SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File Number 0-25364
ANICOM, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3885212
(State of incorporation) (IRS Employer Identification No.)
6133 North River Road, Suite 1000, Rosemont, Illinois 60018-5171
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (847) 518-8700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
(Title of Class)
Preferred Stock Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the voting stock held by non-affiliates of the
registrant (for the purpose of this calculation only, the registrant's directors
and executive officers are deemed affiliates), based on the closing price of the
registrant's Common Stock on March 9, 1999: $156,452,270.
The number of shares outstanding of the registrant's Common Stock as of March 9,
1999: 25,120,202.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the issuer's Notice of Annual Meeting of Stockholders and
Proxy Statement for its Annual Meeting of Stockholders to be held on May 19,
1999 are incorporated by reference into Part III of this report.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Anicom, Inc. ("Anicom" or the "Company") is a North American leader in
the sale and distribution of multimedia technology products consisting of
communications related wire, cable, fiber optics and computer network and
connectivity components. Anicom provides products that "interconnect the
Internet" serving as a vital link to the ever-growing global communications
industry. The Company operates in a single business and geographic segment. The
products offered by Anicom generally fall into four categories: (i) voice and
data communications and fiber optics, (ii) sound, security, fire, alarm and
energy management systems, (iii) electronic cable, and (iv) industrial cable,
wiring and assemblies for automation, computers and robotics. The fastest
growing products for the Company are in voice and data communications and fiber
optics, including an assortment of transmission media (copper and fiber optic
cable), components (blocks, brackets, jacks, patch cords, patch panels,
connectors and stackable hubs), related hardware and cable assemblies. Since its
initial public offering in February 1995, the Company has grown from seven to
more than 75 locations across North America through internal growth and the
successful completion of 16 acquisitions.
The Company has assembled an experienced management team that collectively has
more than 200 years of experience in the sale and distribution of multimedia
technology products. The Company's Chairman of the Board, Alan B. Anixter, and
Board member William R. Anixter, were the co-founders of Anixter Bros., Inc.,
("Anixter Bros.") an international specialist in the distribution of wire, cable
and related products. Alan B. Anixter served as the Chairman and Chief Executive
Officer of Anixter Bros., until 1986 and Chairman until 1988. During his career
at Anixter Bros., that company consummated more than forty corporate
acquisitions and by 1988, had grown to over $1.0 billion in annual net sales. In
addition, Anicom's Chairman and Chief Executive Officer, Scott C. Anixter,
previously was a director of Anixter Bros. while the Company's President, Carl
E. Putnam, previously was a Regional Vice President of Anixter Bros. The Company
believes that the extensive industry experience of its management team and sales
personnel has enabled it to establish and maintain strong relationships with
major vendors and customers and that such experience will continue to serve as a
valuable asset in the implementation of Anicom's integrated growth strategy.
Background
Several of the industries serviced by Anicom have experienced
significant growth in recent years, and management expects this growth to
continue at a rapid pace. As these industries continue to evolve, management
believes that the demand for products offered by the Company will also continue
to grow. Virtually every commercial, industrial and residential enterprise is a
potential customer. By focusing on distribution, management believes it can
readily respond to the changing demands of the industries it serves and it is
not reliant upon the success of a particular product or product category. Many
of the products distributed by the Company are components utilized by
contractors and end-users in the installation or upgrading of highly technical
communications and power systems. As such, the Company's products often are
subject to strict technical specifications. The degree to which products adhere
to these technical specifications, such as class of cable or specific connector
impedance specifications, is a significant factor in differentiating among
products. Accordingly, distributors primarily distinguish themselves by the
depth and breadth of products offered and their knowledge of these products.
Anicom's sales personnel, who average approximately ten years of experience in
the sale and distribution of multimedia technology products, work with Anicom's
customers and vendors to match products to the technical specifications supplied
by its customers. Management believes that this level of service is important in
attracting and retaining customers as well as distinguishing itself as a
provider of products, service and value.
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The growing market for the distribution of multimedia technology
components, such as related wire, cable, fiber optics and computer network and
connectivity products is highly fragmented, with few companies maintaining
greater than $100 million in annual net sales.
Products and Services
Voice and Data Communications and Fiber Optics
The fastest growing products for Anicom are in voice and data
communications and fiber optics. Management estimates that less than 25% of the
voice and data transmission systems currently in existence utilize fiber optic
cable and related connectivity products. Management believes that the
replacement of existing cable with fiber optic cable represents a significant
opportunity for the Company. Anicom sells single, duplex and multifiber cables
for internal and external data communication use in the computer network,
computer interconnect, Internet access and building automation and safety
markets.
A large number of leading telecommunications, computer, computer
software and entertainment companies have committed significant resources to
developing plans for the delivery of communications services which are expected
to increase the use of protocols including Ethernet(R) and Fast Ethernet(R)
networks, as well as asynchronous transfer mode ("ATM") technology. New systems
and technology such as these involve the use of fiber optic cable, copper cable
or wires manufactured to specifications. At the same time, the proliferation of
the World Wide Web on the Internet, personal computers and advances in
networking technology have resulted in increased demand for interconnected local
area network ("LAN") and wide area network ("WAN") systems that utilize the
products offered by Anicom. The growth of these types of networks has resulted
in a separate purchasing process for electronic data transmission cable and
components utilized in these networks. Anicom coordinates with end-users,
systems integrators and network cable manufacturers in determining
specifications of the cable and connectivity products required for a particular
network.
In January 1999, Anicom became the exclusive distributor for NetWolves,
and their FoxBox product which offers a simple, more cost-effective
communication solution using only one device to access the Internet for the flow
of e-commerce over the World Wide Web.
Sound, Security, Fire, Alarm and Energy Management Systems
The demand for the multimedia technogy products offered by Anicom for
use in these types of systems has increased in recent years as a result of
technological advances in commercial building automation, greater concern
regarding the safety features of commercial buildings and the increased demand
for residential security systems. These products include many of the same
components used in voice and data communication. Anicom sells these products to
low voltage contractors, OEMs and commercial end-users. Growth in this market
generally is regarded as the result of increased concern about crime, as well as
the result of technological advances that have allowed manufacturers to improve
reliability and features while lowering the installed costs of such systems.
Similarly, publicly and privately owned buildings, such as office buildings,
stadiums, hospitals and correctional facilities, also continue to use more
sophisticated computer, security, communications and sound systems that
incorporate the types of multimedia technology products offered by Anicom. The
systems used by contractors and systems integrators in these types of facilities
not only offer greater building automation and more sophisticated communication
systems but also are designed to meet the increasingly stringent safety
requirements imposed by local and national building codes.
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Electronic and Industrial Cable
Anicom offers wire and cable products for use in a wide variety of
electrical and electronic systems. Anicom sells these products to contractors,
end-users, systems integrators and original equipment manufacturers ("OEMs").
The wire and cable products are used in the manufacturing of electrical and
electronic equipment, as well as the replacement of wire and cable in existing
systems. Anicom also sells and distributes wire and cable products for
industrial use in the automotive, mining, marine, petro-chemical, paper and pulp
and other natural resource industries. These products include portable cords,
power cables, control and instrumentation cables, mining and welding cables,
armored and high voltage cables and building wire.
Integrated Growth Strategy
Anicom has implemented an integrated growth strategy focusing on
increasing revenue through (i) acquisitions and internal growth into targeted
regional markets with an expanded customer base and complimentary products, (ii)
expanding product offerings, improving market share and providing superior
customer service, and (iii) continuing to improve profitability in existing and
acquired operations through the implementation of financial and operational
controls.
Generally, Anicom seeks to acquire established, high-quality companies
in targeted regional markets. Anicom generally attempts to retain the management
and sales associates of the acquired company while seeking to increase its net
sales through the availability of a greater selection and depth of inventory.
Anicom seeks to improve its profitability by achieving economies of scale and
through the use of the Company's integrated inventory and information systems.
Anicom believes that management's industry experience and Anicom's inventory and
information systems make it an attractive acquirer, particularly for those
companies whose owners desire to remain involved in day-to-day operations.
Sales and Marketing
Anicom is committed to making it easier and more cost
effective for its customers to acquire wire, cable, fiber optics and computer
network and connectivity products. Anicom has established strong customer
relationships through an extensive and experienced sales and marketing force of
approximately 550 people operating throughout North America. Anicom is engaged
in e-commerce and currently has a program in development called'A-trade' to
further amplify Anicom's sales on the Internet.
Anicom has created seven territories, each of which is managed by a
General Manager. The General Managers have an average of approximately 15 years
of experience in the sale and distribution of multimedia technology products.
Each General Manager is responsible for the management of short-term and
long-term sales and marketing efforts in their respective territory. In
addition, the General Managers are supported by a network of ten Regional
Managers who have an average of approximately ten years experience in the
industry.
The sales and marketing force is responsible for establishing and
maintaining long-term relationships with customers and industry referral
sources, soliciting new business from prospective customers and responding to
incoming inquiries and orders. Anicom monitors customer satisfaction through
internal controls and regular interaction with its customers.
In addition to providing multimedia technology products to customers on
a timely basis, Anicom provides value-added, specialized services to its
customers, including cutting and re-spooling services, technical support,
training, seminars and cable assemblies, in response to specific customer
requests. Anicom also has the ability to procure selected specialty items not
readily available to customers
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or all of its competitors, and, through its experienced sales personnel, Anicom
is able to offer its customers technical assistance and support in the selection
of appropriate products. Each significant product category has a dedicated
product manager who is responsible for obtaining the latest information on
product offerings and distributing the information throughout the sales force.
In addition, certain of Anicom's more experienced sales personnel have developed
extensive knowledge in specific product categories (e.g., fiber optics).
Anicom's sales personnel are trained to seek out assistance from those
particular product managers or salespersons who have developed this degree of
knowledge. Management believes that Anicom more aggressively seeks to capitalize
on this expertise and experience than other national and regional distributors
of multimedia technology products with which it competes.
Anicom identifies potential customers through telemarketing efforts,
responses to direct marketing materials, periodic advertisements in trade
journals, industry trade shows and inquiries to its internet web site. Anicom
also receives numerous referrals from customers and vendors. Anicom periodically
provides product and service information by distributing promotional literature
and product catalogs to existing and potential customers. Sales and marketing
representatives initiate customer visits and follow-up on customer inquiries
through further distribution of Anicom's informational materials and on-site
visits. Once a customer relationship has been established, Anicom focuses on
identifying opportunities to market a broader array of products to the customer.
Anicom rewards its sales and marketing force through an incentive-based
bonus program. Under this program, quantifiable performance goals are
established each year by Anicom and each sales associate. In addition, Anicom
seeks to achieve Company-wide objectives and encourage a "team" concept by
rewarding its sales personnel through supplementary bonuses based on
Company-wide or location-based goals.
Suppliers and Inventory
Management believes that Anicom is not dependent on any particular
supplier. Anicom offers a large number of products manufactured by a variety of
vendors. Management believes that vendor relationships are important to Anicom's
success, and Anicom focuses sharply on establishing and maintaining such
relationships. Purchasing decisions generally are made at Anicom's headquarters
in the Chicago area and manufacturers are instructed to ship inventory to the
sales and warehouse locations (or, in some cases, directly to customers)
specified by Anicom. Management believes that Anicom has a good working
relationship with its existing suppliers. No vendor accounted for more than 10%
of Anicom's purchases during any of the past three years, and management
believes that Anicom is not dependent on any particular vendor. Management does
not believe that the loss of any one supplier would have a material adverse
impact on results of operations or financial condition because it generally
believes it can obtain competitive products of comparable quality from other
suppliers.
Anicom's objective is to provide its customers with a continuity of
supply and delivery scheduling that responds to their needs without requiring
excessive levels of inventory. Management also can generate real-time
information on inventory levels using its on-line system. While the depth and
breadth of products offered has increased over the last three years, the
emphasis on strict inventory control has allowed the Company to maintain its
order completion rate and to support its increasing sales levels without
significant increases in relative inventory levels. The Company's inventory
management programs are led by the Vice President of Purchasing who has over 15
years of industry experience. The inventory control measures impose strict
controls on the discretion of Anicom's sales personnel and focus on continuing
improvement of the forecasting and monitoring models used. Anicom has not
experienced any significant inventory obsolescence.
Management Information Systems
As part of its integrated growth strategy, Anicom completed the
implementation of a new information technology system in the fourth quarter of
1997. This customized information technology system builds upon the strengths
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inherent in Anicom's previous systems while allowing for the reengineering of
certain business processes that were necessary to accommodate the significant
growth that Anicom has experienced since 1995. This information system, which is
year 2000 compliant, integrates sales, inventory control and purchasing,
warehouse management, financial control and internal communications while
providing real-time monitoring of inventory levels, shipping status and other
key operational and financial benchmarks at Anicom's sales and distribution
locations.
This system also improves management's ability to respond quickly and
efficiently to customer demands. This system will allow management to continue
to execute their integrated growth strategy by providing a platform capable of
managing a company substantially larger than Anicom's current size. This system
will allow Anicom to continue to integrate the operations of its acquisitions
and maximize productivity which management believes translates into a lower
effective cost to customers. This system also contributes to Anicom's ability to
increase sales productivity by enabling the sales force to provide customers
with personalized service drawing on information contained in the database, and
allows the Company's sales force to provide technical product information in
marketing the products offered by Anicom.
Customers
The Company sells to a wide array of customers, including contractors,
systems integrators, security/fire alarm companies, regional Bell operating
companies, utilities, telecommunications and sound contractors, wireless
specialists, construction companies, universities, governmental agencies and
companies involved in the automotive, mining, marine, petro-chemical, paper and
pulp and other natural resource industries. The Company's customers are
principally located in North America. No customer accounted for more than 10% of
Anicom's net sales during any of the past three years, and management believes
that Anicom is not dependent on any particular customer. With Anicom's
increasing North American presence and inventory selection, management will
continue to focus more of its efforts on the development of sales to a larger
number of national customers. Anicom's net sales outside of North America
represent less than 5% of total net sales for each of the last 3 years.
Competition
The market for multimedia technology products is highly competitive and
fragmented. To compete successfully, management believes that the Company will
need to continue to distribute a broad range of technologically advanced
products, provide competitive pricing while maintaining its margins, provide
prompt delivery of products, deliver responsive customer service, establish and
maintain strong relationships with suppliers and customers, and attract and
retain highly qualified personnel. Anicom faces substantial competition from
several international, national and regional distributors, some of which have
greater financial, technical and marketing resources and distribution
capabilities than the Company and from manufacturers who sell directly to
end-users for certain large-scale projects.
Trade Names
Anicom maintains a number of registered trademarks and trade names in
connection with its business activities, including "Anicom(R)", "Exacpac(R),"
"Anicom MultiMedia Wiring Systems(R)" "RAPI-Change(R)," "Northern Wire &
Cable(R)," "NorthFlex(R)," "CFC(R)," "TW CommCorp(R)" and "L.I.P.S.(R)" Anicom's
policy is to file for trademark and trade name protection for its trademarks and
trade names.
Employees
As of March 1, 1999, Anicom employed approximately 1,151 persons.
Anicom believes that it has good relations with its employees.
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ITEM 2. DESCRIPTION OF PROPERTY
As of March 1, 1999, Anicom conducted its operations from 82 different
locations throughout North America, all of which are leased. Most of its
locations consist of a sales office and a warehouse, except for its locations in
Rosemont, Illinois; Lexington, North Carolina; Wausau, Wisconsin;
Charlottesville, Virginia; and Bloomington, Illinois, which do not include any
warehouse space.
Anicom's aggregate executive office and sales office space is
approximately 243,000 square feet and its aggregate warehouse space was
approximately 958,000 square feet. Generally, Anicom maintains short term leases
for its sales offices and warehouses, with options to renew, where possible.
Anicom believes that its facilities are adequate for its present foreseeable
needs in these geographical markets; however, the Company will continue to
increase or decrease space as the need arises. Management believes that adequate
replacement space is readily available in each market.
ITEM 3. LEGAL PROCEEDINGS
Anicom is not a party to any material legal proceeding nor, to Anicom's
knowledge, is any material legal proceeding threatened against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during Anicom's
fiscal quarter ended December 31, 1998.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Anicom's Common Stock is traded on the Nasdaq National Market under the
symbol "ANIC." The following table sets forth, for the periods indicated, the
range of high and low last sale prices for the Common Stock as reported on the
Nasdaq National Market:
1998 1997
-------------------- -----------------------
High Low High Low
------- -------- --------- -------
1st quarter 16-3/4 13-5/8 11 7-3/4
2nd quarter 16-1/16 12-7/8 12-1/2 7-7/8
3rd quarter 15-1/8 6-3/4 18-1/4 11-1/2
4th quarter 10-3/4 6-1/4 18-5/8 12-7/8
As of March 9, 1999, the approximate number of record holders of Anicom's Common
Stock was 2,239.
Anicom has not paid cash dividends or distributions on its common stock
during 1997 or 1998. Anicom anticipates that it will retain any future earnings
to finance the continuing growth and development of its business. Accordingly,
Anicom does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. The payment of any future dividends will be at the
discretion of Anicom's Board of Directors and will depend upon, among other
things, future earnings, the success of Anicom's development activities, capital
requirements, restrictions in financing arrangements, the general financial
condition of Anicom and general business conditions. At present, Anicom's
ability to declare or pay dividends is limited under its bank line of credit,
which provides that Anicom may not declare or pay any dividends on its Common
Stock if at the time of such declaration or payment, any event of default shall
have occurred or be continuing.
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ITEM 6. SELECTED FINANCIAL DATA
The data set forth below is derived from the Consolidated Financial
Statements of the Company, which have been audited by PricewaterhouseCoopers
LLP, independent accountants. These historical results are not necessarily
indicative of the results to be expected in the future.
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Selected Statement of Income Data:
Net sales $ 470,279 $ 243,664 $ 115,993 $ 29,358 $ 17,866
============= =========== =========== =========== ===========
Net income available to common stockholders $ 7,374(1) $ 4(2) $ 2,622 $ 764 $ 412
============= =========== =========== =========== ===========
Pro forma net income(3) $ 247
===========
Net income per common share:
Basic $ .31(1) $ -- (2) $ 0.20 $ 0.14 $ 0.17
============= =========== =========== =========== ===========
Diluted $ .30(1) $ -- (2) $ 0.19 $ 0.14 $ 0.17
============= =========== =========== =========== ===========
Pro forma net income per share(3) (unaudited):
Basic $ 0.10
===========
Diluted $ 0.10
===========
Weighted average number of shares outstanding:
Basic 23,918 17,476 13,384 5,408 2,400
============= =========== =========== =========== ===========
Diluted 24,816 17,476 13,580 5,658 2,400
============= =========== =========== =========== ===========
As of December 31,
------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ----------- ----------- ----------- -----------
Selected Balance Sheet Data:
Total assets $ 353,221 $ 215,457 87,954 $ 41,169 $ 6,040
============= =========== =========== =========== ===========
Long term obligations $ 108,583 $ 8,549 3,952 $ 597 $ 2,760
============= =========== =========== =========== ===========
- ------------------
<FN>
(1) Amount includes the $5.2 million one-time acquisition integration charge
discussed in Note 10 to the consolidated financial statements.
(2) During 1997, the Company incurred approximately $5.6 million for the costs
related to the development and implementation of the business process
reengineering plan, implementing a new information technology system,
writing off all capitalized costs associated with the Company's previous
system, terminating certain contractual obligations that resulted from a
1996 acquisition, consolidating redundant facilities and the internal
resource costs related to the implementation of the new system and the
business process reengineering plan.
(3) Prior to the Company's initial public offering in 1995, the Company was an
S Corporation and not subject to Federal (and some State) corporate income
taxes. The results for the year ended December 31, 1994 are adjusted to
reflect a pro forma tax provision as if the Company were subject to
corporate income taxes for such period.
</FN>
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth selected income statement data of Anicom
expressed as a percentage of net sales for the periods indicated:
1998 1997 1996
------- ------- -------
Income Statement Data:
Net sales 100.0% 100.0% 100.0%
Cost of sales 77.7 76.8 75.4
------- ------- -------
Gross profit 22.3 23.2 24.6
Operating expenses and other:
Selling 9.3 10.7 11.3
General and administrative 8.5 9.7 9.9
Acquisition integration charge 1.1 -- --
Reengineering costs -- 2.3 --
------- ------- -------
Operating income 3.4 .6 3.4
Interest expense (.6) (.3) (.2)
Interest income -- -- .5
------- ------- -------
Income before income taxes 2.8 .4 3.7
Provision for income taxes 1.2 .3 1.4
------- ------- -------
Net income 1.6 .1 2.3
Less: Dividend on preferred stock -- (.1) --
------- ------- -------
Net income available to common stockholders 1.6% --% 2.3%
======= ======= =======
- ------------------
Note: Percentages may not sum due to rounding.
Results of Operations
Year ended December 31, 1998 compared to year ended December 31, 1997
Net sales for the year ended December 31, 1998 increased to a record
$470.3 million, a 93% increase over net sales of $243.7 million in 1997. The
significant increase is primarily attributable to acquisitions coupled with
internal growth, which has led to new customers, new products, increased market
share, expanded market penetration and increased volume with existing customers.
For the year ended December 31, 1998, net income and diluted earnings per share
were $7.5 million or $0.30 per share compared to $300,000 or $0.00 per share in
1997. Results in 1997 include $5.6 million of costs associated with the
Company's implementation of a business process reengineering plan which was
centered around a new information technology system, that is year 2000 compliant
and provides the capacity necessary to continue the Company's integrated growth
strategy.
Anicom's gross profit for the year ended December 31, 1998 increased by
$48.1 million or 84.9% to $104.7 million versus $56.6 million for the year ended
December 31, 1997. This increase resulted from Anicom's acquired sales volume
and internal growth. As a percentage of net sales, gross profit was 22.3% in
1998 compared to 23.2% in 1997. The gross margin improvements that resulted from
the economic efficiencies created by Anicom's increased purchasing volume were
offset by the impact of lower historical gross profit margins of certain of the
Company's recent acquisitions which have historically had lower margin product
offerings. Management continues to work to mitigate the impact of these
historically lower gross margins by increasing the depth and breadth of products
offered at these locations and by continuing to leverage our purchasing volume
with vendors.
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Selling expenses as a percentage of net sales improved from 10.7% of
net sales in 1997 to 9.3% of net sales in 1998. These improvements resulted
primarily from the Company realizing operating leverage from its growth and
acquisitions and conforming the selling incentive programs of acquired companies
with those of Anicom. Selling expenses increased by $17.8 million for the year
ended December 31, 1998 in conjunction with the Company's increase in net sales
and the increase in sales headcount resulting from the Company's acquisitions
and internal growth.
General and administrative expenses as a percentage of net sales,
improved to 8.5% in 1998 from 9.7% in 1997. This improvement relates to the
continued reduction of acquired companies overhead costs as the Company further
realized operating leverage from its acquisition-based integrated growth
strategy. Negatively affecting the percentages are the costs associated with the
Company's broadband product line which were, in part, offset by a gain on the
December, 1998 disposition of these non-strategic assets. General and
administrative expenses increased from $23.6 million in 1997 to $39.9 million in
1998. The Company's acquisitions in the fourth quarter of 1997 and the first
nine months of 1998, led to these increases.
The Company incurred a one-time acquisition integration charge during
the third quarter of 1998 of approximately $5.2 million. This charge includes
$2.8 million for settlement of real estate obligations, the write-off of
leasehold improvements, and facility relocation costs; $1.4 million for one-time
acquisition incentive bonuses; and $1.0 million related to severance and other
costs.
In 1998 interest expense increased to $2.9 million compared to $762,000
in 1997. This is primarily a result of the Company's increased borrowings under
its credit facility during 1998 to fund the cash consideration and debt payoff
of acquired companies, and to meet the increased working capital requirements
associated with increasing the depth and breadth of product offering available
and sales growth experienced during this period.
The provision for income taxes increased to $5.6 million in 1998 from
$650,000 in 1997. The increase is a result of the increase in income before
income taxes. For the years ended December 31, 1998 and 1997, the provision for
income taxes, as a percentage of income before income taxes, decreased to 42.6%
from 68.4%. The decrease is primarily attributable to the impact of
non-deductible meals and entertainment expenses and non-deductible goodwill
amortization on a significantly higher income before income tax amount in 1998.
Net income for the year ended December 31, 1998 was $7.5 million or
1.6% of net sales as compared to $300,000 for the year ended December 31, 1997.
For the year ended December 31, 1998, basic and diluted earnings per common
share increased to $.31 and $.30 per share, respectively, up from $0.00 per
share for the year ended December 31, 1997. These increases were reported
despite an increase in diluted weighted average shares of approximately 37% from
the same period in 1997. Excluding the impact of acquisition related charges and
net losses incurred from non-strategic assets divested by the Company,
management believes that basic and diluted earnings per share would have been
$0.48 and $0.47 per share in 1998.
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Year ended December 31, 1997 compared to year ended December 31, 1996
Net sales for the year ended December 31, 1997 increased to $243.7
million, a 110.1% increase over net sales of $116.0 million in 1996. The
significant increase is primarily attributable to acquisitions coupled with
internal growth, which has led to new customers, new products, increased market
share, expanded market penetration and increased volume with existing customers.
For the year ended December 31, 1997, net income and earnings per share were
$300,000 or $0.00 per share compared to $2.6 million or $0.20 (Basic earnings
per common share) and $0.19 (Diluted earnings per common share) in 1996. This
change is principally attributable to costs associated with the Company's
implementation of a business process reengineering plan which was centered
around a new information technology system, that is year 2000 compliant and
provides the capacity necessary to continue the Company's integrated growth
strategy. Details of the Company's reengineering plan are discussed below.
