days after the Company Redemption Date, then such holder
will retain all of its rights as a shareholder with respect to such
Series B Preferred Shares, including the accrual of dividends from the
Redemption Date until such payment is made; provided further, however,
that if the holder of any Series B Preferred Shares delivers the
certificate(s) representing the Series B Preferred Shares held by such
holder to the Company after the third (3rd) business day after the
Company Redemption Date, except as set forth in the following clause,
then such holder shall not retain any of its rights as a shareholder
with respect to such Series B Preferred Shares, including the accrual
of dividends; provided further, however, that if the holder of any
Series B Preferred Shares delivers the certificate(s) representing the
Series B Preferred Shares held by such holder to the Company after the
third (3rd) business day after the Company Redemption Date and the
Company fails to pay to such holder the Redemption Price with respect
to such Series B Preferred Shares within thirty (30) days after the
date on which such certificate(s) have been delivered to the Company
(the "Tender Date"), then such holder will retain all of its rights as
a shareholder with respect to such Series B Preferred Shares from the
Tender Date until such payment is made, including the accrual of
dividends from the Tender Date until such payment is made.
(c) Scheduled Redemption at Holder's Option. Each
holder of Series B Preferred Shares, at its option, may require the
Company to redeem all (but not less than all), of the then outstanding
Series B Preferred Shares beneficially owned by such holder for a price
per share equal to the Redemption Price as of the effective date of
such redemption (i) at any time after the third anniversary of the
Issuance Date by giving notice to the Company not less than fifty (50)
days prior to the date on which such shares are to be redeemed or (ii)
at any time following the occurrence of an Event of Noncompliance which
has not been cured by the Company by giving notice to the Company not
less than one (1) business day prior to the date on which such shares
are to be redeemed.
-66-
<PAGE>
(d) Special Redemption at Holder's Option. As a
condition to the issuance or sale by the Company of any Senior or Pari
Passu Securities (as defined below), the Company shall give notice (a
"Senior or Pari Passu Securities Issuance Notice") to the Initial
Holder and its Permitted Transferees, so long as the Initial Holder and
its Permitted Transferees own any of the then outstanding Series B
Preferred Shares, not less than ten (10) business days prior to the
date on which such Senior or Pari Passu Securities are to be issued or
sold, describing in reasonable detail the powers, designations,
preferences and other special rights of such Senior or Pari Passu
Securities. Following any such notice, the Initial Holder and its
Permitted Transferees, so long as the Initial Holder and its Permitted
Transferees own any of the then outstanding Series B Preferred Shares,
at their collective option, may require the Company to redeem all (but
not less than all) of the then outstanding Series B Preferred Shares
then held by the Initial Holder and its Permitted Transferees for a
price per share equal to the Redemption Price as of the effective date
of such redemption by giving notice (a "Special Put Notice") to the
Company within five (5) business days of the receipt by the Initial
Holder and its Permitted Transferees of the Senior or Pari Passu
Securities Issuance Notice. Upon receipt of such Special Put Notice,
the Company shall be obligated to redeem all (but not less than all) of
the then outstanding Series B Preferred Shares then held by the Initial
Holder and its Permitted Transferees on a date no later than sixty (60)
days after the date upon which the Senior or Pari Passu Securities
Issuance Notice was received by the Initial Holder and its Permitted
Transferees.
(e) Insufficient Funds; Failure to Redeem. If the
funds of the Company legally available for redemption of Series B
Preferred Shares are insufficient to redeem the total number of Series
B Preferred Shares to be redeemed, those funds which are legally
available will be used to redeem the maximum possible number of Series
B Preferred Shares ratably among the holders of such shares to be
redeemed based upon the aggregate Redemption Price of the Series B
Preferred Shares held by each such holder. Thereafter, when additional
funds of the Company are legally available for the redemption of Series
B Preferred Shares, such funds will be used to redeem the balance of
the Series B Preferred Shares which the Company became obligated to
redeem but which it has not redeemed (such redemptions to be made on a
monthly basis). In case fewer than the total number of Series B
Preferred Shares represented by any certificate are redeemed in any
installment, a new certificate representing the number of unredeemed
Series B Preferred Shares will be issued to the holder without cost to
such holder promptly after surrender of the certificate representing
the redeemed Series B Preferred Shares. So long as the Initial Holder
and its Permitted Transferees are, collectively, the owners of at least
20% of the then outstanding Series B Preferred Shares, if the Company
fails to redeem all of the then outstanding Series B Preferred Shares
on or before any redemption date, whether due to the lack of sufficient
funds or otherwise, and such failure to redeem is not cured in full on
or before the tenth (10th) business day following written notice from
the Initial Holder and its Permitted Transferee to the Company of such
failure to redeem, thereafter, the Initial Holder and its Permitted
Transferees shall, collectively, be entitled to elect two members of
the Board of Directors (the "Series B Directors") who shall be entitled
to serve until the earlier of (i) the redemption of all of the then
-67-
<PAGE>
outstanding Series B Preferred Shares beneficially owned by the Initial
Holder and its Permitted Transferees, or (ii) the date as of which the
Initial Holder and its Permitted Transferees no longer are,
collectively, the owners of at least 20% of the then outstanding Series
B Preferred Shares. The Company covenants and agrees to amend its
bylaws, if necessary, and take such other actions as may be necessary
to allow the Initial Holder and its Permitted Transferees to,
collectively, elect the Series B Directors upon the occurrence of the
circumstances described in this Section 3(e).
(4) Conversion of Series B Preferred Shares. The Series B
Preferred Shares shall be convertible into shares of Common Stock on
the following terms and conditions:
(a) Conversion by Holder. Upon written notice to the
Company by the holder thereof, each Series B Preferred Share shall be
convertible at any time into a number of fully paid and nonassessable
shares (calculated to the nearest whole share) of Common Stock to be
determined by dividing the Liquidation Preference by the then current
Conversion Price (the "Conversion Ratio").
(b) Mandatory Conversion. If, at any time following
the Issuance Date, the Average Trading Price of the Common Stock
exceeds the percentage of the Conversion Price set forth below, then
the corresponding number of Series B Preferred Shares will convert into
Common Stock at the then applicable Conversion Ratio automatically,
without further action required of the Company or holders thereof, such
conversion to be allocated among the holders thereof on a pro rata
basis based upon their respective holdings:
Average Trading Price as a Number of Series B Preferred Shares
Percentage of Conversion Price to be Converted
------------------------------ -----------------------------------
130% 6,667 (less any Series B Preferred
Shares previously converted)
160% 13,333 (less any Series B Preferred
Shares previously converted)
190%
20,000 (less any Series B Preferred
Shares previously converted)
(c) Adjustment to Conversion Price. In order to
prevent dilution of the conversion rights granted to holders of Series
B Preferred Shares hereunder, the Conversion Price will be subject to
adjustment from time to time pursuant to this Section 4(c).