Anicom's gross profit for the year ended December 31, 1997 increased by
$28.0 million or 97.9% to $56.6 million versus $28.6 million for the year ended
December 31, 1996. This increase resulted from Anicom's acquired sales volume
and internal growth. As a percentage of net sales, gross profit was 23.2% in
1997 compared to 24.6% in 1996. The gross margin improvements that resulted from
the economic efficiencies created by Anicom's increased purchasing volume were
offset by the impact of lower historical gross profit margins of certain
acquisitions. TW Communications, which the Company acquired in December 1997,
has significant operations in the New York City market and carries different,
lower margin product offerings than Anicom has historically offered.
Selling expenses increased by $12.9 million for the year ended December
31, 1997 in conjunction with the Company's increase in net sales and the
increase in sales headcount that resulted from the Company's acquisitions and
internal growth. Selling expenses as a percentage of net sales improved from
11.3% of net sales in 1996 to 10.7% of net sales in 1997. These improvements
resulted from the Company realizing operating leverage from its growth and
acquisitions and conforming the selling incentive programs of companies acquired
in 1996 with those of Anicom. These improvements were, in part, offset by
differences in the selling incentive programs in place at Energy Electric Corp.,
acquired in July, 1997.
General and administrative expenses increased from $11.6 million in
1996 to $23.6 million in 1997. The Company's acquisitions in the last half of
1996 and 1997, non-recurring costs related to a product line sold during the
first quarter of 1997 and non-recurring post acquisition integration costs
accounted for the majority of the increase in general and administrative
expenses. As a percentage of net sales, general and administrative expenses
improved to 9.7% for the year ended December 31, 1997 from 9.9% in the year
prior. These improvements were attributable to increases in net sales outpacing
required expenses for general and administrative costs as the Company further
realized operating leverage from its acquisition-based, integrated growth
strategy.
In the 22-month period from March, 1996 to December, 1997, the Company
completed nine acquisitions. The revenues for these entities in the last fiscal
year prior to acquisition by Anicom totalled approximately $282.0 million. Of
these nine acquisitions, three were completed within the last six months of 1997
and have accounted for approximately $153.7 million or 54.5% of the acquired
revenue. As the Company developed plans to implement the integration of these
businesses into the Anicom information technology system, it became clear that
the capacity of the existing system would be severally strained and that
improved efficiencies could be realized by evaluating each of the Company's
significant business processes. This realization, along with the need to upgrade
the Company's systems to year 2000 compliance, resulted in management
undertaking a significant business-reengineering program.
In the fourth quarter, the Company implemented a complete reengineering
plan, designed to further improve operating efficiencies within the organization
11
<PAGE>
by leveraging the capabilities inherent in the new information system and to
provide the additional information system capacity to continue the Company's
integrated growth strategy.
In November, 1997, the Emerging Issues Task Force released Issue No.
97-13 Accounting for Costs Incurred in Connection with a Consulting Contract or
an Internal Project That Combines Business Process Reengineering and Information
Technology Transformation ("EITF 97-13"). EITF 97-13 provides authoritative
guidance on how companies are to account for third-party or internally generated
costs associated with business process reengineering and information technology
transformation.
After considering the status of the system implementation project and
the impact of EITF 97-13, management decided to accelerate the conversion to the
new platform to mid-December, historically the Company's slowest portion of the
year, to slow down sales in an effort to minimize any distraction to our
customers and to confine the costs to the fourth quarter of 1997. During 1997,
the Company incurred approximately $5.6 million for the costs related to the
development and implementation of the business process reengineering plan,
implementing a new information technology system, writing off all capitalized
costs associated with the Company's previous system, terminating certain
contractual obligations that resulted from a 1996 acquisition, consolidating
redundant facilities and the internal resource costs related to the
implementation of the new system and the business process reengineering plan.
See Note 6 to the Consolidated Financial Statements included elsewhere herein.
Interest income decreased to $225,000 in 1997 from $564,000 in 1996.
During the first and third quarters of 1996, the Company earned interest income
on invested funds raised in common stock offerings. In the second and third
quarters of 1997, the Company earned interest on funds raised in its May private
placement of convertible preferred stock. The variance noted is the result of
the amounts and periods of time these funds were invested prior to their use.
In 1997, interest expense increased to $762,000 from $256,000 for 1996.
The increase is due to the Company borrowing against its credit facility for its
acquisition of Energy and funding increases in working capital required
principally by acquired locations.
The provision for income taxes decreased to $650,000 in 1997 from $1.6
million in 1996. The decrease is a result of the decrease in income before
income taxes. For the years ended December 31, 1997 and 1996, the provision for
income taxes, as a percentage of income before income taxes, increased to 68.4%
from 38.2%. The increase is primarily attributable to the impact of
non-deductible meals and entertainment expenses and non-deductible goodwill
amortization on a significantly lower income before income tax amount.
Net income for the year ended December 31, 1997 was $300,000 as
compared to $2.6 million or 2.3% of net sales for the year ended December 31,
1996 as a result of the reengineering costs incurred and the impact of slowing
down sales in December 1997 to accommodate the acceleration of the information
system implementation. Excluding the impact of sacrificed sales in December and
the one- time, non-recurring accounting charges, management believes that net
earnings for 1997 would have been approximately $0.30 per share.
Effective December 31, 1997, the Company adopted Financial Accounting
Standards Board ("FASB") Statement of Financial Standards No. 128 Earnings Per
Share. There are no basic or diluted earnings per common share based on the
level of net income and common shares outstanding for the year ended December
31, 1997. In 1996, basic earnings per common share were $.20 and diluted
earnings per common share were $.19.
12
<PAGE>
Liquidity and Capital Resources
In November 1998, the Company entered into an agreement with its
lenders to increase its revolving credit facility (the "Facility") from $100
million to $120 million. The Facility provides for borrowings of up to $15
million in currencies other than U.S. dollars. It also provides for various
interest rate options, determined from time to time, based upon the Company's
interest coverage and leverage ratios, as defined, and either the agent's
Domestic Rate less .25% to .50% or LIBOR plus .5% to 1.0%. The Facility expires
in June 2001 with extensions available at the Company's option through June
2003. The Facility contains certain financial covenants, including minimum
tangible net worth, current, interest coverage and debt to earnings ratios.
Management believes that cash flows from operations and borrowings
available under the Facility will be sufficient to fund current operations, and
its planned integrated growth strategy. The Company does not currently have any
significant long-term capital requirements that it believes cannot be funded
from the sources discussed below. However, in connection with its acquisition
and integrated growth strategy, the Company's capital requirements may change
based upon various factors, primarily related to the timing of acquisitions and
the consideration to be used as purchase price. The Company continues to examine
opportunities to raise funds through the issuance of additional equity or debt
securities through private placements or public offerings and to increase its
available line of credit.
In connection with the acquisition of Texcan Cables Limited, Texcan
Cables, Inc. and Texcan Cables International, Inc. (collectively referred to as
"Texcan"), the Company entered into a new $35 million term facility in September
1998, with a Canadian bank ("Canadian Bank Loan"). In November 1998, the
Canadian Bank Loan was acquired with proceeds from the Facility.
As of December 31, 1998, Anicom had working capital of approximately
$135.1 million as compared to $67.5 million as of December 31, 1997. At December
31, 1998, amounts outstanding under the Facility were approximately $85.0
million.
In 1998 operating activities used $33.9 million of cash compared to
$13.0 million used during 1997. This increase has resulted from the increase in
sales and the investment in receivables attributable to contractor and large
project business. Operating cash flow was also used to fund acquisition-related
activities, including expanding product offerings, funding business integration
liabilities and working capital deficiencies of acquired companies. The
Company's investments in receivables and inventory were primarily funded by
borrowings under the Facility.
Investing activities utilized approximately $30.7 million during 1998.
During 1998, Anicom completed the acquisitions of Yankee Electronics, Optical
Fiber Components, Superior Cable & Supply and Texcan. Cash paid for these
acquisitions accounted for the majority of cash used for investing activities.
Cash flows from financing activities in 1998 totaled $66.5 million
compared to $49.4 million in 1997. During 1998 the Company borrowed under the
Facility to fund increased working capital requirements and acquisition
activity. The Company also repaid approximately $12.7 million of debt assumed in
acquisitions with funds from the Facility.
Inflation
Although the operations of Anicom are influenced by general economic
conditions, Anicom does not believe that inflation had a material effect on the
results of the operations during 1998.
13
<PAGE>
Seasonality
In the fourth quarter, Anicom has historically experienced, and expects
to experience in future years, a modest decrease in the level of activity among
many of its customers around the Thanksgiving and Christmas holidays.
Impact of Not Yet Effective Rules
During the second quarter of 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), which will be
effective for the Company's fiscal year 2000. This statement establishes
accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments imbedded in other contracts, be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement also requires that changes in the derivative's fair
value be recognized in earnings unless specific hedge accounting criteria are
met. Management is currently assessing the impact of SFAS No. 133.
Year 2000 Readiness and Related Risks
The Year 2000 issue is the result of computer programs being unable to
interpret dates beyond the year 1999, which could cause a system failure or
other computer errors, leading to disruptions in operations. A task force has
been established by the Company that includes information systems, accounting
and legal personnel of the Company to assess the Company's state of readiness
and to implement an action plan to correct any deficiencies of the Company. To
date, the Company has identified the following areas to assess as to Year 2000
readiness: (1) distribution and financial information systems, (2) supplier,
third-party relationships and customers, and (3) physical facility systems. For
each of these areas, the Company has established the following procedures to
assess its Year 2000 readiness: (a) identifying systems potentially susceptible
to Year 2000 compliance issues, (b) developing and implementing corrective
actions and (c) testing to ensure compliance. Management believes that the
Company is devoting the necessary resources to identify and resolve any
significant Year 2000 issues in a timely manner.
DISTRIBUTION AND FINANCIAL INFORMATION SYSTEMS: As part of its
integrated growth strategy, Anicom completed the implementation of a new
information technology system in the fourth quarter of 1997. This customized
information technology system builds upon the strengths inherent in Anicom's
previous system while allowing for the reengineering of certain business
processes that were necessary to accommodate the significant growth Anicom has
experienced. The information system integrates sales, inventory control and
purchasing, warehouse management, financial control and internal communications
while providing real-time monitoring of inventory levels, shipping status and
other key operational and financial benchmarks at all of Anicom's sales and
distribution locations. In implementing this system, management received written
confirmation from vendors that the enterprise system software, hardware and
network operating systems included in this information system are Year 2000
compliant. Testing of these systems has confirmed this conclusion.
Total costs incurred to purchase the necessary hardware, software,
licenses, consulting services and training associated with the installation,
modification and implementation of the system were approximately $3.6 million.
Of this amount, approximately $2.7 million was expensed with the remainder being
capitalized and depreciated over future periods. The Company does not anticipate
incurring any material additional costs with respect to Year 2000 readiness of
this information technology system.
14
<PAGE>
Since implementing the Company's new information technology system, the
Company has completed certain acquisitions that are in various stages of
conversion to the Company's current system. Management estimates that, with the
exception of Texcan's Canadian operation, which was acquired in September 1998,
all operations will be converted to the Company's new information technology
system no later than the second quarter of 1999. Management believes that the
portion of the costs for this conversion related to Year 2000 readiness is not
material.
Texcan's Canadian financial and distribution systems are currently in
the process of being upgraded to become Year 2000 compliant and management
estimates this will be completed during the first quarter of 1999 at a cost of
$30,000 to $50,000. Texcan's Canadian systems will be converted to the Company's
new information technology system subsequent to the second quarter of 1999.
SUPPLIERS, THIRD-PARTY RELATIONSHIPS AND CUSTOMERS: The Company relies
on third party suppliers for inventory, utilities, transportation and other key
supplies and services. Interruption of supplier operations due to Year 2000
issues could adversely affect the Company's operations. The Company's payroll
outsourcing service has confirmed that the systems used to process the Company's
payroll are year 2000 compliant. The Company has begun evaluating the Year 2000
readiness of its other suppliers through a survey distributed in the fourth
quarter of 1998. Responses are being evaluated and second requests will be
mailed for non-responses. Unsatisfactory responses or non-responses from
critical suppliers will be evaluated on a case by case basis in an attempt to
mitigate risk to the Company. These activities are intended to provide a
reasonable means of managing risk, but cannot eliminate the potential for
disruption due to third-party failure.
The Company does not currently have any formal information concerning
the Year 2000 readiness of its customers, and given the breadth and diversity of
its customer base, the Company is making a formal inquiry of selected customers.
The Company believes that the impact of isolated occurrences resulting from any
of its customers failing to be Year 2000 compliant would not be materially
adverse to the Company. However, widespread interruptions to customers serviced
by the Company could result in reduced sales, increased inventory or receivable
levels and a reduction in cash flow.
The Company has not incurred, and does not believe it will incur,
material costs related to any inquiry as to the Year 2000 readiness of its
suppliers, other third party relationships and customers.
PHYSICAL FACILITY SYSTEMS: The Company is continuing to evaluate the
Year 2000 readiness of its physical facility systems, such as phone systems,
power, security systems, heating, ventilation and air conditioning systems, etc.
The Company expects to complete the assessment phase of its physical facility
systems during the first and second quarter of 1999 with remedial action planned
for the second and third quarter of 1999.
While the Company and many other companies believe their efforts to
address the Year 2000 issues will be successful in avoiding any material adverse
effect on the Company's results of operations or financial condition, it
recognizes that a most reasonably likely worst case Year 2000 scenario would
involve the failure of a third party or a component of the infrastructure,
including national banking systems, electrical power, transportation facilities,
communication systems and governmental activities, to conduct their respective
operations after 1999 such that the Company's ability to obtain and distribute
its products and services would be limited for a period of time. If this were to
occur, it would likely cause temporary financial losses and an inability to
provide products and services to customers, and there may be no practical
alternative to some of these resources available to the Company.
15
<PAGE>
The Company is currently implementing contingency plans to be carried
out in the event of an external Year 2000 failure of vendors that are critical
to normal information systems business operations. Management estimates these
plans will be complete by the 3rd quarter of 1999. These plans include both
internal and external resources and facilities for off-site computer processing
and personnel relocation in the event of power or data communication failure
that results in the inability to utilize an existing company facility.
The foregoing assessment of the impact of the Year 2000 issue on the
Company is based on management's estimates at the present time. The assessment
is based upon numerous assumptions as to future events. There can be no
assurance that these estimates and assumptions will provide accurate, and the
actual results could differ materially. To the extent that Year 2000 issues
cause significant delays in sales, increased inventory or receivable levels or
cash flow reductions, the Company's results of operations and financial
condition could be materially adversely affected.
Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995
The statements contained in Item 1 (Description of Business) and Item 7
(Management's Discussion and Analysis of Financial Condition and Results of
Operations) that are not historical facts may be forward-looking statements.
Whenever possible, the Company has identified these forward-looking statements
by words such as "believes", "expects", "anticipates" and similar expressions.
Anicom cautions readers that these forward-looking statements are subject to a
variety of risks and uncertainties that could cause Anicom's actual results in
1999 and beyond to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, Anicom. These risks and uncertainties are
more fully described in Anicom's filings with the Securities and Exchange
Commission including, without limitation, those described under "Risk Factors"
in the Company's Registration Statement on Form S-3 (File No. 333-61715). These
risks and uncertainties include, without limitation, Anicom's limited operating
history on which expectations regarding its future performance can be based,
general economic and business conditions affecting the industries of Anicom's
customers in existing and new geographical markets, competition from, among
others, national and regional distributors that have greater financial,
technical and marketing resources and distribution capabilities than Anicom, the
availability of sufficient capital, Anicom's ability to identify the right
product mix and to maintain sufficient inventory to meet customer demand,
Anicom's ability to successfully acquire and integrate the operations of
additional businesses and Anicom's ability to operate effectively in
geographical areas in which it has no prior experience.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign exchange rates.
The Company transacts certain of its business in Canadian dollars. These
transactions expose the Company to fluctuations in exchange rates, which could
impact the financial results of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information in response to this item is included in the Company's
consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP, appearing on pages F-1 through F-24 of this Form
10-K.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information in response to this item is incorporated by reference
from the sections captioned "PROPOSAL NO. 1--ELECTION OF DIRECTORS" and
"EXECUTIVE OFFICERS" of the definitive Proxy Statement to be filed in connection
with the Company's 1999 Annual Meeting of Stockholders (the "1999 Proxy
Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information in response to this item is incorporated by reference
from the section of the 1999 Proxy Statement captioned "EXECUTIVE COMPENSATION."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in response to this item is incorporated by reference
from the section of the 1999 Proxy Statement captioned "SECURITY OWNERSHIP OF
MANAGEMENT AND PRINCIPAL STOCKHOLDERS."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in response to this item is incorporated by reference
from the sections of the 1999 Proxy Statement captioned "CERTAIN TRANSACTIONS."
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. The following consolidated financial statements
and notes thereto, and the related Report of
Independent Accountants, are included on pages F-1
through F-24 on this Form 10-K:
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. Schedules
The following consolidated financial statement schedule
is included on page F-25:
Schedule II -- Valuation and Qualifying Accounts
All other financial statement schedules are omitted because
such schedules are not required or the information required
has been presented in the aforementioned financial
statements.
17
<PAGE>
3. Exhibits. The following exhibits are filed with the
report or incorporated herein by reference as set
forth below.
Exhibit No. Description
2.1(1) Agreement and Plan of Merger, dated as of November 24,
1997, between Anicom, Inc., TWC Acquisition Corporation,
TW Communications Corporation, Edward Goodstein and Carl
G. Palazzolo.
2.2(1) Stock Purchase Agreement, dated as of November 24, 1997,
between Anicom, Inc. and the Purchasers named therein.
2.3(2) 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
2.4(3) Series A Convertible Preferred Stock Purchase Agreement,
dated May 20, 1997 by and among the Company and the
purchasers listed on Exhibit A thereto.
3.1 Restated Certificate of Incorporation of Anicom.
3.2(4) Restated Bylaws of Anicom.
4.1(4) Specimen Stock Certificate representing Common Stock.
10.1(3) Stockholders' Agreement, dated May 23, 1997 among
Anicom, Scott C. Anixter and each of the purchasers
listed on the signature page thereto.
10.2 Long-Term Credit Agreement, dated as of November 4,
1998, between Anicom and Harris Trust and Savings Bank.
10.3 Short-Term Credit Agreement, dated as of November 4,
1998, between Anicom and Harris Trust and Savings Bank.
10.4(4) Shareholders Agreement.
10.5(4) Form of Tax Indemnification Agreement.
10.6 Form of Employment Agreement between Anicom and
Scott C. Anixter.
10.7 Form of Employment Agreement between Anicom and
Carl E. Putnam.
10.8(4) Form of Employment Agreement between Anicom and
Robert L. Swanson.
10.9(5) Form of 1995 Stock Incentive Plan as Amended and
Restated.
10.10(6) Form of Amended and Restated 1995 Directors Stock
Option Plan.
10.11(7) Form of Employment Agreement between Anicom and
Robert Brzustewicz.
10.12(7) Form of Employment Agreement between Anicom and
Glen Nast.
10.13 1996 Stock Incentive Plan, as Amended
10.14 Form of Employment Agreement between Anicom and
Donald Welchko.
10.15 Settlement Agreement and Mutual Release, dated April 20,
1998 by and among Robert Brzustewicz and Anicom.
10.16 Settlement Agreement and Mutual Release, dated April 20,
1998 by and among Glen Nast and Anicom.
10.17 1998 Associate Stock Purchase Plan.
10.18(9) Anicom 401(k) Savings Plan.
18
<PAGE>
Exhibit No. Description
21 List of Subsidiaries.
23.1 Consent of Independent Accountants.
27 Financial Data Schedule.
- ------------------
(1) Previously filed as an Exhibit to Anicom's registration statement on
Form S-3, registration no. 333-41225, and incorporated herein by
reference.
(2) Previously filed as an Exhibit to Anicom's quarterly report on
Form 10-Q for the quarter ended September 30, 1998.
(3) Previously filed as an Exhibit to Anicom's current report on
Form 8-K, dated May 30, 1997, and incorporated herein by reference.
(4) Previously filed as an Exhibit to Anicom's Registration Statement on
Form SB-2, registration no. 33-87736C, and incorporated herein by
reference thereto.
(5) Previously filed as an Exhibit to Anicom's annual report on
Form 10-KSB for the quarter ended December 31, 1996 and incorporated
herein by reference.
(6) Previously filed as an Exhibit to Anicom's quarterly report on
Form 10-QSB for the quarter ended September 30, 1996 and incorporated
herein by reference.
(7) Previously filed as an Exhibit to Anicom's current report on Form 8-K,
dated March 12, 1996, and incorporated herein by reference.
(8) Previously filed as an Exhibit to Anicom's registration statement on
Form S-8, registration no. 333-68119, and incorporated herein
by reference.
(b) Reports on Form 8-K. The following Reports on Form 8-K or Form
8-K/A were filed during the last quarter of 1998:
Form 8-K, dated October 5, 1998 (Texcan Cables, Inc.
acquisition)
Form 8-K/A dated October 29, 1998, Amendment to Form
8-K, dated October 5, 1998 (Pro forma financial
information, Texcan Cables, Inc. acquisition)
Form 8-K/A dated November 20, 1998, Amendment to Form
8-K, dated October 5, 1998 (Financial Statements of
Businesses Acquired, Texcan Cables, Inc. acquisition)
19
<PAGE>
Anicom, Inc.
Index to Consolidated Financial Statements and Financial Statement Schedule
<TABLE>
<CAPTION>
Page(s)
<S> <C>
Report of Independent Accountants F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-7 - F-24
The following consolidated financial statement schedule of
Anicom, Inc. is included in Item 14:
Schedule II - Valuation and Qualifying Accounts F-25
</TABLE>
All other schedules for which provision is made in the applicable
regulation of the Securities and Exchange Commission are not required under the
related instructions and are inapplicable and, therefore, have been omitted.
F-1
<PAGE>
Report of Independent Accountants
To the Stockholders and the Board of Directors of Anicom, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 17 of this Form 10-K, present fairly, in
all material respects, the financial position of Anicom, Inc. at December 31,
1998 and 1997, and the results of their operations and of their cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 14(a)(2)
on page 17 of this Form 10-K, presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Chicago, Illinois
February 17, 1999
F-2
<PAGE>
Anicom, Inc.
Consolidated Balance Sheets
As of December 31, 1998 and 1997
(in thousands, except per share data)
1998 1997
-------- --------
Current assets:
Cash and cash equivalents $ 2,589 $ 687
Accounts receivable, less allowance
for doubtful accounts of
$4,140 and $2,442, respectively 106,043 65,125
Inventory 87,250 57,099
Deferred income taxes 3,176 2,478
Other current assets 14,273 4,866
-------- --------
Total current assets 213,331 130,255
Property and equipment, net 9,963 5,771
Goodwill, net of accumulated amortization of
$3,740 and $1,605, respectively 128,280 76,869
Deferred income taxes -- 835
Other assets 1,647 1,727
-------- --------
Total assets $353,221 $215,457
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 58,205 $ 47,740
Accrued expenses 12,927 7,909
Acquisition liabilities 5,687 5,337
Deferred income taxes 222 --
Long-term debt, current portion 1,227 1,773
-------- --------
Total current liabilities 78,268 62,759
Long-term debt, net of current portion 85,516 6,267
Other liabilities 3,067 2,282
-------- --------
Total liabilities 166,851 71,308
-------- --------
Commitments and contingencies
Convertible redeemable preferred stock,
series B, par value $.01 per share,
liquidation value $1,000 per share;
20 and 0 shares authorized,
issued and outstanding, respectively 20,000 --
-------- --------
Stockholders' equity:
Common stock, par value $.001 per share;
100,000 and 60,000 shares authorized,
respectively; 25,083 and 23,293 shares
issued and outstanding, respectively 17 15
Preferred stock, undesignated,
par value $.01 per share;
973 shares authorized,
no shares issued and outstanding -- --
Additional paid-in capital 155,653 140,743
Retained earnings 10,597 3,391
Other comprehensive income 103 --
-------- --------
Total stockholders' equity 166,370 144,149
-------- --------
Total liabilities and stockholders' equity $353,221 $215,457
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
Anicom, Inc.
Consolidated Statements of Income
For the years ended December 31, 1998, 1997 and 1996
(in thousands, except per share data)
1998 1997 1996
--------- --------- ---------
Net sales $ 470,279 $ 243,664 $ 115,993
Cost of sales 365,613 187,098 87,442
--------- --------- ---------
Gross profit 104,666 56,566 28,551
--------- --------- ---------
Operating expenses:
Selling 43,702 25,948 13,068
General and administrative 39,924 23,547 11,547
Acquisition integration charge (Note 10) 5,156 -- --
Reengineering costs (Note 6) -- 5,584 --
--------- --------- ---------
Total operating expenses 88,782 55,079 24,615
--------- --------- ---------
Income from operations 15,884 1,487 3,936
--------- --------- ---------
Other income (expense):
Interest income 111 225 564
Interest expense (2,853) (762) (256)
--------- --------- ---------
Total other income (expense) (2,742) (537) 308
--------- --------- ---------
Income before income taxes 13,142 950 4,244
Provision for income taxes 5,600 650 1,622
--------- --------- ---------
Net income 7,542 300 2,622
Less: dividends on preferred stock (168) (296) --
--------- --------- ---------
Net income available to common stockholders $ 7,374 $ 4 $ 2,622
========= ========= =========
Earnings per common share:
Basic $ .31 $ -- $ .20
========= ========= =========
Diluted $ .30 $ -- $ .19
========= ========= =========
Weighted average common shares outstanding:
Basic 23,918 17,476 13,384
========= ========= =========
Diluted 24,816 17,476 13,580
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements
F-4
<PAGE>
Anicom, Inc.