(i) Adjustment of Conversion Price upon
Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common
Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced,
and if the Company at any time combines (by combination, reverse stock
split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination will be proportionately
increased.
-68-
<PAGE>
(ii) Reorganization, Reclassification,
Consolidation, Merger or Sale. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially
all of the Company's assets to another Person or other transaction
which is effected in such a way that holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common
Stock is referred to herein as "Organic Change." Prior to the
consummation of any Organic Change, the Company will make appropriate
provision to ensure that each of the holders of the Series B Preferred
Shares will thereafter have the right to acquire and receive in lieu of
or addition to (as the case may be) the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion
of such holder's Series B Preferred Shares, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such
holder's Series B Preferred Shares had such Organic Change not taken
place. In any such case, the Company will make appropriate provision
with respect to such holders' rights and interests to ensure that the
provisions of this Section 4(c) will thereafter be applicable to the
Series B Preferred Shares. The Company will not effect any such Organic
Change, unless prior to the consummation thereof, the successor entity
(if other than the Company) resulting from consolidation or merger or
the entity purchasing such assets assumes, by written instrument, the
obligation to deliver to each holder of Series B Preferred Shares such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
(iii) Notices.
(A) Immediately upon any adjustment
of the Conversion Price, the Company will give written notice thereof
to each holder of Series B Preferred Shares, setting forth in
reasonable detail and certifying the calculation of such adjustment.
(B) The Company will give written
notice to each holder of Series B Preferred Shares at least twenty (20)
days prior to the date on which the Company closes its books or sets a
record date (I) with respect to any dividend or distribution upon the
Common Stock, (II) with respect to any pro rata subscription offer to
holders of Common Stock or (III) for determining rights to vote with
respect to any Organic Change or Liquidation; provided that in no event
shall such notice be provided to such holder prior to such information
being made known to the public.
-69-
<PAGE>
(C) The Company will also give
written notice to each holder of Series B Preferred Shares at least
twenty (20) days prior to the date on which any Organic Change or
Liquidation will take place.
(D) The Company shall give written
notice to the holders of the Series B Preferred Shares promptly after
the occurrence of the automatic conversion of the Series B Preferred
Shares into Common Stock as set forth in Section 4(b) hereof.
(d) Mechanics of Conversion. Subject to and in
compliance with all federal and state securities laws, the conversion
of Series B Preferred Shares pursuant to this Section 4 will be deemed
to have been effected (and the holder thereof will be deemed to be the
registered holder of the Conversion Shares), automatically if
conversion is pursuant to Section 4(b) hereof, or, if converted at the
option of the holder of Series B Preferred Shares pursuant to Section
4(a) hereof, by and on the date of surrender of certificates
representing the Series B Preferred Shares being converted to the
Company at its principal place of business, together with the Notice of
Conversion attached hereto as Exhibit I. As soon as practicable after
such conversion, the Company shall cause the transfer agent to deliver
to the registered holder thereof (a) a certificate representing the
shares of Common Stock to which the holder is entitled as a result of
such conversion, and (b) a new certificate for Series B Preferred
Shares for the unconverted shares of Series B Preferred Shares, if any,
represented by the surrendered certificate. The Company shall at all
times reserve for issuance a sufficient number of shares of Common
Stock to be issued as Conversion Shares, and upon issuance thereof, the
Conversion Shares shall be fully paid and nonassessable.
(e) Record Holder. The person or persons entitled to
receive the shares of Common Stock issuable upon a conversion of Series
B Preferred Shares shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on the Conversion
Date.
(5) Transferability
(a) Right of First Offer. Prior to selling or
otherwise disposing (each, a "Transfer") of any Series B Preferred
Shares to any Person, other than a Permitted Transferee, the holder
proposing to make such Transfer (the "Transferring Holder") shall
deliver a written notice (an "Offer Notice") to the Company. The Offer
Notice shall disclose in reasonable detail the proposed number of
Series B Preferred Shares to be transferred (the "Offered Series B
Preferred Shares") and the proposed terms and conditions of the
Transfer. The Company may elect to purchase all (but not less than all)
of the Offered Series B Preferred Shares at the price and on the terms
specified therein by delivering written notice of such election to the
Transferring Holder within ten (10) business days (the "Election
Period") after the delivery of the Offer Notice. If the Company has
elected to purchase all of the Offered Series B Preferred Shares from
-70-
<PAGE>
the Transferring Holder, the transfer of such shares shall be
consummated within thirty (30) days after the Company's notice of its
intent to purchase such shares on the terms and upon the conditions
specified in the Offer Notice. To the extent that the Company has not
elected to purchase all of the Offered Series B Preferred Shares, the
Transferring Holder may, within forty-five (45) days after the
expiration of the Election Period, transfer all (but not less than all)
of such Offered Series B Preferred Shares to one or more Persons in
concurrent transactions at a price no less than the price per share
specified in the Offer Notice and on other terms no more favorable than
offered to the Company in the Offer Notice. Prior to any transfer of
any Offered Series B Preferred Shares after such forty-five (45) day
period has expired, such Offered Series B Preferred Shares shall first
be offered to the Company under this Section 5(a).
(b) Securities Law Restrictions. In addition to the
terms set forth in Section 5(a) hereof, the Series B Preferred Shares
may not be transferred, except pursuant to an exemption or exclusion
from the registration requirements under the Securities Act of 1933, as
amended, which does not require the filing by the Company with the
Securities and Exchange Commission of any registration statement,
offering circular or other document, in which case, the Transferring
Holder shall first supply to the Company an opinion of counsel (which
opinion and counsel shall be reasonably satisfactory to the Company)
that such exemption or exclusion is available; provided that no such
opinion of counsel shall be required with respect to a transfer by the
Initial Holder to a Permitted Transferee.