Consolidated Statements of Stockholders' Equity
For the years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Other Total
------------------ ------------------ Paid-In Retained Comprehensive Stockholders'
Shares Amount Shares Amount Capital Earnings Income Equity
------ --------- -------- -------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 12,214 $ 6 $ 36,371 $ 764 $ 37,141
Net income 2,623 2,623
Proceeds from issuance of
Common stock, net of
offering costs 2,423 1 15,053 15,054
Issuance of common stock
for acquisitions 872 5,537 5,537
Exercise of stock options
and warrants 107 11 11
Receipt and cancellation of
Common stock received in
sale of product line (55) (507) (507)
-------- -------- --------- -------- ----------
Balance, December 31, 1996 15,561 7 56,465 3,387 59,859
Net income 300 300
Proceeds from issuance of
Convertible preferred
stock, net of offering 27 $ 26,155 26,155
costs
Dividends issued to
Convertible preferred
stockholders in common
stock 29 296 (296)
Conversion of convertible
Preferred stock to common
stock (27) (26,155) 3,130 3 26,152
Proceeds from issuance of
Common stock, net of
offering costs 2,900 3 36,131 36,134
Issuance of common stock
for acquisitions 1,646 2 21,627 21,629
Exercise of stock options
and warrants 27 72 72
-------- -------- -------- -------- --------- -------- ----------
Balance, December 31, 1997 -- -- 23,293 15 140,743 3,391 144,149
----------
Net income 7,374 7,374
Foreign currency translation
Adjustments $ 103 103
----------
Total comprehensive income 7,477
Issuance of common stock
for acquisitions 1,732 2 14,579 14,581
Exercise of stock options
and warrants 58 331 331
Dividends on convertible
Redeemable preferred stock,
Series B (168) (168)
-------- -------- -------- -------- --------- -------- --------- ----------
Balance, December 31, 1998 -- -- 25,083 $ 17 $ 155,653 $ 10,597 $ 103 $ 166,370
======== ======== ======== ======== ========= ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
Anicom, Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,374 $ 301 $ 2,623
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and Amortization 4,005 2,163 924
Deferred income taxes 359 615 527
Gain on sale of product lines (1,000) (483) (878)
Loss on disposal of property and equipment -- 278 --
Increase (decrease) in cash attributable to
change in assets and liabilities:
Marketable securities -- 4,345 21,191
Accounts receivable (25,033) (6,702) (6,631)
Inventory (8,827) (12,710) (5,912)
Other assets (8,615) (1,865) (284)
Accounts payable 4,303 3,693 2,366
Accrued expenses (6,478) (2,648) (4,799)
--------- --------- ---------
Net cash (used in) provided by operating activities (33,912) (13,013) 9,127
--------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (3,493) (2,297) (1,105)
Cash paid for acquired companies (29,908) (33,801) (14,201)
Cash received on sale of product lines 2,700 200 --
--------- --------- ---------
Net cash used in investing activities (30,701) (35,898) (15,306)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from equity offerings, net of offering costs -- 62,365 15,054
Proceeds from long-term debt 142,550 57,340 4,190
Payment of long-term debt and assumed bank debt (76,129) (70,302) (12,884)
Other 94 -- 11
--------- --------- ---------
Net cash provided by financing activities 66,515 49,403 6,371
--------- --------- ---------
Net increase in cash and cash equivalents 1,902 492 192
Cash and cash equivalents, beginning of year 687 195 3
--------- --------- ---------
Cash and cash equivalents, end of year $ 2,589 $ 687 $ 195
========= ========= =========
Supplemental cash flow information:
Cash paid for interest $ 2,896 $ 695 $ 81
========= ========= =========
Cash paid for income taxes $ 4,869 $ 4,098 $ 1,382
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Anicom, Inc. and Subsidiaries (the "Company") specializes in the sale
and distribution of multimedia technology products including
communications related wire, cable, fiber optics and computer network
and connectivity products. The Company operates in a single business
and geographical segment.
The Company sells to a wide array of customers, including contractors,
systems integrators, security/fire alarm companies, regional Bell
operating companies, distributors, utilities, telecommunications and
sound contractors, wireless specialists, construction companies,
universities, governmental agencies and companies involved in the
automotive, mining, marine, petro-chemical, paper and pulp and other
natural resource industries. The Company's customers are principally
located in North America. The Company generally sells to its customers
on an unsecured basis.
Summary of Significant Accounting Policies
Consolidation
The accompanying consolidated financial statements consist of Anicom,
Inc. and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
Inventory
Inventory, which primarily consists of finished goods, is stated at the
lower of cost or market. Cost is determined by the weighted average
method.
Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over five
years or the terms of the lease for leasehold improvements, generally
three to seven years. Major renewals and improvements are capitalized.
Expenditures for maintenance and repairs are expensed as incurred. Upon
retirement or other disposition of property, the cost and related
accumulated depreciation are removed from the accounts and any gain or
loss is recognized.
F-7
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
1. Nature of Business and Summary of Significant Accounting Policies,
continued
Goodwill
Goodwill arising from business combinations is amortized using the
straight-line method over forty years. The Company's evaluation of the
recoverability of goodwill includes consideration of operating
performance and undiscounted cash flows of the acquired business units.
Income Taxes
The Company applies the asset and liability approach to accounting for
income taxes. Deferred tax assets and liabilities are established for
the expected future tax consequences of temporary differences between
the financial statement and tax bases of assets and liabilities, using
enacted tax rates.
Financial Instruments
The fair value of cash and cash equivalents is assumed to approximate
the carrying value of these assets due to the short duration of these
assets. The fair value of the Company's debt is estimated to be the
carrying value of these liabilities based upon borrowing rates
currently available to the Company for borrowings with similar terms.
The fair value of the Company's convertible redeemable preferred stock,
series B is estimated to approximate carrying value as such stock is
not traded in the open market and a market price is not readily
available.
Revenue Recognition
Sales and the related cost of sales are recognized upon the shipment of
products.
Earnings Per Common Share
Basic earnings per common share is computed based on net income
available to common shareholders divided by the weighted average common
shares outstanding. Diluted earnings per common share is computed based
on net income divided by weighted average common shares and potentially
dilutive securities such as stock options and warrants and further
assumes the conversion of the Company's convertible redeemable
preferred stock to common stock as of the date of issuance.
Stock-Based Compensation
The Company applies the provisions of Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees" in accounting
for its stock-based employee compensation arrangements and discloses
pro forma net income and earnings per share information in its
footnotes as if the fair value method suggested in Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") had been applied.
F-8
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
1. Nature of Business and Summary of Significant Accounting Policies,
continued
Foreign Currency Translation
All assets and liabilities are translated at current and historical
rates of exchange and operating transactions are translated at weighted
average rates during the year. The translation gains and losses are
accumulated as a component of stockholders' equity.
Reclassifications
Certain reclassifications have been made to the 1996 and 1997 financial
statements to conform to the 1998 presentation.
Recent Pronouncements
During the second quarter of 1998, the FASB issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which will be
effective for the Company's fiscal year 2000. This statement
establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments
imbedded in other contracts, be recorded in the balance sheet as either
an asset or liability measured at its fair value. The statement also
requires that changes in the derivative's fair value be recognized in
earnings unless specific hedge accounting criteria are met. Management
is currently assessing the impact of SFAS 133.
2. Property and Equipment
At December 31, property and equipment consisted of the following
components:
1998 1997
-------- --------
Machinery, equipment and vehicles $ 5,142 $ 2,604
Office equipment 1,511 1,104
Computer equipment and software 4,975 2,944
Leasehold improvements 1,938 852
-------- --------
Total cost 13,566 7,504
Less: Accumulated depreciation and amortization (3,603) (1,733)
-------- --------
Property and equipment, net $ 9,963 $ 5,771
======== ========
F-9
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
3. Long-Term Debt
In November 1998, the Company entered into an agreement with its
lenders to increase its revolving credit facility (the "Facility") from
$100,000 to $120,000. The Facility provides for borrowings of up to
$15,000 in currencies other than U.S. dollars. It also provides for
various interest rate options, determined from time to time, based upon
the Company's interest coverage and leverage ratios, as defined, and
either the agent's Domestic Rate less .25% to .50% or LIBOR plus .5% to
1.0%. The Facility expires in June 2001 with extensions available at
the Company's option through June 2003. The Facility contains certain
financial covenants, including minimum tangible net worth, current,
interest coverage and debt to earnings ratios.
In connection with the acquisition of Texcan Cables Limited, Texcan
Cables, Inc. and Texcan Cables International, Inc. (collectively
referred to as "Texcan") described in Note 9, the Company entered into
a new $35,000 term facility in September 1998, with a Canadian bank
("Canadian Bank Loan"). In November 1998, the Canadian Bank Loan was
acquired with proceeds from the Facility.
At December 31, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Amounts due under the Facility $ 85,000 $ 4,700
Noncollateralized loans payable to
former shareholders of
acquired companies, each due
in equal installments (except as noted):
6.55% note due March 12, 1999 1,000 2,000
Prime rate note (7.50% at December 31, 1998),
payable in monthly installments
through July 1, 2002 382 489
6.00% notes due May 30, 1997 to 1999 84 167
6.00% note due October 27, 1998 -- 167
5.5% to 5.9% demand notes -- 368
Other 277 149
-------- --------
86,743 8,040
Less current portion (1,227) (1,773)
-------- --------
$ 85,516 $ 6,267
======== ========
</TABLE>
F-10
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
3. Long-Term Debt, continued
The following is a schedule of the aggregate maturities in each of the
five years ending December 31, 1999, and thereafter:
Amount
----------
1999 $ 1,227
2000 136
2001 128
2002 62
2003 85,190
----------
Total $ 86,743
==========
4. Convertible Redeemable Preferred Stock, Series B
In September 1998, in connection with the Texcan acquisition discussed
in Note 9, the Company issued 20 shares of Series B convertible
redeemable preferred stock, par value $.01 per share, which are
convertible, in the aggregate, into an additional 1,404 shares of
common stock (the "Series B Preferred Stock"). The Series B Preferred
Stock, contains a liquidation preference of $1,000 per share and earns
dividends at the rate of 3% of the liquidation preference per annum,
payable semi-annually. Series B Preferred Stockholders are not entitled
to any voting rights. The Series B Preferred Stock is redeemable at the
holder's or the Company's option after 3 years from the date of issue
for the liquidation preference value plus accrued and unpaid interest.
Mandatory redemption occurs on the fifth anniversary from the date of
issue. Conversion of the Series B Preferred Stock to common stock may
occur at anytime, in whole or in part, at the option of the holder. The
number of common shares to be issued upon conversion will be computed
by dividing the liquidation preference for each share of Series B
Preferred Stock by $14.25 ("Conversion Price"), rounded to the nearest
whole share. In addition, mandatory conversion may occur based on the
future trading price of the Company's common stock as follows:
Trading Price as a Number of Series B
Percentage of Preferred Shares to be
Conversion Price Converted*
---------------- ----------
130% 6.667
160% 13.333
190% 20.000
* Number of shares less shares previously converted
F-11
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
5. Common Stock
Following approval by the Company's stockholders at its annual meetings
the number of authorized shares of common stock was increased to 60,000
in June 1997 and to 100,000 in June 1998.
In December 1997, the Company completed a private placement of 2,900
shares of its common stock. Net proceeds to the Company after related
costs and expenses were approximately $36,100.
In September 1996, the Company completed a private placement of 2,423
shares of its Common Stock. Net proceeds to the Company after related
costs and expenses were approximately $15,100.
6. Reengineering Costs
In the fourth quarter of 1997, the Company adopted a reengineering plan
(the "Plan") designed to provide additional system capacity to continue
the Company's integrated growth strategy, further improve operating
efficiencies within the organization and to make the Company's
information technology systems Year 2000 compliant. Non-recurring
charges related to the Plan include costs related to developing and
implementing a business process reengineering plan, implementing a new
information technology system, writing off all capitalized costs
associated with the Company's previous system, terminating contracts
associated with certain 1996 acquisitions, consolidating redundant
facilities and internal resource costs related to the implementation of
the new information technology system and business process
reengineering.
The following table summarizes these costs:
Implementation of information technology system $1,536
Internal resource costs incurred during reengineering 1,159
Development and implementation
Contract terminations and other location consolidation costs 2,889
------
$5,584
======
F-12
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
7. Income Taxes
The components of income before the provision for income taxes (in
thousands) are as follows:
1998 1997 1996
------- ------- -------
U.S. operations $12,603 $ 950 $ 4,244
Foreign operations 539 -- --
------- ------- -------
$13,142 $ 950 $ 4,244
======= ======= =======
The provision for income taxes for the years ended December 31, 1998,
1997 and 1996 is comprised of the following:
1998 1997 1996
------ ------ ------
Current:
Federal $3,941 $ 35 $ 879
State 794 -- 216
Foreign 66 -- --
------ ------ ------
4,801 35 1,095
------ ------ ------
Deferred:
Federal 601 475 442
State 113 140 85
Foreign 85 -- --
------ ------ ------
799 615 527
------ ------ ------
$5,600 $ 650 $1,622
====== ====== ======
The following is a reconciliation of the provision for income taxes
computed at the federal statutory rate to the provision for income
taxes reported for the years ended December 31, 1998, 1997 and 1996:
1998 1997 1996
------- ------- -------
Computed income taxes
at federal statutory rate $ 4,600 $ 323 $ 1,443
State income taxes,
net of federal benefit 590 91 198
Non-deductible amortization 312 120 44
Other nondeductible expenses 228 128 73
Nontaxable investment income -- (18) (100)
Foreign taxes (58) -- --
Other (72) 6 (36)
------- ------- -------
$ 5,600 $ 650 $ 1,622
======= ======= =======
F-13
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
7. Income Taxes, continued
At December 31, 1998 and 1997, deferred income tax assets and
liabilities consisted of the following components:
1998 1997
------- -------
Current deferred income tax asset (liability):
Accounts receivable $ 237 $ (752)
Inventory 1,772 1,419
Acquisition liabilities, current (377) 762
Reengineering costs 317 792
Other 1,227 257
------- -------
3,176 2,478
------- -------
Long-term deferred income tax asset (liability):
Property and equipment (106) (73)
Intangibles (1,891) (770)
Gain on sale of product lines (216) (182)
Acquisition liabilities, noncurrent 1,991 1,860
------- -------
(222) 835
------- -------
Net deferred income tax asset $ 2,954 $ 3,313
======= =======
8. Stock Options and Warrants
In January 1995, the Company adopted the 1995 Stock Incentive Plan (the
"1995 Plan") and the Directors' Option Plan (the "Directors Plan")
which authorize the granting of options to officers, key employees and
directors to purchase unissued common stock of the Company subject to
certain conditions, such as continued service. The 1995 Plan and the
Directors Plan authorized the granting of up to 1,200 and 100 options
to purchase common stock, respectively. The option price of options
granted under either of these plans is equal to the fair market value
on the date of grant.
In February 1996, the Company adopted the 1996 Employee Stock Incentive
Plan (the "1996 Plan") which authorized the granting of an additional
1,200 options to purchase common stock of the Company. The adoption of
the 1996 Plan was approved by stockholders in May, 1996.
The Company amended the Directors Plan and the 1996 Plan to increase
the total number of shares of stock available for grant to 200 shares
and 1,800 shares, respectively in May, 1996. This amendment was
approved by stockholders in September, 1996.
The Company amended the Directors Plan and the 1996 Plan to increase
the total number of shares of stock available for grant to 450 shares
and 2,600 shares, respectively in May, 1998.
All outstanding options vest ratably over periods ranging from three to
five years.
F-14
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
8. Stock Options and Warrants, continued
A summary of information related to these options for the years ended
December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- -------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price/Share Shares Price/Share Shares Price/Share
------- ----------- ------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 2,186 $7.19 1,668 $7.10 365 $3.71
Granted 1,756 9.97 545 13.73 1,310 8.02
Exercised/Canceled (21) 6.11 (27) 7.04 (7) 3.00
------- ----------- -------- ------------ -------- ----------
Outstanding, end of year 3,921 $9.24 2,186 $7.19 1,668 $7.10
======= =========== ======== ============ ======== ===========
Available for grant, end of year 329 1,080 1,625
======= ======== ========
Price range at end of year $3.00 to $3.00 to $3.00 to
$16.87 $16.87 $9.00
======= ======== ========
Price range for exercised $3.00 to $3.00 to
$9.00 $8.75 $3.00
======= ======== ========
Weighted-average fair value of
options granted during the year $3,955 $2,239 $3,252
======== ======== ========
</TABLE>
Weighted
Average Weighted
Remaining Average
Number Number Contractual Exercise Price
Price per Share Outstanding Exercisable Life per Share
- ------------------- ------------ ----------- ----------- --------------
$3.00 to $ 4.50 183 183 6.3 years $ 3.00
$4.51 to $ 7.00 1,111 372 8.8 years 5.92
$7.01 to $ 9.00 1,082 647 7.1 years 8.61
$9.01 to $17.00 1,545 173 8.9 years 12.88
----------- --------- --------------
3,921 1,375 $ 9.26
=========== ========= ==============
F-15
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
8. Stock Options and Warrants, continued
SFAS No. 123 requires the Company to disclose pro forma net income and
earnings per share determined as if the Company had accounted for
stock-based compensation awards granted after December 31, 1994 under
the fair value method described in that statement. For purposes of this
disclosure, the fair value of options under SFAS No. 123 were estimated
at each grant date using a Black-Scholes option pricing model, the most
commonly used model, and the following assumptions: risk-free interest
rates from 4.2% to 7.2%, a dividend yield of zero, a volatility factor
of the expected market price of the Company's common stock of 26%, and
an expected option life of three to five years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. The Company's employee stock
options have characteristics significantly different from those of
traded options, including vesting requirements and restrictions on
transfer. Because of these differences and the impact of the Company's
limited history, lack of comparable public companies, the Company's
rapid growth and the significant volatility in stock price since its
initial public offering, management believes that the Black-Scholes
model may not provide a reliable measure of the fair value of the
Company's employee stock options.
The Company's results as reported and its pro forma results using the
valuation model discussed above are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Net income $ 7,542 $ 300 $ 2,622
========== ========= =========
Net income (loss), pro forma $ 5,631 $ (1,939) $ (629)
========== ========= =========
Earnings per common share, as reported:
Basic $ .31 $ -- $ .20
========== ========= =========
Diluted $ .30 $ -- $ .19
========== ========= =========
Earnings (loss) per common share, pro forma:
Basic $ .23 $ (.11) $ (.05)
========== ========= =========
Diluted $ .23 $ (.11) $ (.05)
========== ========= =========
</TABLE>
In connection with the initial public offering, the Company issued
warrants to purchase up to 240 shares of common stock at an exercise
price of $3.60 to the representatives of the underwriters. These
warrants are exercisable for a five year period commencing on February
22, 1996. To date, 203 of these warrants have been exercised.
F-16
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
9. Acquisitions
In September 1998, the Company purchased substantially all of the
assets and assumed certain liabilities of Texcan. Headquartered in
Vancouver, British Columbia, Texcan is a specialist in the distribution
of wire, cable, fiber optics and connectivity products. Texcan has 13
locations throughout Canada and seven locations in the United States.
The aggregate purchase price was approximately $56,900 and consisted of
1,404 shares of common stock; 20 shares of Series B Preferred Stock;
and approximately $27,000 in cash. In addition, Anicom repaid
approximately $12,000 of Texcan bank indebtedness upon closing.
In June 1998, the Company acquired substantially all of the assets and
assumed certain liabilities of Superior Cable & Supply, Inc.
("Superior"). Superior is a specialty distributor of multimedia wire
and cable products and has locations in Oklahoma, Arkansas, Louisiana
and Texas. The purchase price consisted of $3,044 in cash and common
stock. In addition, the Company assumed and repaid approximately $686
of bank indebtedness.
In March 1998, the Company acquired substantially all of the assets and
assumed certain liabilities of Yankee Electronics Inc. ("Yankee") and
Optical Fiber Components Inc. ("OFCI"). Yankee and OFCI are specialty
distributors of multimedia wire and cable located in New Hampshire and
Virginia, respectively. The purchase price for these acquisitions
consisted of $3,800 in cash and common stock. In addition, the Company
assumed approximately $255 of Yankee and OFCI debt that was paid at
closing.
In December 1997, the Company acquired TW Communication Corporation
("TW"). TW is a distributor of wire, cable, fiber optics and
installation supplies predominantly to the telecommunications, data and
cable television industries in the United States. The purchase price
for this acquisition consisted of $16,000 in cash and common stock. In
connection with the acquisition, the Company paid in full approximately
$13,600 of TW bank indebtedness.
In October 1997, the Company acquired certain assets of Zack-DataCom,
the voice and data division of Zack Electronics, Inc. ("Zack") of San
Jose, California, a leader in the sale and distribution of multimedia
low voltage products. The purchase price was $4,700 payable in cash and
common stock.
In July 1997, the Company acquired Energy Electric Cable, a division of
Connectivity Products, Inc. ("Energy"). Energy is a national specialist
in the sale and distribution of multimedia wiring products based in
Auburn Hills, Michigan. The purchase price consisted of $12,000 in cash
and common stock and the pay down of $17,000 of Connectivity Products,
Inc.
F-17
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
9. Acquisitions, continued
("Connectivity") bank debt by Anicom. In addition, the Company entered
into a supply agreement with Connectivity.
In March 1997, Anicom purchased all of the issued and outstanding
common stock of Security Supply, Inc. ("Security Supply") of New
Orleans, Louisiana. Security Supply is a distributor of alarm, security
and life safety products in Louisiana and surrounding states. The
purchase price was approximately $2,000 payable in cash and common
stock.
In February 1997, the Company acquired substantially all of the assets
and assumed certain liabilities of Carolina Cable & Connector, Inc.
("Carolina Cable") of Raleigh, North Carolina. Carolina Cable is a
specialist in the sale and distribution of wire and cable, fiber optics
and computer network and connectivity products. Carolina Cable has
seven locations in the Carolinas and Tennessee. The purchase price
consisted of $3,500 in cash and common stock. In addition, the Company
assumed approximately $3,500 of Carolina Cable indebtedness which was
paid in full at closing.
In September 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Western Wire and Alarm Products,
Inc. ("Western") of Denver, Colorado, a specialist in the sale and
distribution of security devices and wire. The purchase price was $300
payable in cash and common stock. In connection with the acquisition,
the Company paid in full $50 of Western's bank indebtedness.
In September 1996, the Company acquired Norfolk Wire & Electronics Inc.
("Norfolk"), through the purchase of all issued and outstanding shares
of common stock. Norfolk's operations consisted principally of the sale
and distribution of voice and data wire, cable and ancillary products.
In addition to its four locations in the state of Virginia, Norfolk had
locations in Tinton Falls, New Jersey and Gaithersburg, Maryland. The
purchase price was $8,000 payable in cash and common stock. At the
closing, the Company paid in full approximately $2,600 of Norfolk bank
indebtedness.
In May 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of Southern Alarm Supply Co., Inc.
("Southern") of Nashville, Tennessee, a specialist in the sale and
distribution of security devices and wire. The purchase price was $350
payable in cash and common stock.
In March 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of Northern Wire & Cable, Inc.
("Northern"), a specialist in the sale and distribution of wire, cable,
fiber optics and connectivity products for structured wiring, power
cables, cable connector assemblies for automation, computers and
robotics and value-added services for the industrial management and
technology market. Northern had branches in Troy, Michigan; Cleveland,
Ohio; Atlanta, Georgia; Tampa, Florida; and Las Vegas, Nevada. The
purchase price was $13,600 payable in cash, notes and common stock. In
connection with the acquisition, the Company assumed approximately
$5,600 of Northern bank indebtedness which was paid in full at closing.
F-18
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
9. Acquisitions, continued
In February 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Medisco, Inc. ("Medisco") of
Indianapolis, Indiana, a distributor of wire and cable products. The
purchase price was $837 payable in cash.
All acquisitions have been recorded under the purchase method of
accounting. Accordingly, the results of operations of the acquired
businesses are included in the Company's consolidated results of
operations from the date of acquisition. The purchase price is
allocated to assets acquired and liabilities assumed based on the
estimated fair market value on the date of the acquisition.
The following pro forma consolidated financial information assumes that
the significant acquisitions and the 1997 issuances of equity discussed
in Notes 5 and 13, which were a significant source of the funds used in
certain of the acquisitions, occurred on January 1, 1997. It further
assumes that the equity transaction discussed in Note 13 resulted in
the issuance of common stock, based on the conversion of the Preferred
Stock to Common Stock approximately four months after its issuance. The
results do not purport to be indicative of what would have occurred had
the acquisitions been made on January 1, 1997 nor are they indicative
of the results which may occur in the future.
1998 1997
----------- -----------
(unaudited)
Net sales $541,482 $481,377
=========== ==========
Operating income 18,435 (1) 8,347 (2)
=========== ==========
Net income 8,681 (1) 4,088 (2)
=========== ==========
Net income available to common stockholders 8,080 (1) 3,192 (2)
=========== ==========
Pro forma earnings per common share:
Basic $.32 (1) $.14 (2)
=========== ==========
Diluted $.32 (1) $.14 (2)
=========== ==========
Pro forma weighted average
common shares outstanding:
Basic 25,079 22,845
=========== ==========
Diluted 26,482 24,249
=========== ==========
(1) Amount includes the $5,158 acquisition integration charge discussed in
Note 10.
(2) Amount includes the $5,584 of Reengineering costs discussed in Note 6.
F-19
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
10. Acquisition Integration Charge
The Company incurred a one-time acquisition integration charge during
the third quarter of 1998 of approximately $5,156. This charge includes
$2,800 for settlement of real estate obligations, the write-off of
leasehold improvements, and facility relocation costs; $1,350 one-time
acquisition incentive bonuses; and $1,006 related to severance and
other costs.
As of December 31, 1998, approximately $2,658 has been paid the
remainder is included in accrued liabilities. The majority of the
accrual remaining relates to lease abandonment costs that will be paid
through 2002 unless early terminations can be negotiated.
11. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share for each of the years ended December 31, 1998, 1997
and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
Numerator:
Net income $ 7,542 $ 300 $ 2,622
Less: dividend on preferred stock (168) (296) --
------------ ----------- ------------
Net income available to common stockholders $ 7,374 $ 4 $ 2,622
============ =========== ============
Denominator:
Denominator for basic earnings per share - weighted
average common shares outstanding 23,918 17,476 13,384
Plus:
Effect of assumed conversion of
convertible preferred stock 388 -- --
Effect of employee stock options and warrants 510 -- 196
------------ ----------- ------------
24,816 17,476 13,580
============ =========== ============
Earnings per share:
Basic $ .31 $ -- $ .20
============ =========== ============
Diluted $ .30 $ -- $ .19
============ =========== ============
</TABLE>
12. Commitments and Contingencies
Employment Agreements
The Company has entered into employment agreements with certain
officers. In the event of a change in control, as defined, the
employment agreements provide for severance payments for these officers
if employment is terminated. The aggregate base salary payable to these
officers under the employment agreements in 1999 is approximately
$1,000. In the event of a change in control, the Company may become
obligated to make payments to certain of these officers of
approximately $5,500, plus an annuity, the present value of which, in
the aggregate, will not exceed 2% of the transaction value which
resulted in the change in control. In addition, these payments are
subject to gross-up for certain taxes.
F-20
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
12. Commitments and Contingencies, continued
Operating Leases
The Company leases certain warehouse and office facilities and
equipment under operating leases. Rental expense under the leases was
approximately $5,521, $3,216 and $1,419 for the years ended December
31, 1998, 1997 and 1996, respectively. Approximate minimum annual lease
payments required on noncancelable leases having initial or remaining
lease terms in excess of one year as of December 31, 1998 are as
follows:
Year Amount
----------- -------
1999 $ 6,758
2000 5,812
2001 4,759
2002 3,734
2003 2,393
Thereafter 4,613
-------
Total $28,069
=======
The Company is also obligated to pay certain taxes and assessments
relating to these leases. Certain leases contain renewal options.
Retirement Plan
The Company maintains a defined contribution retirement plan (the
"Anicom Plan"). Employer contributions under the plan are limited to
25% of employee contributions up to 4% of compensation.
Subsequent to the acquisition of Norfolk, the Company gained an
additional defined contribution retirement plan (the "Norfolk Plan")
which required Company contributions of 25% up to a maximum of 4% of
employee compensation. Effective September, 1997, no further
contributions to the Norfolk Plan are allowed. Participants in the
Norfolk Plan have been given the opportunity to participate in the
Anicom Plan. The Norfolk plan was terminated in 1998.
With the acquisition of TW, the Company has an additional defined
contribution plan (the "TW Plan"). The TW Plan allows employee
contributions of up to 15% of compensation. The TW Plan does not
require employer contribution. During 1998 the TW Plan was frozen and
all contributions were ceased. Participants in the TW Plan have been
given the opportunity to participate in the Anicom Plan. The Company is
in the process of terminating the TW Plan.
Total Company contributions to the plans were approximately $194, $113
and $104 in 1998, 1997 and 1996, respectively.
F-21
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
12. Commitments and Contingencies, continued
Other
The Company is subject to legal proceedings and arbitration claims
related to acquired businesses and product lines which have been
disposed of as well as those that arise in the ordinary course of
business. In the opinion of management, the amount of any liability
with respect to these actions will not materially affect the financial
position or results of operations of the Company.
13. Other Financial Information
Acquisition liabilities
In connection with each of the Company's acquisitions, management
evaluates acquired operations and develops a plan to integrate these
operations into Anicom's existing structure. In connection with the
integrations, the Company may complete limited workforce reductions or
exit acquired lease agreements. As a part of the determination of
purchase price for acquired companies, liabilities are established for
these costs as well as external deal costs and other costs specific to
each acquisition. In each case, management establishes a plan specific
to the acquisition as soon as practicable after closing. Execution of
the plans are typically completed within a year after closing. Payment
of liabilities established may take place over several years depending
upon the agreed upon settlement.
Below is a summary of acquisition cost activity:
<TABLE>
<CAPTION>
Tax
External Lease Exit Liabilities
Consultants Severance Costs and Other Total
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 133 $ 819 $ 438 $ 178 $ 1,568
Establish liabilities 1,882 3,091 2,043 1,827 8,843
Expenditures (1,537) (560) (286) (409) (2,792)
------- ------- ------- ------- -------
Balance, December 31, 1997 478 3,350 2,195 1,596 7,619
Establish liabilities 3,350 33 1,322 2,807 7,512
Expenditures (2,651) (2,996) (225) (727) (6,599)
------- ------- ------- ------- -------
Balance, December 31, 1998 $ 1,177 $ 387 $ 3,292 $ 3,676 $ 8,532
======= ======= ======= ======= =======
</TABLE>
Convertible preferred stock
Pursuant to an agreement dated May 20, 1997, the Company sold 27 shares
of $.01 par value, Series A Convertible Preferred Stock (the "Preferred
Stock") for $27,000. Net proceeds after related costs and expenses were
approximately $26,200.
The Preferred Stock was convertible into Common Stock if certain
closing market price levels for the Company's Common Stock were
achieved. As of September 23, 1997, all of the shares of Preferred
Stock were converted to shares of Common Stock.
F-22
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
14. Supplemental Cash Flow Information
The following is a summary of the noncash investing and financing for
the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Acquisitions:
Fair value of assets acquired $ 97,627 $ 108,591 $ 53,266
Acquisition liabilities and costs (7,802) (8,843) (3,614)
Bank debt assumed (12,686) (16,818) (9,318)
Other liabilities assumed (12,545) (27,164) (20,456)
Convertible preferred stock issued (20,000) -- --
Common stock issued (14,581) (21,627) (5,537)
------------- ------------- -------------
Cash paid 30,013 34,139 14,341
Less: cash acquired (105) (338) (140)
------------- ------------ -------------
$ 29,908 $ 33,801 $ 14,201
============= ============= =============
Dispositions:
Value of assets sold, net of transaction costs $ 5,627 $ 117 $ 404
============= ============= =============
Short term receivable due $ 2,927
=============
Notes receivable accepted $ 400 $ 875
============= =============
Anicom common stock received $ 507
=============
Conversion of Preferred Stock:
Conversion to Common Stock $ 27,000
=============
Payment of dividends in Common Stock $ 297
=============
</TABLE>
F-23
<PAGE>
Anicom, Inc.
Notes to Consolidated Financial Statements
(in thousands, except per share data)
15. Other Related Party Transactions
One of the Company's directors is a Managing Director of an investment
banking firm which served as a placement agent for the Company's
private placement in December, 1997 and as one of the underwriters of
the Company's follow-on offering in November, 1995. Another of the
Company's directors is the Chief Executive Officer of an insurance
brokerage company which is used by the Company.
16. Quarterly Operating Results (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------
12/31/98 9/30/98 6/30/98 3/31/98
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $130,859 $124,071 $113,252 $102,099
Gross profit 29,894 26,906 25,187 22,680
Operating earnings 5,253 830 (1) 5,150 4,652
Net income $ 2,150 $ (88) (1) $ 2,813 $ 2,667
Earnings per share:
Basic earnings per share $0.08 $ -- $0.12 $0.12
Diluted earnings per share $0.08 $ -- $0.12 $0.11
<FN>
(1) Amount includes the $5,158 acquisition integration charge discussed
in Note 10.
</FN>
</TABLE>
17. Subsequent Event (unaudited)
During the first quarter of 1999 the Company adopted a stockholder
rights plan (the "Rights Plan"). Under the Rights Plan, preferred stock
purchase rights ("Rights") will be distributed to stockholders of
record as of March 31, 1999, at the rate of one Right for each
outstanding share of the Company's common stock. The Rights will not be
exercisable unless a person or group acquires 15% or more of the
Company's common stock or announces a tender offer upon consummation of
which such person or group would own 15% or more of the common stock.
Each Right, when exercisable, entitles the holder to purchase one share
of the Company's common stock at 50% of the current market price. If
the Company is acquired through a merger or other business combination
transaction, or 50% or more of the Company's assets or earning power is
sold, each right will entitle the holder to purchase the surviving
company's common stock at 50% of the current market price. The Rights
will expire in ten years unless earlier redeemed or terminated. The
Company generally may amend the Rights or redeem the Rights at $0.01
per Right at any time prior to the time a person or group has acquired
15% of the Company's common stock.
F-24
<PAGE>
Anicom, Inc.
Schedule II - Valuation and Qualifying Accounts
For the years ended December 31, 1998, 1997 and 1996
(in thousands)
1998 1997 1996
------- ------- -----
Allowance for Doubtful Accounts
Balance, beginning of year $ 2,442 $ 980 $ 120
Additions 2,406 2,183 939
Write-offs, net of recoveries (708) (721) (79)
------- ------- -----
Balance, end of year $ 4,140 $ 2,442 $ 980
======= ======= =====
Inventory Valuation Allowance
Balance, beginning of year $ 2,276 $ 300
Additions 2,134 2,694 $ 535
Write-offs (1,973) (718) (235)
------- ------- -----
Balance end of year $ 2,437 $ 2,276 $ 300
======= ======= =====
F-25
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 31st day of March, 1999.
ANICOM, INC.
By: /s/ SCOTT C. ANIXTER
------------------------------------
Scott C. Anixter
Chairman and Chief Executive Officer
This report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------- --------------------------------- --------------
/s/ SCOTT C. ANIXTER Chairman, Chief Executive Officer March 31, 1999
- ---------------------- and Director
Scott C. Anixter (Principal Executive Officer)
/s/ ALAN B. ANIXTER Chairman of the Board March 31, 1999
- ----------------------
Alan B. Anixter
/s/ CARL E. PUTNAM President, March 31, 1999
- ---------------------- Chief Operating Officer
Carl E. Putnam and a Director
/s/ DONALD C. WELCHKO Vice President, March 31, 1999
- ---------------------- Chief Financial Officer
Donald C. Welchko and a Director
(Principal Financial and
Accounting Officer)
/s/ PETER HUIZENGA Director March 31, 1999
- ----------------------
Peter Huizenga
/s/ LEE B. STERN Director March 31, 1999
- ----------------------
Lee B. Stern
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
ANICOM, INC.
(Original Certificate of Incorporation filed December 28, 1994)
Anicom, Inc. (the "Corporation"), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"DGCL") does hereby certify that the Restated Certificate of Incorporation of
the Corporation set forth below has been duly adopted in accordance with
Sections 242 and 245 of the DGCL:
ARTICLE I
The name of the corporation is Anicom, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Corporation Trust Center, Wilmington, County of
New Castle, Delaware 19801. The name of its registered agent at such address is
The Corporation Trust Company.
ARTICLE III
The nature of the business to be conducted or promoted is to engage in
any lawful act or activity for which corporations may be organized under the
DGCL.
ARTICLE IV
A. The Corporation shall have authority to issue the following classes
of stock, in the number of shares and at the par value as indicated opposite the
name of the class:
NUMBER OF
SHARES PAR VALUE
CLASS AUTHORIZED PER SHARE
--------------------------- ------------------ ------------
Common Stock 10,000,000 $.001
Preferred Stock 1,000,000 $.01
<PAGE>
B. The designations and the powers, preferences and relative,
participating, optional or other rights of the capital stock and the
qualifications, limitations or restrictions thereof are as follows:
1. Common Stock.
a. Voting Rights: Except as otherwise required by law or
expressly provided herein, the holders of shares of Common Stock shall
be entitled to one vote per share on each matter submitted to a vote of
the stockholders of the Corporation.
b. Dividends: Subject to the rights of the holders, if any, of
preferred stock, the holders of Common Stock shall be entitled to
receive dividends at such times and in such amounts as may be
determined by the Board of Directors of the Corporation.
c. Liquidation Rights: In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts and
other liabilities of the Corporation and the preferential amounts to
which the holders of any outstanding shares of Preferred Stock shall be
entitled upon dissolution, liquidation of winding up, the assets of the
Corporation available for distribution to stockholders shall be
distributed ratably among the holders of the shares of Common Stock.
2. Preferred Stock.
Preferred Stock may be issued from time to time in one or more
series. Subject to the other provisions of this Certificate of
Incorporation, the Board of Directors is authorized, subject to any
limitations prescribed by law, to provide for the issuance of and issue
shares of the Preferred Stock in series, and by filing a certificate
pursuant to the laws of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to
fix the designation, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions
thereof. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of
the Common Stock, without a vote of the holders of any Preferred Stock,
or of any series thereof, unless a vote of any such holders is required
pursuant to the certificate or certificates establishing such series of
Preferred Stock.
ARTICLE V
The business and affairs of the Corporation shall be managed by or
under the direction of a board of directors consisting of not less than six (6)
nor more than fifteen (15) directors. The exact number shall be determined from
time to time by resolution adopted by the affirmative vote of a majority of the
directors in office at the time of adoption of such resolution. Initially, the
number of directors shall be eight (8) and shall consist of the following
persons: Alan B. Anixter,
-2-
<PAGE>
Scott C. Anixter, Carl E. Putnam, Donald C. Welchko, William R. Anixter, Ira J.
Kaufman, Michael Segal and Lee B. Stern.
The directors shall be divided into three classes, Class I, Class II
and Class III; with Class I having three members, Class II having three members,
and Class III having two members. Class I shall initially consist of the
following directors: Scott C. Anixter, Carl E. Putnam and Lee B. Stern. Class II
shall initially consist of the following directors: Alan B. Anixter, Michael
Segal and Donald C. Welchko. Class III shall initially consist of the following
directors: William R. Anixter and Ira J. Kaufman. The initial term of office of
the Class I, Class II and Class III directors shall expire at the annual meeting
of stockholders in 1996, 1997 and 1998, respectively. Beginning in 1996, at each
annual meeting of stockholders, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes by the Board of Directors so as to maintain the number of
directors in each class as nearly equal as reasonably possible, and any
additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class. In no case will a decrease in the number of
directors shorten the term of any incumbent director even though such decrease
may result in an inequality of the classes until the expiration of such term. A
director shall hold office until the annual meeting of the year in which his or
her term expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement or removal
from office. Any director may be removed, with or without cause, by the holders
of a majority of the shares entitled to vote at an election of directors. Except
as required by law or the provisions of this Certificate of Incorporation, all
vacancies on the board of directors and newly-created directorships shall be
filled by the board of directors. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of his or her predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorship shall be governed by the terms
of this Certificate of Incorporation and any resolutions of the Board of
Directors applicable thereto, and such directors so elected shall not be divided
into classes pursuant to this Article V. Notwithstanding anything to the
contrary contained in this Certificate of Incorporation, the affirmative vote of
the holders of at least two-thirds of the voting power of the shares entitled to
vote generally in the election of directors shall be required to amend, alter or
repeal, or to adopt any provision inconsistent with, this Article V.
ARTICLE VI
(a) Written Consent. Any action required or permitted to be taken by
the stockholders of the Corporation shall be effected at a duly called annual or
special meeting of stockholders of
-2-
<PAGE>
the Corporation and shall not be effected by consent in writing by the holders
of outstanding stock pursuant to Section 228 of the DGCL or any other provision
of the DGCL.
(b) Special Meetings. Special meetings of stockholders of the
Corporation may be called upon not less than ten nor more than 60 days' written
notice by the Board of Directors pursuant to a resolution approved by a majority
of the Board of Directors or at the request in writing of the stockholders
owning at least ten percent (10%) of the entire capital stock of the corporation
issued and outstanding and entitled to vote.
(c) Amendment. Notwithstanding anything contained in this Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least two-thirds of the shares entitled to vote generally in the election of
directors shall be required to amend, alter or repeal, or to adopt any provision
inconsistent with this Article VI.
ARTICLE VII
In furtherance and not in limitation of the power conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the By-Laws of the Corporation. The By-Laws of the Corporation may be altered,
amended, or repealed, or new By-Laws may be adopted, by the Board of Directors
in accordance with the preceding sentence or by the vote of the holders of at
least two-thirds of the voting power of the shares of the Corporation entitled
to be cast generally in the election of directors at an annual or special
meeting of stockholders, provided that if such alteration, amendment, repeal or
adoption of new By-Laws is effected at a duly called special meeting, notice of
such alteration, amendment, repeal or adoption of new ByLaws is contained in the
notice of such special meeting.
ARTICLE VIII
No stockholder of the Corporation shall by reason of holding shares of
any class of stock have any cumulative voting right. At all elections of
directors of the corporation, or at elections held under specified
circumstances, each holder of stock or of any class or classes or of a series or
series thereof shall only be entitled to one vote for each share of capital
stock held by such stockholder.
ARTICLE IX
A director of the Corporation shall not in the absence of fraud be
disqualified by his office from dealing or contracting with the Corporation
either as a vendor, purchaser or otherwise, nor in the absence of fraud shall a
director of the Corporation be liable to account to the Corporation for any
profit realized by him from or through any transaction or contract of the
Corporation by reason of the fact that he, or any firm of which he is a member
or any corporation of which he is an officer, director or stockholder, was
interested in such transaction or contract if such
-4-
<PAGE>
transaction or contract has been authorized, approved or ratified in a manner
provided in the DGCL for authorization, approval or ratification of transactions
or contracts between the Corporation and one or more of its directors or
officers or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers or have a financial interest.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware as the ByLaws may provide. The books of the Corporation may be kept
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors of the Corporation or in the By-Laws of
the Corporation. Election of directors need not be by written ballot unless the
By-Laws of the Corporation so provide.
ARTICLE XI
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of the DGCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of the DGCL order a meeting of the creditors or
class of creditors and/or the stockholders or class of stock of the Corporation,
as the case may be, to be summoned in such manner as the said court directs. If
a majority in number representing two-thirds the value of the creditors or class
of creditors and/or the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement or to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement of the said reorganization
shall, if sanctioned by the Court to which the said application has been made,
be binding on all the creditors or class of creditors and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
ARTICLE XII
A. Indemnification of Officers and Directors: The Corporation
shall:
(a) indemnify, to the fullest extent permitted by the DGCL,
any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the Corporation) by reason of the fact
that such person is or was a director, or is or was serving at the
request of the
-5-
<PAGE>
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or
if such person has previously been designated for indemnification by
the resolution of the Board of Directors, an officer, employee or agent
of the Corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct
was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which such person reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful; and
(b) indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was
a director, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or if such
person has previously been designated for indemnification by the
resolution of the Board of Directors, an officer, employee or agent of
the Corporation, against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed
to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper; and
(c) indemnify any director, or, if such person has previously
been designated for indemnification by the resolution of the Board of
Directors, an officer, employee or agent against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith, to the extent that such director, officer,
employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to
in Article XII.A. (a) and (b), or in defense of any claim, issue or
matter therein; and
(d) make any indemnification under Article XII.A. (a) and (b)
(unless ordered by a court) only as authorized in the specific case
upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances
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<PAGE>
because such director, officer, employee or agent has met the
applicable standard of conduct set forth in Article XII.A. (a) and (b).
Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties
to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders of the Corporation; and
(e) pay expenses incurred by a director or officer in
defending a civil or criminal action, suit or proceeding in advance of
the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that such director or
officer is not entitled to be indemnified by the Corporation as
authorized in this Article XII. Notwithstanding the foregoing, the
Corporation shall not be obligated to pay expenses incurred by a
director or officer with respect to any threatened, pending, or
completed claim, suit or action, whether civil, criminal,
administrative, investigative or otherwise ("Proceedings") initiated or
brought voluntarily by a director or officer and not by way of defense
(other than Proceedings brought to establish or enforce a right to
indemnification under the provisions of this Article XII unless a court
of competent jurisdiction determines that each of the material
assertions made by the director or officer in such proceeding were not
made in good faith or were frivolous). The Corporation shall not be
obligated to indemnify the director or officer for any amount paid in
settlement of a Proceeding covered hereby without the prior written
consent of the Corporation to such settlement; and
(f) not deem the indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of this
Article XII exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such director's or officer's official
capacity and as to action in another capacity while holding such
office; and
(g) have the right, authority and power to purchase and
maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the
power to indemnify such person against such liability under the
provisions of this Article XII; and
(h) deem the provisions of this Article XII to be a contract
between the Corporation and each director, or appropriately designated
officer, employee or agent who serves in such capacity at any time
while this Article XII is in effect and any repeal or modification of
this Article XII shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore
existing or any action, suit or proceeding
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<PAGE>
theretofore or thereafter brought or threatened based in whole or in
part upon such state of facts. The provisions of this Article XII shall
not be deemed to be a contract between the Corporation and any
directors, officers, employees or agents of any other Corporation (the
"Second Corporation") which shall merge into or consolidate with this
Corporation when this Corporation shall be the surviving or resulting
Corporation, and any such directors, officers, employees or agents of
the Second Corporation shall be indemnified to the extent required
under the DGCL only at the discretion of the board of directors of this
Corporation; and
(i) continue the indemnification and advancement of expenses
provided by, or granted pursuant to, this Article XII, unless otherwise
provided when authorized or ratified, as to a person who has ceased to
be a director, officer, employee or agent of the Corporation and shall
inure to the benefit of the heirs, executors and administrators of such
a person.
B. Elimination of Certain Liability of Directors: No director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, as the same exists or hereafter may be amended, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the DGCL is amended to authorize the further elimination or
limitation of liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended DGCL.
Any repeal or modification of this Article XII by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
ARTICLE XIII
The Board of Directors of the Corporation may adopt a resolution
proposing to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed by its President and Secretary, all on
February 16, 1995.
ANICOM, INC.
By: /s/ Carl E. Putnam
----------------------
Carl E. Putnam
President
By: /s/ David R. Shevitz
-----------------------
David R. Shevitz
Secretary
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<PAGE>
CERTIFICATE OF MERGER
OF
PINNACLE WIRE & CABLE, INC., an Ohio corporation
WITH AND INTO
ANICOM, INC., a Delaware corporation
* * * * * * * * *
The undersigned corporation DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger are as follows:
NAME STATE OF INCORPORATION
- ------------------------------------------------------- -----------------------
Pinnacle Wire & Cable, Inc. (the merged corporation) Ohio
Anicom, Inc. (the surviving corporation) Delaware
SECOND: That the agreement of merger between the parties to the merger
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of Section 252 of
the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation of the merger is Anicom,
Inc.
FOURTH: That the Certificate of Incorporation of Anicom, Inc. which is
surviving the merger, shall be the Certificate of Incorporation of the surviving
corporation.
FIFTH: That the executed agreement of merger is on file at the
principal place of business of the surviving corporation. The address of said
principal place of business is 6133 N. River Road, Suite 410, Rosemont, IL
60018.
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<PAGE>
SIXTH: That a copy of the Plan and Agreement of Merger will be
furnished on requested and without cost to any stockholder of any constituent
corporation.
SEVENTH: The authorized capital stock of each foreign corporation which
is a party to the merger is as follows:
Corporation Class Number of Shares Par Value Per Share
- --------------------------------------------------------------------------------
Pinnacle Wire &
Cable, Inc.
(Ohio) Common 100 $5.00
EIGHTH: This Certificate of Merger shall be effective at 5:00 p.m.
(Delaware time) on July 31, 1995.
Dated: July 28, 1995 ANICOM, INC.
By: /s/ Donald C. Welchko
-----------------------------
Name: Donald C. Welchko
Title: Chief Financial Officer
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<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
ANICOM, INC.
ANICOM, INC., a corporation organized and existing under and by virtue
of the General Corporation law of the State of Delaware (the "Act"), DOES HEREBY
CERTIFY THAT:
1. In accordance with the provisions of Section 242 of the Act,
an amendment to the Certificate of Incorportion of this
Corporation has been duly adopted by the Board of Directors of
this Corporation and by the stockholders of this Corporation
at a Special Meeting of Stockholders.
2. Said amendment amends subparagraph A of Article 4 of the
Certificate of Incorporation so that, as amended, subparagraph
A of Article 4 shall read in its entirety as follows:
"A. The corporation shall have the authority to issue the
following classes of stock, in the number of shares and at the par
value as indicated opposite the name of the class:
No. Shares Par Value
Class Authorized Per Share
Common Stock 30,000,000 $.001
Preferred Stock 1,000,000 $.01"
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
duly executed this 25th day of September, 1996.
By /s/ Carl Putnam
-----------------------------
Carl Putnam, President and
Chief Operating Officer
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK
OF
ANICOM, INC.
Anicom, Inc. (the "Company" or "Issuer"), 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-Seven Thousand (27,000) shares of Series A
Convertible Preferred Stock, of the Company, as follows:
RESOLVED, that the Company is authorized to issue 27,000
shares of Series A Convertible Preferred Stock, $.01 par value (the
"Series A Preferred Shares"), which shall have the following powers,
designations, preferences and other special rights:
(1) Dividends and Liquidation Preference.