(c) Legend. Each certificate evidencing Series B
Preferred Shares shall be stamped or otherwise imprinted with a legend
in substantially the following form:
"THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD OTHER THAN TO A PERMITTED TRANSFEREE EXCEPT PURSUANT TO
AN AVAILABLE EXEMPTION OR EXCLUSION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, PROVIDED THAT AN
OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE
COMPANY, HAS BEEN GIVEN BY COUNSEL SATISFACTORY TO THE COMPANY
TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED. IN ADDITION,
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE PURSUANT TO THE CERTIFICATE OF
DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES B CONVERTIBLE
PREFERRED STOCK, OF THE COMPANY (THE "DESIGNATIONS"). A COPY
OF SUCH DESIGNATIONS SHALL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
-71-
<PAGE>
(6) Certain Definitions.
"Adverse Organic Change" means any recapitalization,
reorganization, reclassification, consolidation, merger or sale of all
or substantially all of the Company's assets to another Person or other
transaction which is effected in such a way that holders of Series B
Preferred Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets, other than cash
per share equal to the Liquidation Preference or other than shares of
capital stock of the Company or successor entity having rights and
preferences no less favorable to those provided to the holders of the
Series B Preferred Shares prior to such transaction.
"Average Trading Price" means, as of a given date, an
amount equal to the arithmetic average of the last closing sale price
of the Common Stock on the Principal Market for the Measurement Period
as reported by Bloomberg Financial Markets, absent manifest error.
"Conversion Price" means $14.25, subject to
adjustment as provided in Section 4(c) hereof.
"Conversion Date" means, as to any particular Series
B Preferred Shares, the date such shares are automatically converted
pursuant to Section 4(b) and in the case of a conversion by a holder,
the date on which such holder delivers to the Company the certificates
representing the Series B Preferred Stock being converted or such later
date as may be specified by such holder in the Notice of Conversion.
"Conversion Shares" means shares of the Company's
Common Stock, US $.001 par value, issuable upon conversion of the
Series B Preferred Shares, as provided in Section 4 hereof.
"Event of Noncompliance" means the failure by the
Company to (i) declare a dividend pursuant to Section 1 hereof on any
Dividend Reference Date, (ii) pay a dividend pursuant to Section 1
hereof on any Dividend Payment Date or (iii) pay the Redemption Price
when due, in any such case, which failure continues for a period of ten
(10) business days following notice thereof to the Company from the
holders of the Series B Preferred Shares.
"Initial Holder" means the Person to whom the Series
B Preferred Shares are initially issued by the Company.
-72-
<PAGE>
"Junior Securities" shall mean shares of the
Company's Common Stock, US $.001 par value per share, and any other
class of capital stock of the Company which by its terms is subordinate
in liquidation preference and payment of dividends to the rights of the
holders of the Series B Preferred Stock.
"Measurement Period" means a ten (10) consecutive
trading day period, provided that if the aggregate trading volume
reported by Bloomberg Financial Markets (absent manifest error) during
such period is less than 1,300,000 shares of Common Stock, additional
trading days will be added to the Measurement Period until the
Measurement Period covers the first to occur of (A) aggregate trading
volume of 1,300,000 shares of Common Stock, or (B) twenty consecutive
trading days with an aggregate trading volume of at least 450,000
shares of Common Stock.
"Permitted Transferee" means (i) Ronald Stern (or, in
the event of Ronald Stern's death or permanent incompetency, his
personal representative for purposes of the administration of his
estate or the protection and management of his assets) or (ii) any
other Person, directly or indirectly, controlled by, or under the
common control of, Ronald Stern as of the date of any Transfer thereto.
"Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
association or other entity or organization, an unincorporated
organization and a government or any department or agency thereof.
"Principal Market" means the quotation system or
national exchange from among the Nasdaq National Market, the New York
Stock Exchange or the American Stock Exchange, or any successor to any
of the foregoing, upon which the largest volume of shares of the
Company's Common Stock shall have traded during the sixty (60) trading
days prior to the date of determination.
"Senior or Pari Passu Securities" means any equity
securities (or any securities convertible into or exchangeable for any
equity securities) which are senior or pari passu in rank and priority
with the Series B Preferred Shares in respect to the preferences as to
dividends, distributions or redemptions or payments upon a Liquidation.
(7) Taxes. The Company shall pay any and all taxes which may
be imposed upon it with respect to the issuance and delivery of Common
Stock upon the conversion of the Series B Preferred Shares as herein
provided. The Company shall not be required in any event to pay any
transfer or other taxes by reason of the issuance of such Common Stock
in names other than those in which the Series B Preferred Shares
surrendered for conversion are registered on the Company's records, and
no such conversion or issuance of Common Stock shall be made unless and
until the person requesting such issuance has paid to the Company the
amount of any such tax, or has established to the satisfaction of the
Company and its transfer agent, if any, that such tax has been paid.
-73-
<PAGE>
(8) Liquidation, Dissolution, Winding-Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Company (a "Liquidation"), the holders of the Series B Preferred Shares
shall be entitled to receive in cash out of the assets of the Company,
whether from capital or from earnings available for distribution to its
stockholders (the "Preferred Funds"), before any amount shall be paid
to the holders of any Junior Securities, an amount per Series B
Preferred Share equal to the Liquidation Preference; provided that, if
the Preferred Funds are insufficient to pay the full amount due to the
holders of Series B Preferred Shares, then each holder of Series B
Preferred Shares shall receive a percentage of the Preferred Funds
equal to the full amount of Preferred Funds payable to such holder as a
percentage of the full amount of Preferred Funds payable to all holders
of Series B Preferred Shares. The purchase or redemption by the Company
of stock of any class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a Liquidation. Neither the
consolidation or merger of the Company with or into any other Person,
nor the sale or transfer by the Company of less than substantially all
of its assets, shall, for the purposes hereof, be deemed to be a
Liquidation. No holder of Series B Preferred Shares shall be entitled
to receive any amounts with respect thereto upon any Liquidation other
than the amounts provided for herein.
(9) Shares to be Retired. Any share of Series B Preferred
Stock converted, redeemed, repurchased or otherwise acquired by the
Company shall be retired and canceled and may not be reissued.
(10) No Fractional Shares. In connection with any conversion,
Liquidation, redemption, or otherwise, the Company shall only issue
Common Stock in denominations equal to the nearest, lower whole number;
fractional shares due holders will be allocated their cash value and
paid by the Company to the holder by check.
(11) Preferred Rank. All shares of Common Stock shall be of
junior rank to all Series B Preferred Shares in respect to the
preferences as to dividends and distributions and payments upon a
Liquidation and the rights of the shares of Common Stock shall be
subject to the preferences and relative rights of the Series B
Preferred Shares.
(12) Lost or Stolen Certificates. Upon receipt by the Company
of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any preferred stock certificates representing the
Series B Preferred Shares, and (in the case of loss, theft or
destruction) of any indemnification undertaking by the holder to the
Company that is reasonably satisfactory to the Company, and upon
surrender and cancellation of the preferred stock certificate(s), if
mutilated, the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date. However, the Company shall not
be obligated to re-issue such lost or stolen preferred stock
certificates if holder contemporaneously requests the Company to
convert such Series B Preferred Shares into Common Stock.
-74-
<PAGE>
(13) Shareholder Action. Except as otherwise set forth herein,
any matter to be voted upon by the holders of the Series B Preferred
Shares may be approved by the written consent of the holders of a
majority of the then outstanding Series B Preferred Shares.
(14) Additional Series B Preferred Shares. The Company hereby
covenants and agrees that, other than the Series B Preferred Shares, it
shall not authorize or issue any additional shares of Series B
Preferred Stock.
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by Don Welchko, its Vice President as of the 18th day of September, 1998.
ANICOM, INC.
By: /S/ DONALD C. WELCHKO
---------------------
Title: Vice President
---------------------
-75-
<PAGE>
EXHIBIT I
ANICOM, INC.
NOTICE OF CONVERSION
Reference is made to the Certificate of Designations, Preferences and Rights of
Series B Convertible Preferred Stock of Anicom, Inc. (the "Designation"). In
accordance with and pursuant to the Designation, the undersigned hereby elects
to convert the number of shares of Series B Convertible Preferred Stock, par
value $.01 (the "Series B Preferred"), of Anicom, Inc., a Delaware corporation
(the "Company"), indicated below into shares of Common Stock, par value $.001
(the "Common Stock"), of the Company, by tendering the stock certificate(s)
representing the share(s) of Series B Preferred specified below as of the date
specified below:
Date of Conversion _________________________________
Number of shares of Series B
Preferred to be converted: _________________________________
Stock certificates no(s). of Series B
Preferred to be converted: _________________________________
Please confirm the following information:
Conversion Price: _________________________________
Number of shares of Common Stock
to be issued: _________________________________
Please issue the Common Stock into which the Series B Preferred Shares are being
converted in the following name and to the following address:
Issue to: _________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
Phone No. of converting holder: _________________________________
Duly executed: By_______________________________
Name & Title: _________________________________
Dated: _________________________________
-76-
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated September
21, 1998, is by and between ANICOM, INC., a Delaware corporation ("Anicom"),
TEXCAN CABLES INC., a Nevada corporation ("Texcan U.S."), and TEXCAN CABLES
LIMITED, a Canadian corporation ("Texcan CN" and, together with Texcan U.S., the
"Texcan Entities").
WHEREAS, concurrent with the execution hereof, Anicom and ANICOM
MULTIMEDIA WIRING SYSTEMS INCORPORATED, a Nova Scotia company and a wholly-owned
subsidiary of Anicom ("Anicom CN" and, together with Anicom, the "Anicom
Entities"), shall purchase substantially all of the assets of the Texcan
Entities and TEXCAN CABLES INTERNATIONAL, INC., a Nevada corporation ("Texcan
International") pursuant to that certain Asset Purchase Agreement, dated as of
September 21, 1998 (the "Asset Purchase Agreement"), by and between the Anicom
Entities and the Texcan Entities and Texcan International;
WHEREAS, pursuant to the Asset Purchase Agreement, the Texcan Entities
will be receiving, as a portion of the purchase price, (a) 1,403,509 shares of
Anicom's common stock (the "Anicom Common Shares"); and (b) 20,000 shares of
Anicom's Series B convertible preferred stock (the "Anicom Preferred Shares"
and, together with the Anicom Common Shares, the "Anicom Shares"); and
WHEREAS, as a condition to the closing of the Contemplated Transactions
(as defined in the Asset Purchase Agreement), Anicom has agreed to grant to the
Texcan Entities certain registration rights for the Anicom Shares on the terms
and conditions set forth herein.
NOW, THEREFORE, upon the premises and the mutual promises herein
contained, and for good and valuable consideration, the receipt and adequacy of
which is acknowledged, the parties agree as follows:
1. Certain Definitions. As used in this Agreement the following
initially capitalized terms shall have the following meanings:
Closing: The closing of the transactions contemplated by the Asset
Purchase Agreement.
Permitted Transferees: (i) Ronald Stern (or, in the event of Ronald
Stern's death or permanent incompetency, his personal representative for
purposes of the administration of his estate or the protection and management of
his assets) or (ii) any other Person, directly or indirectly, controlled by, or
under the common control of, Ronald Stern as of the date of any assignment
-77-
<PAGE>
thereto pursuant to Section 4(a), provided that in either case such Person
agrees to be bound by the terms of this Agreement for all purposes thereafter as
a "Texcan Entity" by executing and delivering to Anicom a notice of assignment
in the form of Attachment I hereto.
Person: A corporation, an association, a partnership, a limited
liability company, an unlimited liability company, an organization, a business,
an individual, a governmental or political subdivision thereof or a governmental
agency.
Registrable Securities: (i) The Anicom Common Shares and (ii) the
shares of Anicom common stock issued or issuable pursuant to the conversion of
the Anicom Preferred Shares and any stock or other securities into which such
Anicom Preferred Shares shall have hereafter been changed, converted or
exchanged which are held by the Texcan Entities or any of their Permitted
Transferees.
Registration Expenses: All expenses incident to Texcan Entities' and
Anicom's performance of or compliance with this Agreement, including, without
limitation, all registration and filing fees, including fees with respect to
filings required to be made with the National Association of Securities Dealers,
Inc., fees and expenses of compliance with securities or blue sky laws,
including, without limitation, all word processing, duplicating and printing
expenses, messenger, telephone and delivery expenses, and fees and disbursements
of counsel and of all independent certified public accountants (including the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance and the fees of the Texcan Entities' independent certified
public accountants with regard to services rendered in connection with the
financial statements and opinions included in a registration statement) and the
cost to furnish each Texcan Entity or Permitted Transferee thereof with copies
of any registration statement, each preliminary prospectus, final prospectus and
each amendment and supplement thereto.
Rule 144: Rule 144 promulgated under the Securities Act, or any
successor rule to similar effect.