(a) Generally. The holders of the Series A 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
annually, commencing to accrue on the date of issuance of such Series A
Preferred Share and receipt by the Company of all the full purchase
price due therefor (the "Issuance Date") at the rate of:
(i) 5% per annum during the first five (5)
years commencing on the Issuance Date; and
<PAGE>
(ii) 15% per annum during the years
commencing on the fifth anniversary of the Issuance Date,
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 A Preferred Shares shall no longer be
outstanding. Accrued dividends shall be payable, quarterly, in arrears,
in cash or in shares of the Company's common stock, par value $.001 per
share (the "Common Stock") at the Company's option, valued at the then
applicable Average Trading Price (as defined below) ending on the day
prior to the date of issuance of such shares; provided that such shares
have been registered under the Securities Act of 1933, as amended, and
listed for trading on the principal securities exchange or trading
market where the Company's Common Stock is then listed or traded (the
"Dividend Shares"). The liquidation preference of the Series A
Preferred Shares shall be $1,000.00 per share plus any accrued and
unpaid dividends (the "Liquidation Preference").
(b) Special Dividend Adjustment. Notwithstanding
Section 1(a)(i) above, the dividend payable by the Company shall be
subject to adjustment pursuant to Section 8.3(a) of that certain Series
A Convertible Preferred Stock Purchase Agreement dated May 21, 1997 by
and among the Company and certain investors set forth therein.
(2) Voting Rights. On matters subject to voting by holders of
the Common Stock, holders of Series A Preferred Shares shall vote
together with the holders of Common Stock, on an as converted basis at
the then applicable Conversion Ratio (as defined below) (as if such
shares of Series A 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 the Common Stock entitled to vote are to be determined) as
one class. The Series A Preferred Shares will not be entitled to any
voting rights as a separate class other than with respect to any
proposed amendments to the terms and conditions of the Series A
Preferred Shares that would be adverse to the holders of the Series A
Preferred Shares.
(3) Redemption. At any time after the fifth (5th) anniversary
of the Issuance Date, Issuer, at its option, may redeem all, but not
less than all, of the then outstanding Series A Preferred Shares for an
amount (the "Redemption Price") equal to the Liquidation Preference as
of the effective date of such redemption by giving notice (a
"Redemption Notice") to each holder of Series A Preferred Shares and
the Company's transfer agent not less than thirty (30) days nor more
than sixty (60) days prior to the date on which such shares are to be
redeemed. Such Notice of Redemption at the Company's election shall
indicate (A) the date that such redemption is to become effective, (B)
the applicable Redemption Price, (C) where and how payment of the
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<PAGE>
Redemption Price will be made, and (D) the then current Conversion
Price. The Redemption Price may be paid, at Issuer's option, either in
cash or shares of Common Stock valued at ninety percent (90%) of the
Average Trading Price (defined below) as of the effective date of such
redemption; provided, that (i) such shares have been registered under
the Securities Act of 1933, as amended and listed for trading on the
principal securities exchange or trading market where the Company's
Common Stock is then listed or traded, and (ii) prior to giving such a
Redemption Notice, if Issuer elects to redeem with Common Stock, Issuer
will first obtain stockholder approval of the issuance to the extent
then required by the rules and regulations of the NASD or of such other
national exchange upon which Issuer's Common Stock is then traded.
Notice of redemption having been given as aforesaid, dividends on the
Series A Preferred Shares shall cease to accrue as of the effective
date of such redemption unless the Issuer defaults in the payment of
the Redemption Price.
(4) Conversion of Series A Preferred Shares. The Series A
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 A 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. The outstanding Series A
Preferred Shares will be deemed to have been converted into shares of
Common Stock at the Conversion Ratio automatically without further
action required of the Issuer or holders thereof, upon the following
terms and conditions:
(i) If, at any time during the first
twelve (12) months following the
Issuance Date, the Average Trading
Price of the Common Stock is at
least 130% of the Conversion Price,
then 33-1/3% of the then
outstanding Series A Preferred
Shares will convert into Common
Stock, such conversion to be
allocated among the holders
thereof, on a pro rata basis based
upon their respective holdings.
(ii) If, at any time during the first
twenty-four (24) months following
the Issuance Date, the Average
Trading Price of the Common Stock
is equal to or exceeds the
percentage of the Conversion Price
set forth below, then the
corresponding percentage of the
then outstanding Series A Preferred
Shares will convert into Common
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<PAGE>
Stock, such conversion to be
allocated among the holders
thereof, on a pro rata basis based
upon their respective holdings:
Average Trading Price as a Percentage of Series A Preferred
Percentage of Conversion Price Shares to be Converted
------------------------------- --------------------------------
160% 662/3%
190% 100%
(iii) If, at any time after the second
anniversary of the Issuance Date,
the Average Trading Price of the
Common Stock is equal to or exceeds
the percentage of the Conversion
Price set forth below for each
corresponding year following the
Issuance Date, then 100% of the
then outstanding Series A Preferred
Shares will convert into Common
Stock:
Year Average Trading Price as a Percentage of
Conversion Price
-------- ----------------------------------------
3 140%
4 150%
5 175%
Notwithstanding the foregoing, no mandatory conversion shall occur
unless and until the shares of Common Stock to be issued have been registered
under the Securities Act of 1933, as amended, and listed for trading on the
principal securities exchange or trading market where the Company's Common Stock
is then listed or traded. Immediately upon the occurrence of a mandatory
conversion, the Company will notify all holders of Series A Preferred Shares of
the mandatory conversion.
(c) Certain Definitions.
(i) "Conversion Price" means eight dollars
and sixty-two and one-half cents ($8.625); provided that, if the
Average Trading Price as of the second anniversary of the Issuance Date
is less than eight dollars and sixty-two and one-half cents ($8.625),
then the Conversion Price shall thereafter be adjusted downward but
never upward to equal the greater of the Average Trading Price or six
dollars ($6.00), subject to the terms and conditions of Section 4(d).
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<PAGE>
(ii) "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 Nasdaq National Market
(the "Nasdaq-NM") for the ten (10) day period ending one day prior to
the date of determination as reported by Bloomberg Financial Markets
("Bloomberg"), or, if the Nasdaq-NM is not the principal trading market
for such security, the last closing sale price of such security on the
principal securities exchange or trading market where such security is
listed or traded for the ten (10) day period ending one day prior to
the date of determination as reported by Bloomberg, or if the foregoing
do not apply, the last closing bid price of such security in the
over-the-counter market on the electronic bulletin board for such
security for the ten (10) day period ending one day prior to the date
of determination as reported by Bloomberg, or, if no closing bid price
is reported for such security by Bloomberg, the last closing trade
price of such security as reported by Bloomberg or, if no last closing
trade price is reported for such security by Bloomberg, the average of
the bid prices for the ten (10) day period ending one day prior to the
date of determination of any market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau, Inc.
(d) Adjustment to Conversion Price. In order to
prevent dilution of the conversion rights granted to holders of Series
A Preferred Shares hereunder, the Conversion Price will be subject to
adjustment from time to time pursuant to this Section 4(d).
(i) Adjustment for Dilutive Events. If and
whenever on or after the original date of issuance of the Series A
Preferred Shares the Company issues or sells, or in accordance with
Section 4(d)(ii) below is deemed to have issued or sold, in one
transaction or a series of related transactions, any shares of Common
Stock for consideration per share less than the Conversion Price in
effect immediately prior to the time of such issue or sale (a "Dilutive
Event"), then forthwith upon the occurrence of any such Dilutive Event
the Conversion Price will be reduced so that the Conversion Price in
effect immediately following the Dilutive Event will equal the quotient
derived by dividing (i) the sum of (x) the product derived by
multiplying the Conversion Price in effect immediately prior to such
Dilutive Event times 27,000,000, plus (y) the product of (A) the Price
Per Share in the Dilutive Event, times (B) three times the
consideration received by the Company in such Dilutive Event, by (ii)
the sum of (x) 27,000,000, plus (y) three times the consideration
received by the Company in the Dilutive Event; provided that the
Conversion Price will not be reduced pursuant to this sentence if the
foregoing calculation results in a Conversion Price in excess of $8.15
(the "Threshold Price"). Notwithstanding the foregoing, the issuance by
the Company of any equity securities to management, directors or
employees of the Company pursuant to plans and options to purchase
equity securities issued in accordance with such plans approved by the
Board and in effect as of the date of the first issuance of the Series
A Preferred Shares shall not constitute a Dilutive Event.
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<PAGE>
(ii) Common Stock Deemed Outstanding. For
purposes of determining the adjusted Conversion Price pursuant to
Section 4(d)(i) above the following events shall be deemed to be an
issuance and sale of Common Stock by the Company:
(A) Issuance of Rights or Options.
If (i) the Company in any manner grants any rights or options to
subscribe for or to purchase shares of Common Stock or any securities
convertible into or exchangeable for shares of Common Stock (such
rights or options referred to herein as "Options" and such convertible
or exchangeable stock or securities referred to herein as "Convertible
Securities") and (ii) the Price Per Share of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the Conversion
Price in effect immediately prior to the time of the granting of such
Options, then (x) the total maximum amount of such Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum number of Convertible Securities issuable
upon the exercise of such Options will be deemed to be Common Stock
issued and sold by the Company, and (y) the consideration received
pursuant to the Dilutive Event will equal the Price Per Share times the
number of shares of Common Stock so deemed issued and sold by the
Company. For purposes of this Section 4(d)(ii)(A), the "Price Per
Share" will be determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such Options,
plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price will be made when
Convertible Securities are actually issued upon the exercise of such
Options or when Common Stock is actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities.
(B) Issuance of Convertible
Securities. If (i) the Company in any manner issues or sells any
Convertible Securities and (ii) the Price Per Share of shares of Common
Stock issuable upon such conversion or exchange is less than the
Conversion Price in effect immediately prior to the time of such issue
or sale, then (x) the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities will be
deemed to be Common Stock issued and sold by the Company, and (y) the
consideration received pursuant to the Dilutive Event will equal the
Price Per Share times the number of shares of Common Stock so deemed
issued and sold by the Company. For the purposes of this Section
4(d)(ii)(B),
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<PAGE>
the "Price Per Share" will be determined by dividing (i) the total
amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment
of the Conversion Price will be made when Common Stock is actually
issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments to the Conversion
Price had been or are to be made pursuant to Section 4(d)(ii)(A) above,
no further adjustment of the Conversion Price will be made by reason of
such issue or sale.
(C) Change in Option Price or
Conversion Rate. If at any time there is a change in (i) the purchase
price provided for in any Options, (ii) the additional consideration,
if any, payable upon the conversion or exchange of any Convertible
Securities, or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock, then the Conversion
Price in effect at the time of such change will be readjusted to the
Conversion Price which would have been in effect had those Options or
Convertible Securities still outstanding at the time of such change
provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time such Options
or Convertible Securities were initially granted, issued or sold.
(D) Calculation of Consideration
Received. If any shares of Common Stock, Option or Convertible Security
are issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor or the Price Per Share, as the case may
be, will be deemed to be the net amount received or to be received,
respectively, by the Company therefor. In case any shares of Common
Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other
than cash received by the Company or the non-cash portion of the Price
Per Share, as the case may be, will be the fair value of such
consideration received or to be received, respectively, by the Company;
except where such consideration consists of securities, in which case
the amount of consideration received or to be received, respectively,
by the Company will be the Average Trading Price thereof as of the date
of receipt. If any shares of Common Stock, Options or Convertible
Securities are issued in connection with any merger in which the
Company is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net
assets and business of the non-surviving corporation as is attributable
to such shares of Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration other than cash
and securities will be determined jointly by the Company and the
holders of a majority of the outstanding Series A Preferred Shares. If
such parties are
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<PAGE>
unable to reach agreement within a reasonable period of time, the fair
value of such consideration will be determined by an independent
appraiser jointly selected by the Company and the holders of a majority
of the outstanding Series A Preferred Shares.
(E) Integrated Transactions. In case
any Option is issued in connection with the issuance or sale of other
securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such
Option by the parties thereto, the Option will be deemed to have been
issued for a consideration of $.01.
(F) Record Date. If the Company
takes a record of the holders of Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in shares of Common Stock, Options or in Convertible Securities or (ii)
to subscribe for or purchase shares of Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the
date of the issuance or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or upon
the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
(iii) 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, the
Threshold Price and the amounts set forth in Section 4(c)(i) 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, the
Threshold Price and the amounts set forth in Section 4(c)(i) in effect
immediately prior to such combination will be proportionately
increased.
(iv) 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 (as defined below) 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 (I) each of the holders of the
Series A 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 A Preferred Shares, such shares of
stock, securities or assets as may be issued or payable
-8-
<PAGE>
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 A Preferred Shares had such Organic Change not
taken place and (II) each of the holders of Series A Preferred Shares
will continue to have the same rights and preferences, in any surviving
entity, as those which apply to the Series A Preferred Shares pursuant
to this Certificate. 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(d) will
thereafter be applicable to the Series A Preferred Shares. The Company
will not effect any such consolidation, merger or sale, 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 A Preferred Shares such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire. "Person" shall mean
an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(v) Notices.
(A) Immediately upon any adjustment
of the Conversion Price, the Company will give written notice thereof
to each holder of Series A 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 A Preferred Shares at least twenty (20)
days prior to the date on which the Company closes its books or takes a
record (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, dissolution 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.
(C) The Company will also give
written notice to each holder of Series A Preferred Shares at least
twenty (20) days prior to the date on which any Organic Change,
dissolution or liquidation will take place.
(D) The Company shall give written
notice to the holders of the Series A Preferred Shares promptly after
the occurrence of the automatic conversion of the Series A Preferred
Shares into Common Stock as set forth in Section 4(b) hereof.
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<PAGE>
(e) Mechanics of Conversion. Subject to and in
compliance with all federal and state securities laws, the conversion
of Series A 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), or, if converted at the option
of the holder of Series A Preferred Shares pursuant to Section 4(a), by
and on the date of surrender of certificates representing the Series A
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, but in no event later than five (5)
business days 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 A Preferred Shares for the unconverted shares of Series A
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.
(f) Record Holder. The person or persons entitled to
receive the shares of Common Stock issuable upon a conversion of Series
A 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) Change of Control. If at any time there is a Change of
Control (as defined below) of the Company, the Company shall,
immediately following the occurrence of any such event, send a notice
to each holder offering to repurchase the Series A Preferred Shares (or
at each holder's option, any portion thereof) for an amount equal to
the Liquidation Preference on the date of such repurchase. If any
holder desires to accept such offer in whole or in part, such holder
must advise the Company of such acceptance within thirty (30) days of
the date of receiving such notice. The Company shall then repurchase
the Series A Preferred Shares or portion thereof so tendered for
repurchase by such holder by paying the purchase price to the holder
(or any person or persons designated by such holder in such acceptance
notice), in immediately available funds, within ten (10) business days
of the Company's receipt of such holder's acceptance notice. If a
holder tenders only a portion of such holder's Series A Preferred
Shares, the holder shall deliver such certificate of Series A Preferred
Shares to the Company and the Company then shall issue to the holder a
new certificate of Series A Preferred Shares, representing the portion
of the Series A Preferred Shares not repurchased by the Company. For
purposes of this Section, "Change of Control" means any event or series
of events by which (i) any person or group (as defined in Rule 13d-1 of
the Exchange Act) obtains a majority (by voting or otherwise) of the
securities of the Company ordinarily having the right to vote in the
election of directors; (ii) during any two year period commencing at
any time on or
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<PAGE>
after the Closing Date, individuals who at the beginning of such period
constituting the Board of Directors cease for any reason to constitute
a majority of the Board of Directors; (iii) any sale, lease, exchange
or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, the assets of the Company;
(iv) the merger or consolidation of the Company with or into another
corporation or the merger of another corporation into the Company with
the effect that immediately after such transaction any beneficial owner
shall have become the beneficial owner of securities of the surviving
corporation of such merger or consolidation representing a majority of
the combined voting power of the outstanding securities of the
surviving corporation ordinarily having the right to vote in the
election of directors; or (v) the adoption of a plan leading to the
liquidation or dissolution of the Company. Notwithstanding the
foregoing, the Company shall not be obligated to repurchase the Series
A Preferred Shares pursuant to the terms of this Section 5 if such
repurchase in the opinion of the Company's then current auditors, would
jeopardize the "pooling" accounting treatment of the transaction giving
rise to such Change of Control.
(6) 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 A 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 A 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.
(7) Liquidation, Dissolution, Winding-Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Series A 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 of the capital stock of the Company of any class junior in rank
to the Series A Preferred Shares in respect of the preferences as to
the distributions and payments on the liquidation, dissolution and
winding up of the Company, an amount per Series A 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 A
Preferred Shares, then each holder of Series A 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 A 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, dissolution or winding up of the
Company. Neither the consolidation or
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<PAGE>
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,
dissolution or winding up of the Company. No holder of Series A
Preferred Shares shall be entitled to receive any amounts with respect
thereto upon any liquidation, dissolution or winding up of the Company
other than the amounts provided for herein.
(8) Repurchases of Series A Preferred Stock by the Issuer.
Neither the Issuer nor any of its subsidiaries shall repurchase any
outstanding shares of Series A Preferred Stock unless the Issuer on the
same terms either (i) offers to purchase all of the then outstanding
shares of Series A Preferred Stock or (ii) offers to purchase shares of
Series A Preferred Stock from the holders in proportion to the
respective number of shares of Series A Preferred Stock held by each
holder. In any such repurchase by the Issuer or any of its
subsidiaries, if all shares of Series A Preferred Stock are not being
repurchased, then the number of shares of Series A Preferred Stock to
be repurchased shall be allocated among all shares of Series A
Preferred Stock held by holders which accept the Issuer's repurchase
offer so that the shares of Series A Preferred Stock are repurchased
from such holders in proportion to the respective number of shares of
Series A Preferred Stock held by each such holder which accepts the
Issuer's offer (or in such other proportion as agreed by all such
holders who accept the Issuer's offer).
(9) Shares to be Retired. Any share of Series A Preferred
Stock converted, redeemed, repurchased or otherwise acquired by the
Corporation 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 and all
additional shares of preferred stock of the Company shall be of junior
rank to all Series A Preferred Shares in respect to the preferences as
to dividends and distributions and payments upon the liquidation,
dissolution and winding up of the Company and the rights of the shares
of Common Stock and of any shares of preferred stock, other than the
Series A Preferred Stock shall be subject to the preferences and
relative rights of the Series A Preferred Shares.
(12) Vote to Change the Terms of Series A Preferred Shares.
The affirmative vote at a meeting duly called for such purpose or the
written consent without a meeting of the holders of not less than
two-thirds (2/3) of the then outstanding Series A Preferred Shares
(excluding any Series A Preferred Shares held by the Company or
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<PAGE>
affiliates of the Company) shall be required for the Company to amend,
alter, change or repeal any of the powers, designations, preferences
and rights of the Series A Preferred Shares.
(13) 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 A 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 A Preferred Shares into Common Stock.
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by Donald C. Welchko , its Chief Financial Officer and Vice President
as of the 21st day of May 1997.
ANICOM, INC.
By: /s/ Donald C. Welchko
--------------------------------
Title: Vice President and CFO
------------------------------
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<PAGE>
EXHIBIT I
ANICOM, INC.
NOTICE OF CONVERSION
Reference is made to the Certificate of Designations, Preferences and Rights of
Convertible Preferred Stock, Series A, of Anicom, Inc. (the "Designation"). In
accordance with and pursuant to the Designation, the undersigned hereby elects
to convert the number of shares of Convertible Preferred Stock, Series A, par
value $.001 (the "Series A 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 A Preferred specified below as of the date
specified below:
Date of Conversion ____________________________
Number of shares of Series A
Preferred to be converted: ____________________________
Stock certificates no(s). of Series A
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 A 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: ____________________________
<PAGE>
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
ANICOM, INC.
ANICOM, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Act"), DOES HEREBY
CERTIFY THAT:
1. In accordance with the provisions of Section 242 of the Act,
an amendment to the Amended and Restated Certificate of
Incorporation of this Corporation has been duly adopted by the
Board of Directors of this Corporation and by the stockholders
of this Corporation at the Annual Meeting of Stockholders.
2. Said amendment amends subparagraph A of Article 4 of the
Amended and Restated Certificate of Incorporation so that, as
amended, subparagraph A of Article 4 shall read in its
entirety as follows:
"Authorized Shares. The total number of shares of all classes
of stock which the Corporation shall have authority to issue
is sixty-one million (61,000,000) shares, consisting of sixty
million (60,000,000) shares of Common Stock, $.001 par value
per share (the "Common Stock"), and one million (1,000,000)
shares of Preferred Stock, $.01 par value per share (the
"Preferred Stock")."
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
duly executed this 2nd day of June, 1997.
By /s/ Carl E. Putnam
-----------------------------------
Carl E. Putnam, President and Chief
Operating Officer
<PAGE>
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
ANICOM, INC.
ANICOM, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Act"), DOES HEREBY
CERTIFY THAT:
1. In accordance with the provisions of Section 242 of the Act,
an amendment to the Amended and Restated Certificate of
Incorporation of this Corporation has been duly adopted by the
Board of Directors of this Corporation and by the stockholders
of this Corporation at the Annual Meeting of Stockholders.
2. Said amendment amends subparagraph A of Article Four of the
Amended and Restated Certificate of Incorporation so that, as
amended, subparagraph A of Article Four shall read in its
entirety as follows:
"Authorized Shares. The total number of shares of all classes
of stock which the Corporation shall have authority to issue
is one hundred one million (101,000,000) shares, consisting of
one hundred million (100,000,000) shares of Common Stock,
$.001 par value per share (the "Common Stock"), and one
million (1,000,000) shares of Preferred Stock, $.01 par value
per share (the "Preferred Stock")."
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
duly executed this 17th day of July, 1998.
ANICOM, INC.
By: /s/ Carl E. Putnam
-----------------------------------
Carl E. Putnam, President and Chief
Operating Officer
<PAGE>
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
<PAGE>
Series B Preferred Shares shall be $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
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<PAGE>
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).
(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.
-3-
<PAGE>
(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.
(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
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<PAGE>
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 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:
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<PAGE>
Average Trading Price as a Number of Series B Preferred
Percentage of Conversion Price Shares 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.
(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
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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.
(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
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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
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
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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."
(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.
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"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.
"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.
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<PAGE>
"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.
(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
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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.
(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 Donald C. Welchko, its Vice President as of the 18th day of September,
1998.
ANICOM, INC.
By: /s/ Donald C. Welchko
-------------------------
Title: Vice President
-----------------------
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<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: _______________________
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
of
ANICOM, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
ANICOM, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Company"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Company as required by Section 151 of the General Corporation
Law at a meeting duly called and held on March 16, 1999:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Company (hereinafter called the "Board of Directors"
or the "Board") in accordance with the provisions of the Company's Restated
Certificate of Incorporation, the Board of Directors hereby creates a series of
Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the
Company and hereby states the designation and number of shares, and fixes the
relative rights, preferences, and limitations thereof as follows:
Series C Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series C Junior Participating Preferred Stock" (the "Series C
Preferred Stock") and the number of shares constituting the Series C Preferred
Stock shall initially be 50,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series C Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities or rights issued by the
Company convertible into Series C Preferred Stock and further provided that the
Board of Directors shall increase the number of shares constituting the Series C
Preferred Stock to the extent necessary for the Company to have available
sufficient shares of such Series C Preferred Stock available to fulfill all of
the Company's obligations to holders of securities and Rights of the Company.
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<PAGE>
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series C Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock, in preference to the
holders of Common Stock, par value $.01 per share (the "Common Stock"),
of the Company, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of the
funds legally available for the purpose, dividends payable when and as
dividends are declared on the Common Stock in an amount, subject to the
provision for adjustment hereinafter set forth, equal to 1,000 times
the aggregate per share amount of all cash dividends, and 1,000 times
the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, declared on the Common Stock (except
as provided in the next sentence). In the event the Company shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of
Series C Preferred Stock were entitled immediately prior to such event
under the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribution on
the Series C Preferred Stock as provided in paragraph (A) of this
Section 2 immediately after it declares a dividend or distribution on
the Common Stock.
Section 3. Voting Rights. The holders of shares of Series C Preferred
Stock shall have the following voting rights:
(A) Each share of Series A Preferred Stock shall entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Company.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series C Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Company having general voting rights shall vote together
as one class on all matters submitted to a vote of stockholders of the
Company.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series C Preferred Stock shall have no special voting
rights and their consent shall not be
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required (except to the extent they are entitled to vote with holders
of Common Stock as set forth herein) for taking any corporate action.
Section 4. Reacquired Shares. Any shares of Series C Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Company's
Restated Certificate of Incorporation, or in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 5. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series C
Preferred Stock unless, prior thereto, the holders of shares of Series C
Preferred Stock shall have received an aggregate amount per share, subject to
the provision for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount to be distributed per share to holders of shares of Common
Stock. In the event the Company shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series C Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 6. Consolidation, Merger, etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for, or changed into, other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series C Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator
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of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 7. No Redemption. The shares of Series C Preferred Stock shall
not be redeemable.
Section 8. Rank. The Series C Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Company's Preferred Stock.
Section 9. Amendment. The Certificate of Incorporation of the Company
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series C Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series C Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Company by its Chairman and Chief Executive Officer and attested
by its Corporate Secretary this 25th day of March, 1999.
/s/ SCOTT C. ANIXTER
------------------------------------
Scott C. Anixter
Chairman and Chief Executive Officer
Attest:
/s/ DAVID R. SHEVITZ
- -------------------------
David R. Shevitz
Corporate Secretary
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EXHIBIT 10.2
LONG-TERM MULTICURRENCY CREDIT AGREEMENT
DATED AS OF NOVEMBER4, 1998,
AMONG
ANICOM, INC.,
THE LENDERS
PARTY HERETO,
AND
HARRIS TRUST AND SAVINGS BANK,
INDIVIDUALLY AND AS AGENT
<PAGE>
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
SECTION 1. THE REVOLVING CREDITS.
Section 1.1. The Revolving Credit.
Section 1.2. The Revolving Credit Notes.