SEC: The United States Securities and Exchange Commission.
Securities Act: The United States Securities Act of 1933, as amended,
or any successor statute.
-78-
<PAGE>
Termination Date: The date which is the earlier of the fifth
anniversary of the date hereof and the date the Texcan Entities and any
Permitted Transferees thereof no longer hold any Registrable Securities.
2. Registration of the Registrable Securities under Securities Act.
2.1 Mandatory Registration.
a. Anicom shall file with the SEC, on or before the sixtieth
day after the Closing, a registration statement on Form S-3, which shall
register the Registrable Securities for resale. Anicom, with the assistance of
the Texcan Entities, shall promptly respond to any SEC comments on such
registration statement and shall otherwise use commercially reasonable efforts
to cause such registration statement to be declared effective as soon as
practicable.
b. Anicom shall comply with all applicable provisions of and
rules under the Securities Act and state securities laws in the preparation and
filing of such registration statement. Without limiting the foregoing, Anicom
shall ensure that such registration statement does not, as of its effective
date, contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (provided that Anicom shall not be responsible for the accuracy
or completeness of any information relating to, and furnished by the Texcan
Entities in writing for inclusion in such registration statement).
c. Anicom will pay all Registration Expenses in connection
with the registration of Registrable Securities pursuant to this Section 2.1.
2.2 Incidental Registration.
a. Right to Include the Registrable Securities. If Anicom, at
any time before the Termination Date, proposes to register securities under the
Securities Act by registration on Forms S-1, S-2 or S-3 or any successor or
similar form(s) (but excluding registrations on Forms S-4 or S-8 or, any
successor or similar forms), whether for sale for its own account or pursuant to
a demand for registration granted to any other party, Anicom will give written
notice each such time to the Texcan Entities and any Permitted Transferees of
its intention to do so. Upon the written request of a Texcan Entity or a
Permitted Transferee thereof holding Registrable Securities (specifying the
intended method of disposition, and the number of, Registrable Securities
requested by such Texcan Entity or Permitted Transferee to be included in such
registration), made within 10 business days after the receipt of any such
notice, Anicom will include in its proposed registration all such Registrable
Securities, subject to the priorities and limitations set forth in Sections
2.2(b) and 2.2(d) below. If Anicom thereafter determines for any reason not to
register or to delay registration of Anicom's offering of its securities, Anicom
may, at its election, give written notice of such determination to the Texcan
Entities and/or their Permitted Transferees who chose to participate in such
registration and, thereupon, (i) in the case of a determination not to register,
shall be relieved of the obligation to register such Registrable Securities in
connection with such registration (but not from any obligation of Anicom to pay
the Registration Expenses in connection therewith), and (ii) in the case of a
determination to delay registration, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registration of such
other securities. Anicom will pay all Registration Expenses in connection with
registration of Registrable Securities requested pursuant to this Section 2.2.
The right to request the registration of Registrable Securities pursuant to this
Section 2.2(a) is in addition, and not in lieu of, the mandatory registration
rights provided for in Section 2.1.
-79-
<PAGE>
b. Priority in Incidental Registration Rights. If the
registration referred to in Section 2.2(a) is to be an underwritten registration
and the managing underwriter(s) in connection with such registration advise
Anicom (or the other shareholders participating therein) in writing that in
their good faith opinion such offering would be adversely affected by the
inclusion therein of the total number of Registrable Securities requested by the
Texcan Entities and their Permitted Transferees to be included therein, Anicom
shall include in such registration: (1) first, all securities Anicom proposes to
sell for its own account (the "Company Securities"), (2) second, up to the full
number of securities proposed to be registered for the account of the
shareholders on behalf of whom registration may have initially been requested
and who are entitled to a priority in such case, and (3) the securities
requested to be registered by shareholders of Anicom (including, without
limitation, the Texcan Entities and their Permitted Transferees) entitled to
participate in the registration, drawn from them pro rata based on the number
each has requested to be included in such registration; provided, however that
notwithstanding anything herein to the contrary, neither the Texcan Entities nor
any Permitted Transferees thereof shall have the right, and Anicom shall not be
obligated, under this Agreement to include in any such registration Registrable
Securities of the Texcan Entities and the Permitted Transferees thereof, in the
aggregate, in excess of twenty percent (20%) of the aggregate number of
securities registered in any such registration.
c. Order of Priority. The Texcan Entities' rights to register
the Registerable Securities hereunder shall be pari passu with all such rights
currently held by other shareholders of Anicom. Anicom represents and warrants
to the Texcan Entities that, except for with respect to the limitations set
forth in clause (2) of Section 2.2(b) and in the last clause of the last
sentence in Section 2.2(b) above, no shareholder of Anicom has "piggyback"
registration rights more favorable than the rights granted to the Texcan
Entities under this Agreement. Anicom hereby agrees that it will not grant any
more favorable "piggyback" registration rights to another shareholder on or
before the earlier of (i) September 21, 2001 or (ii) the date on which the
aggregate number of Anicom Preferred Shares owned or held by one or more of the
Texcan Entities and the Permitted Transferees thereof collectively represent
less than 1.8% of the outstanding shares of Anicom common stock, on an
as-converted basis (the "Superior Rights Date"). In the event that Anicom
hereafter grants more favorable "piggyback" registration rights to another
shareholder prior to the Superior Rights Date, Anicom shall automatically be
deemed to have granted comparable registration rights to the Texcan Entities and
their Permitted Transferees hereunder. Anicom shall provide the Texcan Entities
and their Permitted Transferees with notice of any such grant of more favorable
"piggyback" registration rights and shall execute such documentation as the
Texcan Entities and their Permitted Transferees may reasonably request to
evidence such rights.
-80-
<PAGE>
d. Limitations; Exceptions. Anicom shall not be required to
effect any registration of Registrable Securities under this Section 2.2
incidental to the registration of any of its securities in connection with
mergers, acquisitions, exchange offers, subscription offers, dividend
reinvestment plans or stock option or other employee benefit plans.
Notwithstanding anything herein to the contrary, the Texcan Entities and their
Permitted Transferees agree that they will exercise their right to incidental
registration in a registration statement under this Section 2.2 first with
respect to the shares of Anicom common stock issued or issuable pursuant to the
conversion of the Anicom Preferred Shares and any stock or other securities into
which such Anicom Preferred Shares shall have hereafter been changed, converted
or exchanged which are then held by all of the Texcan Entities and their
Permitted Transferees, collectively, and then against the Anicom Common Shares
then held by all of the Texcan Entities and their Permitted Transferees,
collectively.
e. Number of Incidental Registrations. Each Texcan Entity and
any Permitted Transferee thereof may exercise its right to incidental
registration under this Section 2.2 an unlimited number of times before the
Termination Date; provided, that the Texcan Entities and their Permitted
Transferees, in the aggregate, may not exercise their right to incidental
registration in a registration statement under this Section 2.2 with respect to
less than the lesser of: (i) 10,000 shares of common stock, and (ii) the total
number of shares of Registrable Securities then held by such Texcan Entities and
their Permitted Transferees, collectively.
2.3 Registration Procedures. In connection with the mandatory
registration pursuant to Section 2.1 above or, subject to Section 2.2(a) or
2.2(c) above, whenever the Texcan Entities or any of their Permitted Transferees
have requested an incidental registration pursuant to Section 2.2 above, Anicom
will:
a. prepare and file with the SEC such amendments and
supplements to such registration statements and the prospectus(es) used in
connection therewith, which prospectus(es) are to be filed pursuant to Rule 424
under the Securities Act, as may be necessary to keep the (i) registration
statement pursuant to Section 2.1 effective until the date upon which, in the
opinion of counsel to Anicom (a copy of which shall be provided to the Texcan
Entities or their Permitted Transferees), the Registrable Securities are
permitted to be distributed by the Texcan Entities or their Permitted
Transferees pursuant to Rule 144, and may then be sold without regard to any
volume limitation (or if the volume limitation would permit distribution and
sale of all such securities in a single three-month period), or the Termination
Date, if earlier, and (ii) the registration statements pursuant to Section 2.2
effective for a period of 90 days (unless the Registrable Securities registered
thereunder have been sold or disposed of prior to the expiration of such 90-day
period), and in each case comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statements during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statements or
supplements to such prospectuses;
-81-
<PAGE>
b. furnish to the Texcan Entities and their Permitted
Transferees without charge, such number of copies of such registration
statements, each amendment and supplement thereto, the prospectus(es) included
in such registration statements, and such other documents as the Texcan Entities
and their Permitted Transferees may reasonably request in order to facilitate
the disposition of the Registrable Securities (Anicom consents to the use of
such prospectuses or any amendment or supplement thereto by the Texcan Entities
and their Permitted Transferees in connection with the offering and sale of the
Registrable Securities covered by such prospectuses or any amendment or
supplement thereto); and furnish to the Texcan Entities and their Permitted
Transferees, without charge, at least one conformed copy of the registration
statement or statements and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
c. use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as the Texcan Entities and their Permitted Transferees reasonably
request and do any and all other acts and things which may be reasonably
necessary or advisable to (i) keep such registration or qualification effective
during the period such registration statement is required to be kept effective
and (ii) enable the Texcan Entities and their Permitted Transferees to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by the Texcan Entities and their Permitted Transferees (provided that
Anicom will not be required to (1) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (2) subject itself to taxation in any such jurisdiction or (3)
consent to general service of process in any such jurisdiction);
d. notify the Texcan Entities and their Permitted Transferees,
promptly, and if requested, confirm such advice in writing (i) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and,
with respect to a registration statement or any post-effective amendment, when
the same has become effective, (ii) of any request by the SEC for amendments or
supplements to a registration statement or related prospectus or for additional
information, (iii) of the happening of any event as a result of which a
registration statement or the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading, and Anicom will prepare a supplement
or amendment to such registration statement or prospectus so that such
registration statement or prospectus will not contain any untrue statement of a
material fact or omit to state any fact necessary to make the statements therein
not misleading, (iv) of the receipt by Anicom of any notification with respect
to the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (v) of Anicom's reasonable determination that a post-effective
amendment to a registration statement would be appropriate;
e. cause all such Registrable Securities to be listed on each
securities exchange and inter-dealer quotation system on which similar
securities issued by Anicom are then listed and pay all fees and expenses in
connection therewith; and
-82-
<PAGE>
f. advise the Texcan Entities and their Permitted Transferees
promptly after Anicom shall have received notice or obtained knowledge of (i)
the issuance of any stop order by the SEC suspending the effectiveness of such
registration statements or the initiation or threatening of any proceeding for
such purposes and will use its reasonable efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued, or
(ii) the suspension of the qualification of any of the Registrable Securities
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purposes and will promptly use its best efforts to prevent such
suspension or have such suspension lifted if it should be effected.
2.4 The Texcan Entities' Covenants.
a. Each of the Texcan Entities and their Permitted Transferees
shall furnish to Anicom in writing such information relating to it as Anicom may
reasonably request in writing in connection with the preparation of such
registration statements, and each of the Texcan Entities and their Permitted
Transferees agrees to notify Anicom as promptly as practicable of any inaccuracy
or change in information it has previously furnished to Anicom or of the
happening of any event, in either case as a result of which any prospectus
relating to such registrations contains an untrue statement of a material fact
regarding such Texcan Entity or Permitted Transferee or the distribution of such
Registrable Securities or omits to state any material fact regarding any of the
Texcan Entities and their Permitted Transferees or the distribution of such
Registrable Securities required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and to promptly furnish to Anicom any additional information required to correct
and update any previously furnished information or required such that such
prospectus shall not contain, with respect to any of the Texcan Entities and
their Permitted Transferees or the distribution of such Registrable Securities,
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing.
b. The Texcan Entities and their Permitted Transferees agree
that, upon receipt of any notice from Anicom of the happening of any event of
the kind described in Section 2.3(d) (ii), (iii), (iv) or (v) or Section 2.3(f)
hereof, the Texcan Entities will forthwith discontinue disposition of such
Registrable Securities covered by such registration statement or prospectus
until the Texcan Entities' receipt of the copies of the supplemented or amended
prospectus relating to such registration statement or prospectus, or until it is
advised in writing by Anicom that the use of the applicable prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in such prospectus, and, if so directed by Anicom,
the Texcan Entities and their Permitted Transferees will deliver to Anicom all
copies, other than permanent file copies then in the Texcan Entities' or their
Permitted Transferees' possession, of the prospectus covering the Registrable
Securities current at the time of receipt of such notice.