Section 1.3. Letters of Credit
Section 1.4. Manner and Disbursement of Loans.
Section 1.5. Extensions of the Revolving Commitments
SECTION 2. Interest and Change In Circumstances.
Section 2.1. Interest Rate Options.
Section 2.2 Minimum LIBOR Portion Amounts.
Section 2.3. Computation of Interest.
Section 2.4. Manner of Rate Selection.
Section 2.5. Change of Law.
Section 2.6. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR.
Section 2.7. Taxes and Increased Costs.
Section 2.8. Change in Capital Adequacy Requirements.
Section 2.9. Funding Indemnity
Section 2.10.L ending Branch.
Section 2.11. Discretion of Lenders as to Manner of Funding.
SECTION 3. Fees, Prepayments, Terminations, and Applications.
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Section 3.1. Fees.
Section 3.2. Prepayments.
Section 3.3. Terminations.
Section 3.4 Place and Application of Payments.
Section 3.5. Notations.
SECTION 4. Guaranties.
Section 4.1. Subsidiary Guaranties
SECTION 5. Definitions; Interpretation.
Section 5.1. Definitions.
Section 5.2. Interpretation.
SECTION 6. Representations and Warranties.
Section 6.1. Organization and Qualification
Section 6.2. Subsidiaries
Section 6.3. Corporate Authority and Validity of Obligations
Section 6.4. Use of Proceeds; Margin Stock
Section 6.5. Financial Reports
Section 6.6. No Material Adverse Change
Section 6.7. Full Disclosure
Section 6.8. Good Title
Section 6.9. Litigation and Other Controversies
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Section 6.10. Taxes
Section 6.11. Approvals
Section 6.12. Affiliate Transactions
Section 6.13. Investment Company; Public Utility Holding Company
Section 6.14. ERISA
Section 6.15. Compliance with Laws
Section 6.16. Other Agreements
Section 6.17. No Default
Section 6.18. Year 2000 Compliance
SECTION 7. Conditions Precedent
Section 7.1. All Advances.
Section 7.2. Initial Advance
Section 7.3. Termination of Existing Credit Agreement
Section 7.4. November 19th as Earliest Effective Date
SECTION 8. Covenants
Section 8.1. Corporate Existence; Subsidiaries
Section 8.2. Maintenance of Properties
Section 8.3. Taxes and Assessments
Section 8.4. Insurance
Section 8.5. Financial Reports
Section 8.6. Current Ratio
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Section 8.7. Interest Coverage Ratio
Section 8.8. Tangible Net Worth
Section 8.9. Debt to Earnings Ratio
Section 8.10. Leverage Ratio
Section 8.11. Indebtedness for Borrowed Money
Section 8.12. Liens
Section 8.13. Investments, Loans, Advances and Guaranties
Section 8.14. Acquisitions
Section 8.15. Sales and Leasebacks
Section 8.16. Dividends and Certain Other Restricted Payments
Section 8.17. Mergers, Consolidations and Sales
Section 8.18. ERISA
Section 8.19. Compliance with Laws
Section 8.20. Burdensome Contracts With Affiliates
Section 8.21 No Changes in Fiscal Year
Section 8.22. Inspection and Field Audit
Section 8.23. Formation of Subsidiaries
Section 8.24. Subordinated Indebtedness
Section 8.25. Use of Proceeds
Section 8.26. Year 2000 Compliance
Section 8.27. European Monetary Union
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<PAGE>
SECTION 9. Events of Default and Remedies
Section 9.1. Events of Default.
Section 9.2. Non-Bankruptcy Defaults.
Section 9.3. Bankruptcy Defaults
Section 9.4. Collateral for Undrawn Letters of Credit
SECTION 10. The Agent.
Section 10.1. Appointment and Authorization.
Section 10.2. Rights as a Lender
Section 10.3 Standard of Care
Section 10.4. Costs and Expenses
Section 10.5. Indemnity
SECTION 11. Miscellaneous.
Section 11.1. Withholding Taxes
Section 11.2. Non-Business Days.
Section 11.3. No Waiver, Cumulative Remedies.
Section 11.4. Waivers, Modifications and Amendments
Section 11.5. Costs and Expenses
Section 11.6. Documentary Taxes.
Section 11.7. Survival of Representations.
Section 11.8. Survival of Indemnities.
Section 11.9. Participations
Section 11.10. Assignment Agreements
Section 11.11. Notices
Section 11.12. Construction
Section 11.13. Headings
Section 11.14. Severability of Provisions.
Section 11.15. Counterparts.
Section 11.16. Entire Understanding
Section 11.17. Currency
Section 11.18. Currency Equivalence
Section 11.19. Binding Nature, Governing Law, Etc
Section 11.20. Submission to Jurisdiction; Waiver of Jury Trial
Signature
Exhibit A - Revolving Credit Note
Exhibit B - Compliance Certificate
Exhibit C - Subordinated Indebtedness
Exhibit D - Subordination Provisions Applicable to Subordinated Debt
Exhibit E - Form of Guaranty Schedule 6.2 - Subsidiaries
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<PAGE>
LONG-TERM MULTICURRENCY CREDIT AGREEMENT
To each of the Lenders party hereto:
Ladies and Gentlemen:
The undersigned, Anicom, Inc., a Delaware corporation (the "Company"),
applies to you for your several commitments, subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, to extend credit to the Company, all as more fully hereinafter set forth.
SECTION 1. The Revolving Credits.
Section 1.1. The Revolving Credit. Subject to the terms and conditions
hereof, each Lender severally agrees to extend a revolving credit (the
"Revolving Credit") to the Company which may be availed of by the Company from
time to time during the period from and including the date hereof to but not
including the Revolving Credit Termination Date, at which time the commitments
of the Lenders to extend credit under the Revolving Credit shall expire. The
maximum amount of the Revolving Credit which each Lender agrees to extend to the
Company shall be as set forth opposite such Lender's signature hereto under the
heading "Revolving Credit Commitment" or as otherwise provided in Section 11.10
hereof, as such amount may be reduced pursuant hereto. The Revolving Credit may
be utilized by the Company in the form of Loans and Letters of Credit, all as
more fully hereinafter set forth, provided that (i) the aggregate Original
Dollar Amount of Loans and Letters of Credit outstanding at any one time shall
not exceed the Revolving Credit Commitments and (ii) the aggregate Original
Dollar Amount of Loans denominated in Alternative Currencies shall not exceed
$15,000,000. During the period from and including the date hereof to but not
including the Revolving Credit Termination Date, the Company may use the
Revolving Credit Commitments by borrowing, repaying and reborrowing Loans in
whole or in part and/or by having the Agent issue Letters of Credit, having such
Letters of Credit expire or otherwise terminate without having been drawn upon
or, if drawn upon, reimbursing the Agent for each such drawing, and having the
Agent issue new Letters of Credit, all in accordance with the terms and
conditions of this Agreement. For purposes of this Agreement, where a
determination of the unused or available amount of the Revolving Credit
Commitments is necessary, the Original Dollar Amount of Loans outstanding under
the Revolving Credit and Letters of Credit shall be deemed to utilize the
Revolving Credit Commitments. The obligations of the Lenders hereunder are
several and not joint, and no Lender shall under any circumstances be obligated
to extend credit under the Revolving Credit in excess of its Revolving Credit
Commitment. Section 1.2. The Revolving Credit Notes. Subject to the terms and
conditions hereof, the Revolving Credit may be availed of by the Company in the
form of loans (individually a "Loan" and collectively the "Loans") in U.S.
Dollars or an Alternative Currency. Each Borrowing of Loans under the Revolving
Credit shall be made ratably by the Lenders in accordance with their Percentages
of the Revolving Credit Commitments. All Loans made by a Lender under the
Revolving Credit shall be made against and evidenced by a single Long-Term
Revolving Credit Note of the Company (individually a "Note" and collectively the
"Notes") payable to the order of such Lender in the amount of its Revolving
Credit Commitment, with each Note to be in the form (with appropriate
insertions) attached hereto as Exhibit A. Each Note shall be dated the date of
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<PAGE>
issuance thereof, be expressed to bear interest as set forth in Section 2
hereof, and be expressed to mature on the Revolving Credit Termination Date.
Without regard to the principal amount of each Note stated on its face, the
actual principal amount at any time outstanding and owing by the Company on
account thereof shall be the sum of all advances then or theretofore made
thereon less all payments of principal actually received.
Section 1.3. Letters of Credit.
(a) General Terms. Subject to the terms and conditions hereof, the
Revolving Credit may be availed of by the Company in the form of standby and
commercial letters of credit issued by the Agent for the account of the Company
in U.S. Dollars (individually a "Letter of Credit" and collectively the "Letters
of Credit"), provided that the aggregate amount of Letters of Credit issued and
outstanding hereunder shall not at any time exceed the lesser of (i) $10,000,000
and (ii) the excess (if any) of the Revolving Credit Commitments over the
aggregate Original Dollar Amount of Loans then outstanding. For purposes of this
Agreement, a Letter of Credit shall be deemed outstanding as of any time in an
amount equal to the maximum amount which could be drawn thereunder under any
circumstances and over any period of time plus any unreimbursed drawings then
outstanding with respect thereto. If and to the extent any Letter of Credit
expires or otherwise terminates without having been drawn upon, the availability
under the Revolving Credit Commitments shall to such extent be reinstated. The
Letters of Credit shall be issued by the Agent, but each Lender shall be
obligated to reimburse the Agent for such Lender's Percentage of the amount of
each draft drawn under a Letter of Credit in accordance wit h this Section
1.3 and, accordingly, each Letter of Credit shall be deemed to utilize the
Revolving Credit Commitments of all Lenders pro rata in accordance with their
Percentages thereof.
(b) Term. Each Letter of Credit issued hereunder shall expire not later
than the earlier of (i) twelve (12) months from the date of
issuance (or be cancelable not later than twelve (12) months from the
date of issuance and each renewal) or (ii) the Revolving Credit
Termination Date. In the event the Agent issues any Letter of Credit with an
expiration date that is automatically extended unless the Agent gives notice
that the expiration date will not so extend beyond its then scheduled expiration
date, the Agent will give such notice of non-renewal before the time necessary
to prevent such automatic extension if before such required notice date (i)
he expiration date of such Letter of Credit if so extended would be after
the Revolving Credit Termination Date, (ii) the Revolving Credit
Commitments have terminated or (iii) an Event of Default exists and the
Required Lenders have given the Agent instructions not to so permit the
extension of the expiration date of such Letter of Credit.
(c) General Characteristics. Each Letter of Credit issued hereunder
shall be payable in U.S. Dollars, conform to the general requirements of the
Agent for the issuance of standby or commercial letters of credit , as the case
may be, as to form and substance, and be a letter of credit which the Agent may
lawfully issue.
(d) Applications. At the time the Company requests each Letter of
Credit to be issued (or prior to the first issuance of a Letter of Credit in the
case of a continuing application), the Company shall execute and deliver to the
Agent an application for such Letter of Credit in the form then customarily
prescribed by the Agent (individually an "Application" and collectively the
"Applications"). Subject to the other provisions of this subsection, the
obligation of the Company
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to reimburse the Agent for drawings under a Letter of Credit shall be governed
by the Application for such Letter of Credit. Anything contained in the
Applications to the contrary notwithstanding, (i) in the event the Agent
is not reimbursed by the Company for the amount the Agent pays on any draft
drawn under a Letter of Credit issued hereunder by 1:00 p.m. (Chicago time) on
the date when such drawing is paid, the obligation of the Company to reimburse
the Agent for the amount of such draft paid shall bear interest (which the
Company hereby promises to pay on demand) from and after the date the draft is
paid until payment in full thereof at a fluctuating rate per annum determined by
adding 2% to the Domestic Rate as from time to time in effect (computed on the
basis of a year of 360 days for the actual number of days elapsed), (ii)
the Company shall pay fees in connection with each Letter of Credit as set
forth in Section 3 hereof, (iii) except as otherwise provided in
Section 3.4 hereof, prior to the occurrence of a Default or an Event of
Default the Agent will not call for additional collateral security for the
obligations of the Company under the Applications, and (iv) except as
otherwise provided in Section 3.4 hereof, prior to the occurrence of a
Default or an Event of Default the Agent will not call for the funding of a
Letter of Credit by the Company prior to being presented with a draft drawn
thereunder (or, in the event the draft is a time draft, prior to its due date).
The Company hereby irrevocably authorizes the Agent to charge any of the
Company's deposit accounts maintained with the Agent for the amount necessary to
reimburse the Agent for any drafts drawn under Letters of Credit issued
hereunder.
(e) Change in Laws. If the Agent or any Lender shall determine in good
faith that any change in any applicable law, regulation or guideline (including,
without limitation, Regulation D of the Board of Governors of the Federal
Reserve System) or any new law, regulation or guideline, or any interpretation
of any of the foregoing by any governmental authority charged with the
administration thereof or any central bank or other fiscal, monetary or other
authority having jurisdiction over the Agent or such Lender (whether or not
having the force of law), shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against the Letters of Credit, or the
Agent's or such Lender's or the Company's liability with respect
thereto; or
(ii) impose on the Agent or such Lender any penalty with
respect to the foregoing or any other condition regarding this
Agreement, the Applications or the Letters of Credit;
and the Agent or such Lender shall determine in good faith that the result of
any of the foregoing is to increase the cost (whether by incurring a cost or
adding to a cost) to the Agent or such Lender of issuing, maintaining or
participating in the Letters of Credit hereunder (without benefit of, or credit
for, any prorations, exemptions, credits or other offsets available under any
such laws, regulations, guidelines or interpretations thereof), then the Company
shall pay on demand to the Agent or such Lender from time to time as specified
by the Agent or such Lender such additional amounts as the Agent or such Lender
shall determine are sufficient to compensate and indemnify it for such increased
cost. If the Agent or any Lender makes such a claim for compensation, it shall
provide the Company (with a copy to the Agent in the case of any Lender) a
certificate setting forth the computation of the increased cost as a result of
any event mentioned herein in reasonable detail and such certificate shall be
conclusive if reasonably determined.
(f) Participations in Letters of Credit. Each Lender shall participate
on a pro rata basis in accordance with its Percentage of the Revolving Credit
Commitments in the Letters of Credit
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<PAGE>
issued by the Agent, which participation shall automatically arise upon the
issuance of each Letter of Credit. Each Lender unconditionally agrees that in
the event the Agent is not immediately reimbursed by the Company for the amount
paid by the Agent on any draft presented under a Letter of Credit, then in that
event such Lender shall pay to the Agent such Lender's Percentage of the amount
of each draft so paid and in return such Lender shall automatically receive an
equivalent percentage participation in the rights of the Agent to obtain
reimbursement from the Company for the amount of such draft, together with
interest thereon as provided for herein. The obligations of the Lenders to the
Agent under this subsection shall be absolute, irrevocable and unconditional
under any and all circumstances whatsoever and shall not be subject to any
set-off, counterclaim or defense to payment which any Lender may have or have
had against the Company, the Agent, any other Lender or any other party
whatsoever. In the event that any Lender fails to honor its obligation to
reimburse the Agent for its Percentage of the amount of any such draft, then in
that event the defaulting Lender shall have no right to participate in any
recoveries from the Company in respect of such draft.
Section 1.4. Manner and Disbursement of Loans. (a) Notice to the Agent
and the Lenders. The Company shall give written or telephonic notice to the
Agent (which notice shall be irrevocable once given and, if given by telephone,
shall be promptly confirmed in writing) by no later than 11:00 a.m. (Chicago
time) on the date the Company requests that any Borrowing of Loans be made to it
under the Revolving Credit Commitments, and the Agent shall promptly notify each
Lender of the Agent's receipt of each such notice. Each such notice shall
specify the date of the Borrowing of Loans requested (which must be a Business
Day and which date shall be at least three Business Days subsequent to the date
of such notice in the case of any Loans constituting a LIBOR Portion denominated
in U.S. Dollars and at least four Business Days subsequent to the date of such
notice in the case of any Loans constituting a LIBOR Portion denominated in an
Alternative Currency), the type of Loan being requested, and the amount of such
Borrowing. Each Borrowing of Loans shall initially constitute part of the
Domestic Rate Portion except to the extent the Company has otherwise timely
elected that such Borrowing, or any part thereof, constitute part of a LIBOR
Portion as provided in Section 2 hereof. The Company agrees that the
Agent may rely upon any written or telephonic notice given by any person the
Agent in good faith believes is an Authorized Representative without the
necessity of independent investigation and, in the event any telephonic notice
conflicts with the written confirmation, such telephonic notice shall govern if
the Agent and the Lenders have acted in reliance thereon.
(b) Disbursement of Loans. Not later than 1:00 p.m. (Chicago
time) on the date specified for any Borrowing of Loans to be made hereunder
(other than a Borrowing of Loans to the extent constituting a LIBOR Portion
denominated in an Alternative Currency), each Lender shall make the proceeds of
its Loan comprising part of such Borrowing available to the Agent in Chicago,
Illinois in immediately available funds to the Agent in Chicago. Each Lender
shall make the proceeds of each Loan constituting a LIBOR Portion denominated in
an Alternative Currency at such office as the Agent has previously specified in
a notice to such Lender in such funds which are then customary for the
settlement of international transactions in such currency and no later than such
local time as is necessary for such funds to be received and transferred to the
Company for same day value on the date the Loan is to be made. Subject to the
provisions of Section 7 hereof, the proceeds
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of each Lender's Loan denominated in U.S. Dollars shall be made available to the
Company at the office of the Agent in Chicago, Illinois, and the proceeds of
each Lender's Loans denominated in an Alternative Currency shall be made
available to the Company at such office as the Agent has previously agreed to
with the Company, in each case in the type of funds received by the Agent from
the Lenders. Unless the Agent shall have been notified by a Lender by no later
than such time as would be necessary for such Lender to make the proceeds of its
Loan available to the Agent on the date a Borrowing is to be made hereunder that
such Lender does not intend to make the proceeds of its Loan available to the
Agent, the Agent may assume that such Lender has made such proceeds available to
the Agent on such date and the Agent may in reliance upon such assumption make
available to the Company a corresponding amount. If such corresponding amount is
not in fact made available to the Agent by such Lender and the Agent has made
such amount available to the Company, the Agent shall be entitled to receive
such amount from such Lender forthwith upon the Agent's demand, together with
interest thereon in respect of each day during the period commencing on the date
such amount was made available to the Company and ending on but excluding the
date the Agent recovers such amount at a rate per annum equal to the effective
rate charged to the Agent for overnight federal funds transactions with member
banks of the federal reserve system, or in the case of a Loan denominated in an
Alternative Currency, the Overnight Foreign Currency Rate, for each day as
determined by the Agent (or in the case of a day which is not a Business Day,
then for the preceding day). If such amount is not received from such Lender by
the Agent immediately upon demand, the Company will, on demand, repay to the
Agent the proceeds of such Loan attributable to such Lender with interest
thereon at a rate per annum equal to the interest rate applicable to the
relevant Loan, but without such payment being considered a payment or prepayment
of a LIBOR Portion, so that the Company will have no liability under Section<-1-
32>2.9 hereof with respect to such payment.
(c) Company's Failure to Notify. In the event the Company fails to give
notice pursuant to Section 1.4(a) above of a Borrowing equal to the
amount for which the Company is obligated to reimburse the Agent for a drawing
which the Agent has paid on a Letter of Credit (a "Reimbursement Obligation")
and has not notified the Agent by 12:00 noon (Chicago time) on the day such
Reimbursement Obligation becomes due that the Company intends to repay such
Reimbursement Obligation through funds not borrowed under this Agreement, the
Company shall be deemed to have requested a Borrowing of Loans constituting a
Domestic Rate Portion on such day in the amount of the Reimbursement Obligation
then due, subject to Section 7 hereof, which Borrowing shall be applied
to pay the Reimbursement Obligation then due.
Section 1.5. Extensions of the Revolving Commitments. The Company may
advise the Agent in writing of its desire to extend the Revolving Credit
Termination Date for an additional 364 days; provided (i) such
request is made no later than 90 days prior to the date on which such
Revolving Credit Termination Date is scheduled to occur, (ii) not more
than one such request for the extension of a Termination Date may be made in any
one calendar year and (iii) in no event shall the Revolving Credit
Termination Date be extended beyond June 30, 2003. The Agent shall
promptly notify the Lenders of each such request. Each Lender shall notify the
Agent in writing within 45 days after such Lender receives such notice
from the Agent, whether such Lender in its sole discretion agrees to such
extension (each such Lender agreeing to such extension being
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hereinafter referred to as a "Consenting Lender"). In the event that a Lender
shall fail to so notify the Agent within such 45day period, whether it agrees to
such extension, such Lender shall be deemed to have refused to grant the
requested extension. Upon receipt by the Agent of the consent of all the Lenders
within such 45day period, the Revolving Credit Termination Date or Dates shall
be automatically extended for 364 days. In the event the Company and all
the Lenders do not consent to the requested extension of the Revolving Credit
Termination Date, such Revolving Credit Termination Date shall take place as
scheduled. SECTION 2. Interest and Change In Circumstances.
Section 2.1. Interest Rate Options.
(a) Portions. Subject to the terms and conditions of this Section,
portions of the principal indebtedness evidenced by the Notes (all of the
indebtedness evidenced by the Notes bearing interest at the same rate for the
same period of time being hereinafter referred to as a "Portion") may, at the
option of the Company, bear interest with reference to the Domestic Rate
("Domestic Rate Portions") or with reference to the Adjusted LIBOR ("LIBOR
Portions"), and Portions may be converted from time to time from one basis to
another. All of the indebtedness evidenced by a particular class of Notes which
is not part of a LIBOR Portion shall constitute a single Domestic Rate Portion.
LIBOR Portions may be denominated in U.S. Dollars or an Alternative Currency,
but Domestic Rate Portions must be denominated in U.S. Dollars only. All of the
indebtedness evidenced by Notes of the same type which bears interest with
reference to a particular Adjusted LIBOR for a particular Interest Period and is
denominated in a particular currency shall constitute a single LIBOR Portion.
There shall not be more than five (5) LIBOR Portions applicable to the
Notes outstanding at any one time, and each Lender shall have a ratable interest
in each Portion based on its Percentage. Anything contained herein to the
contrary notwithstanding, the obligation of the Lenders to create, continue or
effect by conversion any LIBOR Portion shall be conditioned upon the fact that
at the time no Default or Event of Default shall have occurred and be
continuing. The Company hereby promises to pay interest on each Portion at the
rates and times specified in this Section 2.
(b) Domestic Rate Portion. Each Domestic Rate Portion shall bear
interest at the rate per annum determined by adding the Applicable Margin to the
Domestic Rate as in effect from time to time, provided that if a Domestic Rate
Portion or any part thereof is not paid when due (whether by lapse of time,
acceleration or otherwise) such Portion shall bear interest, whether before or
after judgment, until payment in full thereof at the rate per annum determined
by adding 2% to the interest rate which would otherwise be applicable thereto
from time to time. Interest on each Domestic Rate Portion shall be payable
quarterly in arrears on the last day of each March, June, September and December
in each year (commencing December 31, 1998) and at maturity of the
applicable Notes, and interest after maturity (whether by lapse of time,
acceleration or otherwise) shall be due and payable upon demand. Any change in
the interest rate on the Domestic Rate Portions resulting from a change in the
Domestic Rate shall be effective on the date of the relevant change in the
Domestic Rate.
(c) LIBOR Portions. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding the
Applicable LIBOR Margin to the Adjusted LIBOR for such Interest Period, provided
that if any LIBOR Portion is not paid when due
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(whether by lapse of time, acceleration or otherwise) such Portion shall bear
interest, whether before or after judgment, until payment in full thereof (i) if
such Portion is denominated in U.S. Dollars at the rate per annum determined by
adding 2% to the interest rate which would otherwise be applicable thereto
through the end of the Interest Period then applicable thereto, and effective at
the end of such Interest Period such LIBOR Portion shall automatically be
converted into and added to the Domestic Rate Portion and shall thereafter bear
interest at the interest rate applicable to such Domestic Rate Portion after
default and (ii) if such Portion is denominated in an Alternative
Currency, at the rate per annum determined by adding 2% to the interest rate
which would otherwise be applicable thereto at the time of such default until
the end of the Interest Period applicable thereto and, thereafter, at a rate per
annum equal to the sum of the Applicable Margin plus 2% plus the Overnight
Foreign Currency Rate. Interest on each LIBOR Portion shall be due and payable
on the last day of each Interest Period applicable thereto and, with respect to
any Interest Period applicable to a LIBOR Portion in excess of 3 months, on the
date occurring every 3 months after the date such Interest Period began and at
the end of such Interest Period, and interest after maturity (whether by lapse
of time, acceleration or otherwise) shall be due and payable upon demand. The
Company shall notify the Agent on or before 11:00 a.m. (Chicago time) on the
fourth Business Day preceding the end of an Interest Period applicable to a
LIBOR Portion whether such LIBOR Portion is to continue as a LIBOR Portion in
the same currency, in which event the Company shall notify the Agent of the new
Interest Period selected therefor, and in the event the Company shall fail to so
notify the Agent, such LIBOR Portion, if denominated in U.S. Dollars, shall
automatically be converted into and added to the Domestic Rate Portion as of and
on the last day of such Interest Period or, if denominated in an Alternative
Currency, shall automatically as of the last day of such Interest Period, be
continued as a LIBOR Portion in the same amount and in the same currency and
with an Interest Period of one month, subject to Section 7 hereof. The
Agent shall promptly notify each Lender of each notice received from the Company
pursuant to the foregoing provisions. Anything contained herein to the contrary
notwithstanding, the obligation of the Lenders to create, continue or effect by
conversion any LIBOR Portion shall be conditioned upon the fact that at the time
no Default or Event of Default shall have occurred and be continuing.