2.5 Reasonable Investigation. In connection with the preparation and
filing of each registration statement under the Securities Act pursuant to this
Agreement, Anicom will give the Texcan Entities and their Permitted Transferees
-83-
<PAGE>
and their counsel and accountants such access to its books and records and such
opportunities to discuss the business of Anicom with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary in their respective reasonable opinions or in the reasonable
opinion of their respective counsel to conduct a reasonable investigation for
the purpose of establishing a due diligence defense within the meaning of the
Securities Act and in order to enable the Texcan Entities or their Permitted
Transferees to execute any certificates required by the underwriters in any
underwritten offering in which they participate.
2.6 Indemnification.
a. Indemnification by Anicom. In the event of any registration
of any Registrable Securities under the Securities Act, Anicom will, and hereby
does, indemnify and hold harmless, to the fullest extent permitted by law, the
Texcan Entities, their Permitted Transferees, and each of their respective
officers and directors and each Person who controls any Texcan Entity within the
meaning of the Securities Act (collectively, the "Texcan Parties") against any
and all judgments, fines, penalties, charges, costs, amounts paid in settlement,
losses, claims, damages, liabilities, expenses, or attorney fees, joint or
several, incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or SEC, whether pending or threatened, whether or not an indemnified party
is or may be a party thereto ("Indemnified Damages"), to which they or any of
them may become subject under the Securities Act or any other statute or common
law, insofar as any such Indemnified Damages arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement relating to the sale of such securities or any
post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under blue sky or other securities laws of
jurisdictions in which the Registrable Securities are offered ("Blue Sky
Filing"), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in the final prospectus (as amended or supplemented if
Anicom shall have filed with the SEC any amendment thereof or supplement
thereto) if used within the period during which Anicom is required to keep the
registration statement to which such prospectus relates current, or the omission
or alleged omission to state therein (if so used) a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the indemnification
agreement contained herein shall not apply to such Indemnified Damages to the
Texcan Parties arising out of, or based upon, any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, if such
statement or omission: (i) was made in reliance upon and in conformity with
written information furnished to Anicom by the Texcan Entities or their
Permitted Transferees for use in connection with preparation of the registration
statement, any prospectus contained in the registration statement, any such
amendment or supplement thereto or any Blue Sky Filing; or (ii) was included in
a registration statement, prospectus contained therein or any amendment or
-84-
<PAGE>
supplement thereto, and prior to the use thereof, Anicom had given written
notice to the Texcan Parties of the existence of an untrue statement or an
omission and Anicom's intent to promptly file an amendment to its registration
statement to correct such untrue statement or omission. Furthermore, the
indemnification agreement contained herein shall not apply to any Indemnified
Damages to the Texcan Parties arising out of, or based upon, the Texcan
Entities' or their Permitted Transferees', or any of their representatives',
failure to deliver a prospectus, including any amendments or supplements
thereto, in connection with any sale thereunder in accordance with the rules and
regulations of the SEC. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of any Texcan Party and
shall survive the transfer of such securities by the Texcan Entities and their
Permitted Transferees.
b. Indemnification by the Texcan Entities. Anicom may require,
as a condition to including the Registrable Securities of the Texcan Entities
and their Permitted Transferees in any registration statement filed pursuant to
this Agreement, that Anicom shall have received an undertaking satisfactory to
it from the Texcan Entities and their Permitted Transferees to indemnify and
hold harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 2.6) Anicom, its officers and directors and each
officer of Anicom and each other Person, if any, who controls Anicom within the
meaning of the Securities Act with respect to any untrue statement or alleged
untrue statement in, or omission or alleged omission from, such registration
statement, any prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission (i) arises from information relating to,
or provided by, the Texcan Entities or their Permitted Transferees and was made
in reliance upon written information the Texcan Entities or their Permitted
Transferees furnished to Anicom for use in the preparation of such registration
statement, prospectus, amendment or supplement, or (ii) was included in a
registration statement, prospectus contained therein or any amendment or
supplement thereto, and prior to the use thereof, Anicom had given notice to the
Texcan Parties of the existence of an untrue statement or an omission and
Anicom's intent to promptly file an amendment to its registration statement to
correct such untrue statement or omission. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of Anicom
or any such director, officer or controlling Person and shall survive the
transfer of such securities by the Texcan Entities and their Permitted
Transferees. The Texcan Entities' and their Permitted Transferees' indemnity as
described in this Section 2.6(b) shall be limited to the dollar amount of the
proceeds of the Registrable Securities actually sold by the Texcan Entities and
their Permitted Transferees pursuant to such registration statement.
c. Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
-85-
<PAGE>
party shall be entitled to participate in and, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. If the indemnifying party does not
assume such defense, the indemnified party shall keep the indemnifying party
apprised at all times as to the status of the defense; provided, however, that
the failure to keep the indemnifying party so informed shall not affect the
obligations of the indemnifying party hereunder. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement or other compromise which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the indemnified party
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made.
d. Indemnification Payments. The indemnification required by
this Section 2.6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
e. Contribution. If the indemnification provided for in this
Section 2.6 shall for any reason be held by a court to be unavailable to an
indemnified party under subparagraph (a) or (b) hereof in respect of any
Indemnified Damages, then, in lieu of the amount paid or payable under
subparagraph (a) or (b) hereof, the indemnified party and the indemnifying party
under subparagraph (a) or (b) hereof shall contribute to the aggregate
Indemnified Damages, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party with respect
to the statements or omissions which resulted in such Indemnified Damages, as
well as any other relevant equitable considerations. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The obligations of the Texcan
-86-
<PAGE>
Entities (and their Permitted Transferees) and Anicom to contribute as provided
in this subparagraph (e) are several in proportion to the relative value of
their respective Registrable Securities covered by such registration statement
and not joint. In addition, no Person shall be obligated to contribute hereunder
any amounts in payment for any settlement of any action or claim effected
without such Person's consent, which consent shall not be unreasonably withheld.
In no event shall any of the Texcan Entities nor any Permitted Transferee
thereof be obligated to contribute under this Section 2.6(e) an amount in excess
of the dollar amount of the proceeds of the Registrable Securities sold by any
such Texcan Entity or any such Permitted Transferee pursuant to the registration
statement giving rise to such damages.
f. Other Rights; Liabilities. The indemnity agreements
contained herein shall be in addition to (i) any cause of action or similar
right of the indemnified party against the indemnifying party or others, and
(ii) any liabilities the indemnifying party may be subject to pursuant to the
law.