On the date the Company requests a Loan in an Alternative Currency, as
provided in Section 2.4, the Agent shall promptly notify each Lender of
the currency in which such Loan is requested. If a Lender determines that such
Alternative Currency is not available to it in sufficient amount and for a
sufficient term to enable it to advance or continue the Loan requested of it as
part of such LIBOR Portion and so notifies the Agent no later than 2:00<-1-
32>p.m. (Chicago time) on the same day it receives notice from the Agent of such
requested Loan, the Agent shall so notify the Company by 2:45 p.m. (Chicago
time). If the Company nevertheless desires such Loan, it must notify the Agent
by no later than 3:00 p.m. (Chicago time) on such day. If the Agent does not
receive such notice from the Company by 3:00 p.m. (Chicago time), the
Company shall automatically be deemed to have revoked its request for the Loan
and the Agent will promptly notify the Lenders of such revocation. If the
Company does give such notice by 3:00 p.m. (Chicago time), each Lender that did
not notify the Agent by 2:00 p.m. (Chicago time) that the requested Alternative
Currency is unavailable to it to fund the requested Loan shall, subject to
Section 7 hereof, make its Loan in the
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requested Alternative Currency in accordance with Section 1.4 hereof.
Each Lender that did so notify the Agent by 2:00 p.m. (Chicago time) that it
would not be able to make the Loan requested from it shall, subject to Section 7
hereof, make a Loan denominated in U.S. Dollars in the Original Dollar Amount
of, and with the same Interest Period as, the Loan such Lender was originally
requested to make. Such Loan denominated in U.S. Dollars shall be made by the
affected Lender on the same day as the other Lenders make their Loans
denominated in the applicable Alternative Currency as part of the relevant LIBOR
Portion, but shall bear interest with reference to the Adjusted LIBOR applicable
to U.S. Dollars rather than the relevant Alternative Currency for the applicable
Interest Period and shall be made available in accordance with the procedures
for disbursing U.S. Dollar Loans under Section 1.4 hereof. Any Loan made
in an Alternative Currency shall be advanced in such currency, and all payments
of principal and interest thereon shall be made in such Alternative Currency.
Section 2.2. Minimum Borrowing Amounts. Each Domestic Rate Portion
shall be in an amount equal to $500,000 or such greater amount which is an
integral multiple of $100,000. Each LIBOR Portion denominated in U.S. Dollars
shall be in an amount equal to $1,000,000 or such greater amount which is an
integral multiple of $500,000. Each LIBOR Portion denominated in an Alternative
Currency shall be in a minimum amount for which the U.S. Dollar Equivalent is
$1,000,000 and which is an integral multiple of 500,000 units of the relevant
currency or, solely in the case of a LIBOR Portion denominated in an Alternative
Currency being continued in the same currency, if less, the same amount of such
currency.
Section 2.3. Computation of Interest. All interest on the Loans
constituting part of the Domestic Rate Portion shall be computed on the basis of
a year of 365 or 366 days, as the case may be, for the actual number of days
elapsed. All interest on the Loans constituting all or part of a LIBOR Portion
shall be computed on the basis of a year of 360 days for the actual number of
days elapsed.
Section 2.4. Manner of Rate Selection. The Company shall notify
the Agent by 11:00 a.m. (Chicago time) at least 3 Business Days prior to the
date upon which the Company requests that any LIBOR Portion denominated in U.S.
Dollars be created or that any part of a LIBOR Portion otherwise denominated or
any part of a Domestic Rate Portion be converted into a LIBOR Portion
denominated in U.S. Dollars and (iii) by 12:00 Noon (Chicago time) at
least 4 Business Days prior to the date upon which the Company requests that any
LIBOR Portion denominated in an Alternative Currency be created or that any part
of a LIBOR Portion otherwise denominated or any part of a Domestic Rate Portion
be converted into a LIBOR Portion denominated in an Alternative Currency. Each
such notice shall specify in each instance the amount of the Portion being
created or converted and in the case of the creation of or conversion into any
LIBOR Portion, the Interest Period selected therefor and the currency in which
such Portion is to be denominated. If any request is made to convert a LIBOR
Portion into another type of Portion available hereunder, such conversion shall
only be made so as to become effective as of the last day of the Interest Period
applicable thereto. All requests for the creation, continuance and conversion of
Portions under this Agreement shall be irrevocable. Such requests may be written
or oral and the Agent is hereby authorized to honor telephonic requests for
creations, continuances and conversions received by it from any person the Agent
in good faith believes to be an Authorized Representative without the
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necessity of independent investigation, the Company hereby indemnifying the
Agent and the Lenders from any liability or loss ensuing from so acting. The
Agent shall give prompt notice to the Lenders of any notice it receives pursuant
to this Section and will give prompt notice to each Lender of the Overnight
Foreign Currency Rate as soon as it is set. The Agent shall determine the
interest rate applicable to each LIBOR Portion and the Original Dollar Amount of
such Portions denominated in an Alternative Currency, and a reasonable
determination thereof by the Agent shall be conclusive and binding except in the
case of manifest error or willful misconduct. The Original Dollar Amount of each
LIBOR Portion denominated in an Alternative Currency shall be determined or
redetermined, as applicable, effective as of the first day of each Interest
Period applicable to such Portion. The Agent shall give notice to the Company
and each Lender of the interest rate applicable to each LIBOR Portion and, if
such LIBOR Portion is denominated in an Alternative Currency, shall give notice
to the Company and each Lender of the Original Dollar Amount thereof.
Section 2.5. Change of Law. Notwithstanding any other provisions of
this Agreement or any Note, if at any time any Lender shall determine in good
faith that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for such Lender to create or continue
to maintain any LIBOR Portions in the relevant currency, it shall promptly so
notify the Agent (which shall in turn promptly notify the Company and the other
Lenders) and the obligation of such Lender to create, continue or maintain any
such LIBOR Portion in such currency under this Agreement shall terminate until
it is no longer unlawful for such Lender to create, continue or maintain such
LIBOR Portion. The Company, on demand, shall, if the continued maintenance of
any such LIBOR Portion is unlawful, thereupon prepay the outstanding principal
amount of the affected LIBOR Portion, together with all interest accrued thereon
and all other amounts payable to the affected Lender with respect thereto under
this Agreement; provided, however, that the Company may elect to convert the
principal amount of the affected Portion into another type of Portion available
hereunder, subject to the terms and conditions of this Agreement.
Section 2.6. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR. Notwithstanding any other provision of this Agreement or any
Note, if prior to the commencement of any Interest Period, the Required Lenders
shall determine in good faith that (i) deposits in the applicable
currency in the amount of any LIBOR Portion scheduled to be outstanding in such
currency during such Interest Period are not readily available to such Lenders
in the relevant market or (ii) by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining
Adjusted LIBOR Rate or (iii)currency control or other exchange
regulations are imposed in the country in which an Alternative Currency is
issued with the result that different types of such currency are issued or
(iv) in the determination of the Agent, a U.S. Dollar Equivalent of an
Alternative Currency is not readily calculable, then (x) such Lenders
shall promptly give notice thereof to the Agent (which shall in turn promptly
notify the Company and the other Lenders), (y) the obligations of the
Lenders to create, continue or effect by conversion any such LIBOR Portion in
such amount and for such Interest Period shall terminate until deposits in such
amount, in such currency and for the Interest Period selected by the Company
shall again be readily available in the relevant market and adequate and
reasonable means exist for
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<PAGE>
ascertaining Adjusted LIBOR Rate or the U.S. Dollar Equivalent of such affected
currency, as the case may be and (z) within five (5) Business Days of
receipt of such notice from the Agent, the Company shall repay all Loans in such
affected currency or convert such Loans into Loans denominated in U.S. Dollars
or another Alternative Currency, subject to the other terms set forth in this
Agreement.
Section 2.7. Taxes and Increased Costs. With respect to any LIBOR
Portion, if any Lender shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, treaty, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority having
jurisdiction over such Lender or its lending branch or the LIBOR Portions
contemplated by this Agreement (whether or not having the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in
or for the account of, or loans by, or any other acquisition of funds
or disbursements by, such Lender which is not in any instance already
accounted for in computing the interest rate applicable to such LIBOR
Portion;
(ii) subject such Lender, any LIBOR Portion or a Note to the
extent it evidences such a Portion to any tax (including, without
limitation, any United States interest equalization tax or similar tax
however named applicable to the acquisition or holding of debt
obligations and any interest or penalties with respect thereto), duty,
charge, stamp tax, fee, deduction or withholding in respect of this
Agreement, any LIBOR Portion or a Note to the extent it evidences such
a Portion, except such taxes as may be measured by the overall net
income or gross receipts of such Lender or its lending branches and
imposed by the jurisdiction, or any political subdivision or taxing
authority thereof, in which such Lender's principal executive office or
its lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to such Lender hereunder or under a Note
to the extent it evidences any LIBOR Portion (other than by a change in
taxation of the overall net income or gross receipts of such Lender or
its lending branches); or
(iv) impose on such Lender any penalty with respect to the
foregoing or any other condition regarding this Agreement, any LIBOR
Portion, or its disbursement, or a Note to the extent it evidences any
LIBOR Portion;
and such Lender shall determine in good faith that the result of any of the
foregoing is to increase the cost (whether by incurring a cost or adding to a
cost) to such Lender of creating or maintaining any LIBOR Portion hereunder or
to reduce the amount of principal or interest received or receivable by such
Lender (without benefit of, or credit for, any prorations, exemption, credits or
other offsets available under any such laws, treaties, regulations, guidelines
or interpretations thereof), then the Company shall pay on demand to the Agent
for the account of such Lender from time to time as specified by such Lender
such additional amounts as such Lender shall reasonably determine are sufficient
to compensate and indemnify it for such increased cost or reduced amount;
provided, however, that the Company shall not be obligated to pay any such
amount or amounts
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to the extent such additional cost or payment was incurred or paid by such
Lender more than ninety (90) days prior to the date of the delivery of
the certificate referred to in the immediately following sentence (nothing
herein to impair or otherwise affect the Company's liability hereunder for costs
or payments subsequently incurred or paid by such Lender). If a Lender makes
such a claim for compensation, it shall provide to the Company (with a copy to
the Agent) a certificate setting forth the computation of the increased cost or
reduced amount as a result of any event mentioned herein in reasonable detail
and such certificate shall be conclusive if reasonably determined.
Section 2.8. Change in Capital Adequacy Requirements. If any Lender
shall determine that the adoption after the date hereof of any applicable law,
rule or regulation regarding capital adequacy, or any change in any existing
law, rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by such Lender
(or any of its branches) or any corporation controlling such Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's or such
corporation's capital, as the case may be, as a consequence of such Lender's
obligations hereunder or for the credit which is the subject matter hereof to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to liquidity and capital adequacy)
by an amount deemed by such Lender to be material, then from time to time,
within fifteen (15) days after demand by such Lender, the Company shall
pay to the Agent for the account of such Lender such additional amount or
amounts reasonably determined by such Lender as will compensate such Lender for
such reduction; provided, however, that the Company shall not be obligated to
compensate such Lender to the extent its rate of return was so reduced more than
ninety (90) days prior to the date of such demand (nothing herein to
impair or otherwise affect the Company's liability hereunder to compensate for
subsequent reductions in such Lender's rate of return).
Section 2.9. Funding Indemnity. In the event any Lender shall incur any
loss, cost or expense (including, without limitation, any loss (including loss
of profit), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or contracted to be acquired by
such Lender to fund or maintain its part of any LIBOR Portion or the relending
or reinvesting of such deposits or other funds or amounts paid or prepaid to
such Lender) as a result of:
(i) any payment of a LIBOR Portion on a date other than the
last day of the then applicable Interest Period for any reason, whether
before or after default, and whether or not such payment is required by
any provisions of this Agreement; or
(ii) any failure by the Company to create, borrow, continue or
effect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement;
then, upon the demand of such Lender, the Company shall pay to the Agent for the
account of such Lender such amount as will reimburse such Lender for such loss,
cost or expense. If a Lender requests such a reimbursement, it shall provide to
the Company (with a copy to the Agent) a
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<PAGE>
certificate setting forth the computation of the loss, cost or expense giving
rise to the request for reimbursement in reasonable detail and such certificate
shall be conclusive if reasonably determined; provided, however, that the
Company shall not be obligated to pay any such amount or amounts to the extent
such loss, cost or expense was incurred by such Lender more than ninety (90)<-1-
32>days prior to the date of the delivery of such certificate (nothing herein to
impair or otherwise affect the Company's liability hereunder to compensate for
any subsequent loss, cost, or expense incurred by such Lender).
Section 2.10. Lending Branch. Each Lender may, at its option, elect to
make, fund or maintain its pro rata share of the Loans hereunder at the
branches, offices, subsidiaries or affiliates specified on the signature pages
hereof or on any Assignment Agreement executed and delivered pursuant to
Section 11.10 hereof or at such of its branches, offices, subsidiaries or
affiliates as such Lender may from time to time elect. All the terms of this
Agreement shall only apply to any such branch, office, subsidiary or affiliates
and the Loans and Notes issued hereunder shall be deemed held by each Lender for
the benefit of any such branch, office, subsidiary or affiliate. To the extent
reasonably possible, a Lender shall designate an alternate branch or funding
office with respect to its pro rata share of the LIBOR Portions to reduce any
liability of the Company to such Lender under Section 2.7 hereof or to
avoid the unavailability of an interest rate option under Section 2.6
hereof, so long as such designation is not otherwise disadvantageous to the
Lender.
Section 2.11. Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Notes in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including, without
limitation, determinations under Sections 2.6, 2.7 and 2.9 hereof) shall
be made as if each Lender had actually funded and maintained each LIBOR Portion
during each Interest Period applicable thereto through the purchase of deposits
in U.S. Dollars or the applicable Alternative Currency, as the case may be, for
such LIBOR Portion, in the relevant market in the amount of such Lender's pro
rata share of such LIBOR Portion, having a maturity corresponding to such
Interest Period, denominated in the relevant currency and bearing an interest
rate equal to the LIBOR Rate, as the case may be, for such Interest Period.
SECTION 3. Fees, Prepayments, Terminations, and Applications.
Section 3.1. Fees.
(a) Commitment Fee. For the period from and including the date hereof
to but not including the Revolving Credit Termination Date, the Company shall
pay to the Agent for the account of the Lenders a commitment fee at the rate
equal to the Applicable Margin in effect from time to time (computed on the
basis of a year of 360 days for the actual number of days elapsed) on the
average daily Unused Revolving Credit Commitments. Such commitment fee shall be
payable quarterly in arrears on the last day of each March, June, September and
December in each year (commencing December 31, 1998) and on the Revolving
Credit Termination Date.
(b) Letter of Credit Fees. On the date of issuance of each Letter of
Credit, and as condition thereto, and quarterly in arrears thereafter, the
Company shall pay to the Agent for the account of itself and the Lenders a
letter of credit fee computed at the rate per annum (computed on the basis of a
year of 360 days for the actual number of days elapsed) equal to the Applicable
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Margin in effect from time to time for LIBOR Portions on the maximum amount of
the related Letter of Credit which is scheduled to be outstanding during the
immediately succeeding twelve (12) months. In addition to the letter of
credit fee called for above, the Company further agrees to pay to the Agent for
its own account such processing and transaction fees and charges as the Agent
from time to time customarily imposes in connection with any amendment,
cancellation, negotiation and/or payment of letters of credit and drafts drawn
thereunder.
(c) Agent's Fee. On June 30, 1999 and on the date occurring on
each anniversary of such date when any credit, or commitment to extend credit,
is outstanding hereunder, the Company shall pay to the Agent, for its own use
and benefit, an Agent's fee as mutually agreed upon by the Company and the
Agent.
Section 3.2. Prepayments.
(a) Voluntary Prepayments.
(i) Domestic Rate Portions. The Company shall have the privilege of
prepaying in whole or in part (but if in part, then in a minimum amount of
$500,000 or such greater amount which is an integral multiple of $100,000) the
Domestic Rate Portion of any Note at any time upon notice to the Agent prior to
11:00 a.m. (Chicago time) on the date fixed for prepayment.
(ii) LIBOR Portions. The Company may prepay any LIBOR Portion of any
Note only on the last date of the then applicable Interest Period, in whole or
in part (but if in part, then: (x) if such Portion is denominated in U.S.
Dollars, in an amount not less than $1,000,000 or such greater amount which is
an integral multiple of $100,000, (y) if such Portion is denominated in
an Alternative Currency, an amount for which the U.S. Dollar Equivalent is not
less than $1,000,000 and which is an integral multiple of 100,000 units of the
relevant currency and (z) in all cases in an amount such that the minimum
amount required for LIBOR Portion denominated in such currency pursuant to
Section 2.2 hereof remains outstanding after giving effect to such
payment), upon notice to the Agent (which notice shall be irrevocable once
given, must be received by the Agent no later than 11:00 a.m. (Chicago
time) on the date fixed for prepayment in the case of a prepayment of the
Domestic Rate Portion and on the third Business Day preceding the date of any
such prepayment of a LIBOR Portion denominated in U.S. Dollars or the fourth
Business Day preceding the date of any such prepayment of a LIBOR Portion
denominated in the Alternative Currency, and in each case shall specify the
principal amount to be repaid). Any such prepayment shall be effected by payment
of the principal amount to be prepaid and accrued interest thereon to the end of
the applicable Interest Period.
(iii) Generally. In the case of a prepayment by the Company under
Section 3.2(a), (i) any notice of prepayment by the Company received by
the Agent subsequent to 11:00 a.m. (Chicago time) on a given day shall be
treated as though received at the opening of business on the next Business Day,
(ii) the Agent shall promptly notify the Lenders of any notice of prepayment by
the Company, (iii) the Company shall prepay the relevant amount by paying to the
Agent for the account of the Lenders the principal amount to be prepaid and
(x) if such a prepayment prepays the Notes in full and is accompanied by
the termination in whole of the Revolving Credit Commitments, accrued interest
thereon to the date of prepayment and (y) any amounts due to the Lenders
under Section 2.9 hereof.
(b) Mandatory Prepayments. (i) The Company covenants and agrees that
if at any time
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the sum of the then aggregate Original Dollar Amount of Loans then outstanding
denominated in Alternative Currencies shall be in excess of $15,000,000, the
Company shall, no later than three (3) Business Days after the Agent's
demand, pay over the amount of such excess to the Agent for the ratable benefit
of the Lenders as and for a mandatory prepayment on the Notes until payment in
full thereof. Each such prepayment shall be accompanied by accrued interest on
the amount prepaid to the date of prepayment plus any amounts due to the Lenders
under Section 2.9 hereof. The Lenders acknowledge and agree that, upon
such demand by the Agent, the Company may, subject to Section 7 hereof, request
a Borrowing of Loans in order to provide it the funds necessary to repay such
excess. The Company shall be responsible for making such arrangements with the
Lenders as shall be necessary to repay such excess. Unless and to the extent a
Lender in its discretion agrees otherwise, nothing in this Section shall impair
or otherwise affect the Company's obligation to repay a Loan made by such Lender
denominated in an Alternative Currency, nor obligate a Lender to accept
repayment of a Loan made by such Lender denominated in an Alternative Currency,
in a currency other than such Alternative Currency.
(ii) The Company covenants and agrees that if at any time the sum of the
greater of (x) the aggregate Original Dollar Amount of all Loans and Letters of
Credit and (y) the U.S. Dollar Equivalent of all Loans and Letters of Credit
exceeds the Revolving Credit Commitments then in effect, the Company shall
immediately and without notice or demand pay over the amount of the excess to
the Agent for the ratable benefit of the Lenders as and for a mandatory
prepayment on the Notes until payment in full thereof. Each such prepayment
shall be accompanied by accrued interest on the amount prepaid to the date of
prepayment plus any amounts due to the Lenders under Section 2.9 hereof.
Section 3.3. Terminations. The Company shall have the
right at any time and from time to time, upon 5 Business Days' prior notice to
the Agent (which shall promptly so notify the Lenders), to ratably terminate
without premium or penalty and in whole or in part (but if in part, then in an
aggregate amount not less than $1,000,000 or such greater amount which is an
integral multiple of $500,000) the Revolving Credit Commitments; provided,
however, that (i) the Revolving Credit Commitments may not be reduced to an
amount less than the aggregate Original Dollar Amount of the Loans and Letters
of Credit then outstanding and (ii) the Company shall have no right to terminate
the Revolving Credit Commitments unless the corresponding commitments of the
lenders party to the ShortTerm Credit Agreement have been terminated in full.
Any termination of the Revolving Credit Commitments pursuant to this Section may
not be reinstated.
Section 3.4. Place and Application of Payments. All payments of
principal, interest, fees and all other Obligations payable hereunder and under
the other Loan Documents shall be made to the Agent at its office at 111 West
Monroe Street, Chicago, Illinois (or at such other place as the Agent may
specify) on the date any such payment is due and payable. Payments received by
the Agent after 11:00 a.m. (Chicago time) shall be deemed received as of the
opening of business on the next Business Day. All such payments shall be made
(i) in the case of U.S. Dollars, in immediately available funds at the place of
payment, or (ii) in the case of amounts payable hereunder in an Alternative
Currency, in such funds then customary for settlement of international
transactions in such currency. All such payments shall be made without set-off
or counterclaim and without reduction for, and free from, any and all present or
future taxes, levies, imposts, duties,
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fees, charges, deductions, withholdings, restrictions and conditions of any
nature imposed by any government or any political subdivision or taxing
authority thereof (but excluding any taxes imposed on or measured by the net
income of any Lender). Except as herein provided, all payments shall be received
by the Agent for the ratable account of the Lenders and shall be promptly
distributed by the Agent ratably to the Lenders. Principal payments (including
prepayments) on the Notes shall first be applied to the Domestic Rate Portion of
such Notes until payment in full thereof, with any balance applied to LIBOR
Portions of such Notes in the order in which their Interest Periods expire.
Anything contained herein to the contrary notwithstanding, all payments
and collections received in respect of the Obligations, in each instance, by the
Agent or any of the Lenders after the occurrence of an Event of Default shall be
remitted to the Agent and distributed as follows:
(a) first, to the payment of any outstanding costs and
expenses incurred by the Agent in protecting, preserving or enforcing
rights under this Agreement or any of the other Loan Documents, and in
any event including all costs and expenses of a character which the
Company has agreed to pay under Section 11.4 hereof (such funds
to be retained by the Agent for its own account unless it has
previously been reimbursed for such costs and expenses by the Lenders,
in which event such amounts shall be remitted to the Lenders to
reimburse them for payments theretofore made to the Agent);
(b) second, to the payment of any outstanding interest or
other fees or amounts due under this Agreement or any of the other Loan
Documents other than for principal, pro rata as among the Agent and the
Lenders in accord with the amount of such interest and other fees or
amounts owing each;
(c) third, to the payment of the principal of the Notes and
any liabilities in respect of unpaid drawings under the Letters of
Credit, pro rata as among the Lenders in accord with the then
respective unpaid principal balances of the Notes and the then unpaid
liabilities in respect of unpaid drawings under the Letters of Credit;
(d) fourth, to the Agent, to be held as collateral security
for any undrawn Letters of Credit, until the Agent is holding an amount
of cash equal to the then outstanding amount of all Letters of Credit;
(e) fifth, to the Agent and the Lenders pro rata in accord
with the amounts of any other indebtedness, obligations or liabilities
of the Company owing to them and secured by the Collateral Documents
unless and until all such indebtedness, obligations and liabilities
have been fully paid and satisfied; and
(f) sixth, to the Company or to whoever the Agent reasonably
determines to be lawfully entitled thereto.
Section 3.5. Notations. Each Loan made against a Note, the status of
all amounts evidenced by a Note as constituting part of the Domestic Rate
Portion or a LIBOR Portion, and, in the case of any LIBOR Portion, the rates of
interest and Interest Periods applicable to such Portion, and the currency in
which such Portion is denominated, shall be recorded by the relevant Lender on
its books and records or, at its option in any instance, endorsed on a schedule
to the applicable Note of such Lender and the unpaid principal balance and
status, rate, Interest Periods and currency so recorded or endorsed by such
Lender shall be prima facie evidence in any court
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or other proceeding brought to enforce such Note of the principal amount
remaining unpaid thereon, the status of the Loan or Loans evidenced thereby, the
currency in which such Loans were denominated, and the interest rates and
Interest Periods applicable thereto; provided that the failure of a Lender to
record any of the foregoing shall not limit or otherwise affect the obligation
of the Company to repay the principal amount of each Note together with accrued
interest thereon.
SECTION 4. Guaranties.
Section 4.1. Subsidiary Guaranties. The Loans and other Obligations shall
be guaranteed by each Material Subsidiary pursuant to a written guaranty from
such Material Subsidiary in form and substance reasonably acceptable to the
Required Lenders; provided that no such guaranty shall be required from Anicom
Canada so long as 65% of the capital stock of Anicom Canada is pledged to secure
the Obligations under the Pledge Agreement.
SECTION 5. Definitions; Interpretation.
Section 5.1. Definitions. The following terms when used herein shall have
the following meanings:
"Acquisition" means (i) the acquisition of all or any
substantial part of the assets, property or business of any other person, firm
or corporation, or (ii) any acquisition of a majority of common stock,
warrants or other equity securities of any firm or corporation.