3. Holdback Agreements. Each of the Texcan Entities agrees that, in the
event that it elects to participate in any registration pursuant to a
registration statement filed by Anicom with respect to an underwritten public
offering by Anicom that becomes effective on or before the Termination Date (a
"Follow-On Offering") and fifty percent (50%) or more of the Registrable
Securities that it has requested to be registered in such Follow-On Offering are
included in such registration in accordance with the terms of this Agreement, it
shall not effect any public sale or distribution (including sales pursuant to
Rule 144) of Registrable Securities during the seven days prior to and the
ninety day period beginning on the effective date of the Follow-On Offering
(other than Registrable Securities which are registered in such Follow-On
Offering), unless the underwriters managing such Follow-On Offering otherwise
consent thereto. Furthermore, if the underwriters managing any such Follow-On
Offering request written confirmation of the foregoing covenant, each of the
Texcan Entities shall provide such confirmation upon a written request therefor.
Each of the Texcan Entities further agrees that in the event that it elects not
to participate in any Follow-On Offering, it shall not unreasonably refuse to
(i) agree to refrain from effecting any public sale or distribution (including
sales pursuant to Rule 144) of Registrable Securities in excess of fifteen
percent (15%) of the number of Registrable Securities received by the Texcan
Entities pursuant to the Asset Purchase Agreement during the five days prior to
and the forty-five day period beginning on the effective date of the Follow-On
Offering (other than Registrable Securities which are registered in such
Follow-On Offering), unless the underwriters managing such Follow-On Offering
otherwise consent thereto and (ii) execute written confirmation thereof if the
underwriters managing any such Follow-On Offering request such written
confirmation.
4. Miscellaneous.
a. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns. Anicom may not assign its
obligations hereunder. Without the prior written consent of Anicom, which
consent may be granted or withheld at Anicom's sole discretion, the Texcan
Entities may not assign their rights hereunder or otherwise provide to any third
party the benefits granted to the Texcan Entities hereunder; provided, however,
that any Texcan Entity may assign its rights under this Agreement to a Permitted
Transferee.
-87-
<PAGE>
b. Severability. If any term or provision of this Agreement is
held by a court of competent jurisdiction to be invalid, void, or unenforceable,
the remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
c. Further Assurances. Subject to the specific terms of this
Agreement, each of the parties hereto shall make, execute, acknowledge and
deliver such other instruments and documents, and take all such other actions,
as may be reasonably required in order to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
d. Waivers, Etc. No failure or delay on the part of either
party hereto (or the intended third party beneficiaries referred to herein) in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement nor
consent to any departure therefrom shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.
e. Entire Agreement. This Agreement, together with Asset
Purchase Agreement and the documents and agreements referenced therein, contain
the entire understanding of the parties with respect to the subject matter
hereof. The section headings contained in this Agreement are solely for the
purpose of reference, and shall not in any way affect the meaning or
interpretation of this Agreement.
f. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original but all of which together shall be one and the same
instrument.
g. Notices. All notices, demands and requests required or
permitted to be given hereunder shall in every case be in writing and shall be
deemed duly given (a) when delivered personally, (b) three (3) Business Days
after being deposited in the United States mail, registered or certified mail,
return receipt requested, (c) one Business Day after being dispatched by a
United States or Canadian nationally recognized overnight courier service, or
(d) when sent by telecopier, provided that a copy is mailed by U.S. or Canadian
certified mail, return receipt requested, to the parties at the addresses and
-88-
<PAGE>
telecopier numbers as set forth below or at such other addresses or telecopier
numbers as may be furnished in writing:
If to Anicom: Anicom, Inc.
6133 North River Road
Suite 1000
Rosemont, Illinois 60018
Attention: Donald C. Welchko
Telecopier No.: (847) 518-8777
With a copy to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Jeffrey R. Patt, Esq.
Telecopier No.: (312) 902-5220
If to the TEXCAN ENTITIES:
Tricontinental Industries, Ltd.
Suite 650
375 Water Street
Vancouver, British Columbia
Canada V6B 5C6
Attention: Ronald Stern
Telecopy No.: 604/681-8861
With copy to: Hunton & Williams
Riverfront Plaza
East Tower
951 East Bryd Street
Richmond, Virginia 23219
Attention: T. Justin Moore, III, Esq.
Telecopy No.: 804/788-8218
h. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
i. Amendments. This Agreement may be amended only by a written
agreement signed by the parties hereto.
j. Specific Performance. Anicom acknowledges and agrees that
monetary damages would be inadequate to compensate the Texcan Entities for the
breach of any of Anicom's obligations contained in this Agreement and that the
Texcan Entities would be seriously and irreparably injured if any provision of
-89-
<PAGE>
this Agreement is not performed by Anicom in accordance with the specific terms
and conditions of this Agreement. Accordingly, Anicom agrees, without prejudice
to any additional or alternative remedies the Texcan Entities have hereunder,
that the Texcan Entities shall be entitled to:
(a) seek injunctive relief to prevent any breach
of this Agreement by Anicom:
(b) enforce specifically the terms and provisions
hereof and any obligation in favor thereof,
or any of them, contained in this Agreement;
and
(c) seek declaratory relief or injunctive relief
in respect of anything done in breach of an
obligation in favor thereof, or any of them,
contained in this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
ANICOM, INC.
By: /s/ DONALD C. WELCHKO
----------------------
Title: Vice President
-----------------------
TEXCAN CABLES INC.
By: /s/ KEVIN KARR
----------------------
Title: Vice President - Finance
------------------------
TEXCAN CABLES LIMITED
By: /s/ KEVIN KARR
----------------------
Title: Vice President - Finance
------------------------
-90-
<PAGE>
Attachment I
to
Registration Rights Agreement
Notice of Assignment
[Texcan Cables Inc., a Nevada corporation] [Texcan Cables Limited, a
Canadian corporation] (the "Assignor") and ______________________, a
__________________ (the "Assignee") hereby notify Anicom, Inc., a Delaware
corporation ("Anicom"), that Assignor has transferred to Assignee _____ shares
of Anicom's [common stock] [Series B Convertible preferred stock].
By its execution of this Notice of Assignment, Assignee agrees to be
bound by the terms of the Registration Rights Agreement dated September 21, 1998
by and among Anicom, Texcan Cables Inc. and Texcan Cables Limited for all
purposes hereafter as a "Texcan Entity."
[TEXCAN CABLES INC.]
[TEXCAN CABLES LIMITED]
_____________________________________
[Name]
[Title]
[ASSIGNEE]
_____________________________________
[Name]
[Title]
-91-