"Adjusted LIBOR" means a rate per annum determined by the Agent in
accordance with the following formula:
Adjusted LIBOR = LIBOR
--------------------------
100%-Reserve Percentage
"Reserve Percentage" means, for the purpose of computing Adjusted LIBOR, the
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in Regulation
D) for the applicable Interest Period as of the first day of such Interest
Period, but subject to any amendments to such reserve requirement by such Board
or its successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this definition,
LIBOR Portions shall be deemed to be Eurocurrency liabilities as defined in
Regulation D without benefit of or credit for prorations, exemptions or offsets
under Regulation D. "LIBOR" means, for each Interest Period, (a)the LIBOR
Index Rate for such Interest Period, if such rate is available, and
(b) if the LIBOR Index Rate cannot be determined, the arithmetic average
of the rates of interest per annum (rounded upward, if necessary, to the nearest
1/100th of 1%) at which deposits in U.S. Dollars, or the relevant Alternative
Currency, as appropriate, in immediately available funds are offered to the
Agent at 11:00 a.m. (London, England time) 2 Business Days before the
beginning of such Interest Period by 3 or more major banks in the interbank
eurodollar market selected by the Agent for a period equal to such Interest
Period and in an amount equal or comparable to the applicable LIBOR Portion
scheduled to be outstanding from the Agent during such Interest Period. "LIBOR
Index Rate" means, for any Interest Period, the rate per annum (rounded upwards,
if necessary, to the next higher one hundred-thousandth of a percentage point)
for deposits in U.S. Dollars, or the relevant Alternative Currency, as
appropriate, for a period equal to such Interest Period which appears on the
Telerate Page 3740 or Telerate Page 3750 as appropriate for such
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currency as of 11:00 a.m. (London, England time) on the date 2 Business
Days before the commencement of such Interest Period. "Telerate Page 3740" or
"Telerate Page 3750" means each of the displays designated as "Page 3740" or
"Page 3750" respectively on the Telerate Service (or such other page as may
replace Page 3740 or Page 3750 on that service or such other service as may be
nominated by the British Bankers' Association as the information vendor for the
purpose of displaying British Banker's Association Interest Settlement Rates for
U.S. Dollar deposits). Each determination of LIBOR made by the Agent shall be
conclusive and binding on the Company and the Lenders absent manifest error.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for the purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise.
"Agent" means Harris Trust and Savings Bank and any successor thereto
appointed pursuant to Section 10.1 hereof.
"Agreement" means this Credit Agreement, as the same may be amended,
modified or restated from time to time in accordance with the terms hereof.
"Alternative Currency" means, subject to the provisions of Section 2.6
hereof, Canadian Dollars, French Francs, Pounds Sterling, Deutsche Marks,
Italian Lira and any other currency (other than U.S. Dollars) approved by each
Lender, so long as such currencies are freely transferable and convertible into
U.S. Dollars in the international interbank market and are traded and readily
available to each Lender in the London interbank market.
"Anicom Canada" means Anicom Multimedia Wiring Systems Incorporated, a
corporation organized under the laws of Nova Scotia, Canada.
"Applicable Margin" shall mean with respect to the Commitment Fee and
each type of Portion specified below the rate specified for such Obligation in
the chart below, subject to quarterly adjustment as hereinafter provided:
Applicable Applicable Applicable
When Following Margin Margin For Margin
Status Exists For For LIBOR For
any Margin Domestic Portions Is: Commitment
Determination Rate Portion Fee Is:
Date Is:
Level I Status (0.50%) .50% .125%
Level II Status (0.50%) .75% .15 %
Level III Status (0.50%) .875% .1875%
Level IV Status (0.25%) 1.00% .25 %
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provided, however, that all of the foregoing percentages set forth in the chart
above are subject to the following:
(i) on or before the date that is ten (10) Business
Days after the latest date by which the Company is required to deliver
a Compliance Certificate to the Agent for a given quarterly accounting
period pursuant to Section 8.5(c) hereof (each date that is ten
Business Days after the latest date by which the Company is required to
deliver a Compliance Certificate to the Agent being herein referred to
as the "Margin Determination Date"), the Agent shall determine whether
Level I Status, Level II Status, Level III Status or Level IV Status
exists as of the close of the applicable quarterly accounting period
(each, a "quarterly test period") and shall also determine the Interest
Coverage Ratio and Debt to Earnings Ratio as of such close, in each
case based upon such Compliance Certificate and the financial
statements delivered to the Agent under Section 8.5 hereof for
such quarterly test period, and shall promptly notify the Company of
such determination and of any change in the Applicable Margin resulting
therefrom;
(ii) the Applicable Margin for the Loans shall be the rate set
forth in the chart above, after giving effect to adjustments pursuant
to clause (iii) of this proviso below, unless the Interest
Coverage Ratio as of the close of such quarterly test period is less
than 2.5 to 1.0. In such event, the Applicable Margin for the
Loans in each case shall be .0625% above the rate otherwise specified
hereunder (after giving effect to adjustments pursuant to such clause
(iii) hereof);
(iii) the Applicable Margin for the Loans shall be the rate set
forth in the chart above, after giving effect to adjustments pursuant
to clause (ii) of this proviso above, unless the Debt to
Earnings Ratio as of the close of the relevant quarterly test period is
greater than 2.75 to 1.0. In such event, the Applicable Margin for the
Loans in each case shall be .25% above the rate otherwise specified
hereunder (after giving effect to adjustments pursuant to such clause
(ii) hereof);
(iv) any change in the Applicable Margin (except for such a
change pursuant to clause (iii) hereof) shall be effective as of
such Margin Determination Date, with such new Applicable Margin to
continue in effect until the next Margin Determination Date. If the
Company has not delivered a Compliance Certificate by the date such
Compliance Certificate is required to be delivered under Section<-1-
32>8.5 hereof, until a Compliance Certificate is delivered before the
next Margin Determination Date, the Applicable Margin shall be the
Applicable Margin for Level IV Status as if the Debt to Earnings Ratio
as calculated for purposes of clause (iii) above were greater
than 2.75 to 1.0. If the Company subsequently delivers a Compliance
Certificate before the next Margin Determination Date, the Applicable
Margin established by such Compliance Certificate shall take effect
from the date ten (10) Business Days after the date of such
delivery and remain effective until the
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<PAGE>
next Margin Determination Date; and
(v) the initial Applicable Margin in effect through the first
Margin Determination Date shall be the Applicable Margin for Level I
Status.
"Application" is defined in Section 1.3 hereof.
"Assignment Agreements" is defined in Section 11.10 hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Company pursuant to Section 7.2(a) hereof or on
any update of any such list provided by the Company to the Agent, or any further
or different officer of the Company so named by any Authorized Representative of
the Company in a written notice to the Agent.
"Borrowing" means the total of Loans of a single type made to the
Company by all the Lenders on a single date, and if such Loans are to be part of
a LIBOR Portion, for a single Interest Period. Borrowings of Loans are made and
maintained ratably from each of the Lenders according to their Percentages of
the applicable Commitments.
"Business Day" means any day other than a Saturday or Sunday on which
banks are not authorized or required to close in Chicago, Illinois and, when
used with respect to LIBOR Portions, a day on which banks are also dealing in
U.S. Dollar deposits or the relevant Alternative Currency in London, England and
Nassau, Bahamas and if the applicable Business Day relates to the borrowing or
payment of a LIBOR Portion denominated in an Alternative Currency, on which
banks and foreign exchange markets are open for business in the city where
disbursements of or payments on such Portion are to be made.
"Canadian Debt" means the indebtedness of Anicom Canada arising from a
loan made by the Canadian Lender in an aggregate principal amount equal to the
U.S. Dollar equivalent of $35,000,000 to finance a like amount of the purchase
price payable by Anicom Canada for the Texcan Acquisition.
"Canadian Dollar" means the lawful currency of Canada.
"Canadian Lender" means a commercial bank in Canada.
"Capital Lease" means any lease of Property which in accordance with
GAAP is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means the amount of the liability shown
on the balance sheet of any Person in respect of a Capital Lease determined in
accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Company" is defined in the introductory paragraph hereof.
"Compliance Certificate" is defined in Section 8.5 hereof.
"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Company and its Subsidiaries for such period computed on a
consolidated basis in accordance with GAAP, including without limitation
interest income and, without limiting the foregoing, after deduction from gross
income of all expenses and reserves, including reserves for all taxes on or
measured by income, but excluding any extraordinary profits and also excluding
any taxes on such profits.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the
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Company or any of its Subsidiaries, are treated as a single employer under
Section 414 of the Code. "Convertible Preferred Stock" shall
mean the Series B Convertible Preferred Stock issued
by the Company on September 21, 1998.
"Current Ratio" means, as of any time the same is to be determined, the
ratio of current assets of the Company and its Subsidiaries to current
liabilities of the Company and its Subsidiaries, all as determined on a
consolidated basis in accordance with GAAP consistently applied, but, in any
event subject to the following restrictions and limitations:
(a) current liabilities for such purposes shall include all
loans outstanding hereunder and under the Short-Term Credit Agreement
which mature within one year of such date of determination;
(b) current liabilities for such purposes shall exclude all
Special Post-Closing Acquisition Liabilities; and
(c) current assets for such purposes shall include all
prepaid expenses. "Debt to Earnings Ratio" means, as of any time the
same is to be determined, the ratio of
Total Funded Debt at such time to EBITDA for the four fiscal quarters of the
Company then ended. "Default" means any event or condition the
occurrence of which would, with the passage
of time or the giving of notice, or both, constitute an Event of Default.
"Deutsche Mark" means the lawful currency of the Federal Republic of
Germany.
"Domestic Rate" means, for any day, the greater of (i) the rate of
interest announced by the Agent from time to time as its prime commercial rate,
as in effect on such day (it being understood and agreed that such rate may not
be the Agent's best or lowest rate); and (ii) the sum of (x) the rate determined
by the Agent to be the average (rounded upwards, if necessary, to the next
higher 1/100 of 1%) of the rates per annum quoted to the Agent at approximately
10:00 a.m. (Chicago time) (or as soon thereafter as is practicable) on such day
(or, if such day is not a Business Day, on the immediately preceding Business
Day) by two or more Federal funds brokers selected by the Agent for the sale to
the Agent at face value of Federal funds in an amount equal or comparable to the
principal amount owed to the Agent for which such rate is being determined, plus
(y) 1/2 of 1%.
"Domestic Rate Portions" is defined in Section 2.1(a) hereof.
"EBIT" means, for any period, Consolidated Net Income for such period
plus all amounts deducted in arriving at such Consolidated Net Income amount for
such period for Interest Expense and for foreign, federal, state and local
income tax expense.
"EBITDA" means, for any period, EBIT for such period plus (i) all
amounts deducted in arriving at such EBIT in respect of all amounts properly
charged for depreciation of fixed assets and amortization of Capital Leases and
intangible assets during such period on the books of the Company and its
Subsidiaries and (ii) (to the extent such period includes the third fiscal
quarter of the fiscal year of the Company ended on or about December 31,
1998) all the Fiscal 1998 Charges during such period, all as determined in
accordance with GAAP.
"EMU" means economic and monetary union as contemplated in the Treaty
on European Union.
"EMU Commencement" means the date of commencement of the third stage of
EMU (which at the date hereof is expected to be on January 1, 1999) or
the date on which circumstances arise which (in the opinion of the Agent) have
substantially the same effect and result in substantially the
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<PAGE>
same consequences as commencement of the third stage of EMU as contemplated by
the Treaty on European Union.
"EMU Legislation" means legislative measures of the European Council
for the introduction of, changeover to or operation of a single or unified
European currency (whether known as the "euro" or otherwise), being in part the
implementation of the third stage of EMU.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Euro" means the single currency of Euro Members of the European Union.
"Euro Member" means each state described as a "participating member
state" in any EMU
Legislation.
"Euro Unit" means the currency unit of the Euro.
"Event of Default" means any event or condition identified as such in
Section 9.1 hereof.
"Existing Lenders" means Harris Trust and Savings Bank, The First
National Bank of Chicago and LaSalle National Bank.
"Existing Credit Agreement" means the Credit Agreement dated as of
June 30, 1998, among the Company, Harris Trust and Savings Bank, as Agent
and the Existing Lenders, as amended and supplemented.
"Fiscal 1998 Charges" means up to $5,158,000 of the charges taken by
the Companyagainst its earnings in the third fiscal quarter of its fiscal year
ended on or about December 31, 1998 for the Company's costs (including internal
costs) related to the Texcan Acquisition (including the consolidation of
redundant facilities).
"French Franc" means the lawful currency of the Republic of France.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its Subsidiaries on a basis consistent
with the preparation of the Company's most recent financial statements furnished
to the Lenders pursuant to Section 6.5 hereof.
"Guarantor" means each Material Subsidiary (other than, subject to
Section 4.1, Anicom Canada) of the Company that executes and delivers to the
Agent a Guaranty Agreement.
"Guaranty Agreement" means each guaranty issued by a Material
Subsidiary (other than, subject to Section 4.1, Anicom Canada) to the
Agent guaranteeing all or any Obligations.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any
manner by such Person representing money borrowed (including by the issuance of
debt securities), (ii) all indebtedness for the deferred purchase price
of property or services (other than trade accounts payable arising in the
ordinary course of business which are not more than sixty (60) days past
due), (iii) all indebtedness secured by any Lien upon Property of such
Person, whether or not such Person has assumed or become liable for the payment
of such indebtedness, (iv) all Capitalized Lease Obligations of such
Person and (v) all obligations of such Person on or with respect to
letters of credit, bankers' acceptances and other extensions of credit whether
or not representing obligations for borrowed money.
"Intangible Assets" means, as of any time the same is to be determined,
goodwill, patents, trademarks, copyrights and franchises of the Company and its
Subsidiaries (including, without limitation, unamortized debt discount and
expense, organization costs and deferred research and development expense)
determined on a consolidated basis in accordance with GAAP.
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<PAGE>
"Interest Expense" means, with reference to any period, the sum of all
interest charges (including imputed interest charges with respect to Capitalized
Lease Obligations and all amortization of debt discount and expense) of the
Company and its Subsidiaries for such period as computed on a consolidated basis
in accordance with GAAP.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date
with respect to such LIBOR Portion and ending 1, 2, 3 or 6 months thereafter as
selected by the Company in its notice as provided herein; provided that, all of
the foregoing provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless in the case of an Interest Period
for a LIBOR Portion the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity
date of the relevant Notes;
(iii) the interest rate to be applicable to each Portion for
each Interest Period shall apply from and including the first day of
such Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment
scheduled to be made during such Interest Period without paying part of
a LIBOR Portion on a date other than the last day of the Interest
Period applicable thereto.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the month
in which an Interest Period is to end, then such Interest Period shall end on
the last Business Day of such month.
"Italian Lira" means the lawful currency of the Republic of Italy.
"Lender" means Harris Trust and Savings Bank, the other signatories
hereto (other than the Company) and all other lenders becoming parties hereto
pursuant to Section 11.10 hereof.
"Letter of Credit" is defined in Section 1.3 hereof.
"Leverage Ratio" means, as of any time the same is to be determined,
the ratio of Total Funded Debt of the Company and its Subsidiaries to Total
Capitalization of the Company and its Subsidiaries, all as determined on a
consolidated basis in accordance with GAAP.
"Level I Status" shall mean, for any Margin Determination Date,
that as of the close of the quarterly test period with reference to which such
Margin Determination Date was set, the Pricing Leverage Ratio is less than or
equal to 10%.
"Level II Status" shall mean, for any Margin Determination Date, that
as of the close of the quarterly test period with reference to which such Margin
Determination Date was set, the Pricing Leverage Ratio is greater than 10% but
less than or equal to 20%.
"Level III Status" shall mean, for any Margin Determination Date, that
as of the close of the
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<PAGE>
quarterly test period with reference to which such Margin Determination Date was
set, the Pricing Leverage Ratio is greater than 20% but less than or equal to
30%.
"Level IV Status" shall mean, for any Margin Determination Date, that
as of the close of the quarterly test period with reference to which such Margin
Determination Date was set, the Pricing Leverage Ratio is greater than 30%.
"LIBOR Portions" means and includes LIBOR Portions, unless the context
in which such term is used shall otherwise require.
"LIBOR Portions" is defined in Section 2.1(a) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.
"Loan Documents" means this Agreement, the Notes, the Assignment
Agreements and each other instrument or document to be delivered hereunder or
thereunder or otherwise in connection therewith.
"Loans" is defined is Section 1.2 hereof.
"Material Subsidiary" means any Subsidiary which has, as of the close
of any completed fiscal year of the Company (commencing with the Company's
fiscal year ending December 31, 1996), EBITDA for any such fiscal year (directly
and together with its subsidiaries) greater than 7% of the EBITDA of the Company
and its Subsidiaries for any such fiscal year on a consolidated basis in
accordance with GAAP.
"Non-Material Subsidiary" means each Subsidiary other than a Material
Subsidiary.
"Notes" is defined in Section 1.2 hereof.
"Obligations" means all obligations of the Company to pay principal and
interest on the Loans, all reimbursement obligations owing under the
Applications, all fees and charges payable hereunder, and all other payment
obligations of the Company arising under or in relation to any Loan Document, in
each case whether now existing or hereafter arising, due or to become due,
direct or indirect, absolute or contingent, and howsoever evidenced, held or
acquired.
"Original Dollar Amount" means at any time the same is to be determined
(x) in relation to any LIBOR Portion denominated in an Alternative
Currency, the U.S. Dollar Equivalent of such Portion on the first day of the
Interest Period then applicable thereto (the day on which such Portion was most
recently created, continued or effected by conversion) and (y) in
relation to any other Portion, the amount thereof in U.S. Dollars.
"Overnight Foreign Currency Rate" shall mean for any amount payable in
a currency other than U.S. Dollars, the rate of interest per annum as determined
by the Agent (rounded upwards, if necessary, to the nearest whole multiple of
one-sixteenth of one percent (1/16 of 1%)) at which overnight or weekend
deposits of the appropriate currency (or, if such amount due remains unpaid more
than three Business Days, then for such period of time not longer than six
months as the Agent may elect in its absolute discretion) for delivery in
immediately available and freely transferable funds would be offered by the
Agent to major banks in the interbank market upon request of such major banks
for the applicable period as determined above and in an amount comparable to the
unpaid principal amount of the related Loan (or, if the Agent is not placing
deposits in such currency in the interbank market, then the Agent's cost of
funds in such currency for such period).
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<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Percentage" means, for each Lender, the percentage of the Revolving
Credit Commitments represented by such Lender's Revolving Credit Commitment or,
if the Revolving Credit Commitments have been terminated, the percentage held by
such Lender (including through participation interest in Letters of Credit
pursuant to Section 1.3 hereof) of the aggregate principal amount of all
outstanding Obligations.
"Person" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title<-1-
32>IV of ERISA or subject to the minimum funding standards under Section<-1-
32>412 of the Code that either (i) is maintained by a member of the
Controlled Group for employees of a member of the Controlled Group, or (ii)<-1-
32>is maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"Pledge Agreement" means that certain Pledge Agreement dated as of even
date herewith between the Company and the Agent.
"Portion" is defined in Section 2.1(a) hereof.
"Pounds Sterling" means the lawful currency of the United Kingdom.
"Pricing Leverage Ratio" means, as of any time the same is to be
determined, the ratio of Total Funded Debt to Total Capitalization of the
Company and its Subsidiaries, all as determined on a consolidated basis in
accordance with GAAP.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Put/Call Agreement" means any contract whereby the Company obligates
itself to purchase the Canadian Debt from the Canadian Lender.
"Reimbursement Obligation" is defined in Section 1.4(c) hereof.
"Required Lenders" means, as of the date of determinations thereof,
those Lenders holding at least 66-2/3% of the Revolving Credit Commitments or,
in the event that no Revolving Credit Commitments are outstanding hereunder,
holding at least 66-2/3% in aggregate principal amount of the Loans and credit
risk on the Letters of Credit outstanding hereunder.
"Revolving Credit" is defined in Section 1.1 hereof.
"Revolving Credit Commitments" means the commitments of the Lenders to
extend credit under the Revolving Credit in the amounts set forth opposite their
signatures hereto under the heading "Revolving Credit Commitment" and opposite
their signatures on Assignment Agreements delivered pursuant to Section
11.10 hereof under the heading "Revolving Credit Commitment", as such amounts
may be reduced pursuant hereto.
"Revolving Credit Note" is defined in Section 1.2 hereof.
"Revolving Credit Termination Date" means June 30, 2001, or such
earlier date on which the Revolving Credit Commitments are terminated in whole
pursuant to Section 3.3, 9.2 or 9.3
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<PAGE>
hereof, or such later date to which the Revolving Credit Termination Date is
extended pursuant to Section 1.5 hereof.
"Shareholders' Equity" means, as of any time the same is to be
determined, the sum (without duplication) of (i) shareholders' equity
(including all capital stock, additional paid-in-capital and retained earnings
after deducting treasury stock, but excluding minority interests in
subsidiaries) which would appear on the balance sheet of the Company and its
Subsidiaries plus (to the extent not included in such Shareholders' Equity)
(ii) the Convertible Preferred Stock, all as determined on a consolidated
basis in accordance with GAAP.
"SEC" means the Securities and Exchange Commission or any successor
agency thereto.
"Short-Term Credit Agreement" means that certain ShortTerm Credit
Agreement dated as of even date herewith among the Company, Harris Trust and
Savings Bank, individually and as agent, The First National Bank of Chicago,
LaSalle National Bank, Bank of America National Trust and Savings Association
and the other lenders from time to time party thereto, as amended and
supplemented from time to time.
"Special Post-Closing Acquisition Liabilities" means as of any time,
those liabilities established by the Company after making an Acquisition which
survive such Acquisition associated with the Property or Person so acquired, or
the employees of such Person, to the extent (i) such liabilities are
reflected as a current liability in accordance with GAAP on a consolidated
balance sheet of the Company and its Subsidiaries, (ii) the creation of
such liabilities is offset by a concurrent debit of like amount in accordance
with GAAP to the goodwill of the Company and its Subsidiaries and (iii)
such liabilities have been reasonably described in the most recent Compliance
Certificate submitted to the Agent.
"Subordinated Indebtedness" means, as of any time the same is to be
determined, indebtedness of the Company or any Subsidiary subordinated in right
of payment to the Obligations, pursuant to documentation containing interest
rates, payment terms, maturities, amortization schedules, covenants, defaults,
remedies, subordination provisions and other material terms in form and
substance satisfactory to the Lenders. The Lenders further acknowledge and agree
that subordination provisions in the form or substantially the form annexed
hereto as Exhibit D constitute subordination provisions satisfactory in
form and substance to the Lenders.
"Subsidiary" means any corporation or other Person more than 50% of the
outstanding ordinary voting shares or other equity interests of which is at the
time directly or indirectly owned by the Company, by one or more of its
Subsidiaries, or by the Company and one or more of its Subsidiaries.
"Tangible Net Worth" means, as of any time the same is to be
determined, Shareholders' Equity less the sum of (i) all notes receivable
from officers and employees of the Company and its Subsidiaries and (ii)
Intangible Assets.
"Texcan" means, collectively, Texcan Cables, Inc., a Nevada
corporation, Texcan Cables International, Inc., a Nevada corporation and Texcan
Cables Limited, a Canadian corporation.
"Texcan Acquisition" means the acquisition of all or substantially all
of the assets of Texcan by Anicom Canada on September 21, 1998 pursuant
to that certain Asset Purchase Agreement dated as of September 21, 1998
between the Company, Anicom Canada and Texcan.
"Total Capitalization" means the sum of Total Funded Debt and
Shareholders' Equity.
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<PAGE>
"Total Funded Debt" means, at any time the same is to be determined,
the aggregate of all Indebtedness for Borrowed Money of the Company and its
Subsidiaries at such time, plus all Indebtedness for Borrowed Money of any other
Person which is directly or indirectly guaranteed by the Company or any of its
Subsidiaries or which the Company or any of its Subsidiaries has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which the Company or any of its Subsidiaries has otherwise assured a creditor
against loss.
"Treaty on European Union" means the Treaty of Rome of March 25,
1957, as amended by the Single European Act of 1986 and the Maastricht Treaty
(which was signed at Maastricht on February 7, 1992, and came into force
on November 1, 1993, as amended from time to time).
"Unfunded Vested Liabilities" means, for any Plan at any time, the
amount (if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Unused Revolving Credit Commitments" means, at any time, the
difference between the Revolving Credit Commitments then in effect and the
aggregate outstanding Original Dollar Amount of Loans and Letters of Credit.
"U.S. Dollars" and "$" means the lawful currency of the United States
of America.
"U.S. Dollar Equivalent" means the amount of U.S. Dollars which would
be realized by converting an Alternative Currency into U.S. Dollars in the spot
market at the exchange rate quoted by the Agent, at approximately 11:00 a.m.
(London time) two Business Days prior to the date on which a computation thereof
is required to be made, to major banks in the interbank foreign exchange market
for the purchase of U.S. Dollars for such Alternative Currency.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the issued
and outstanding shares of capital stock (other than directors' qualifying shares
as required by law) or other equity interests are owned by the Company and/or
one or more Wholly-Owned Subsidiaries within the meaning of this definition.
"Year 2000 Problem" means any significant risk that computer hardware,
software, or equipment containing embedded microchips essential to the business
or operations of the Company or any of the Subsidiaries will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as efficiently and reliably as in the case of times or time periods
occurring before January 1, 2000, including the making of accurate leap
year calculations.
Section 5.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The words
"hereof", "herein", and "hereunder" and words of like import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All references to time of day herein are references
to Chicago, Illinois time unless otherwise specifically provided. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, it shall be done in
accordance with GAAP except where such principles are inconsistent with the
specific provisions of this Agreement.
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<PAGE>
SECTION 6. Representations and Warranties.
The Company represents and warrants to the Agent and the Lenders as
follows:
Section 6.1. Organization and Qualification. The Company is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Delaware, has full and adequate corporate power to own its
Property and conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying.
Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has full and adequate power to
own its Property and conduct its business as now conducted, and is duly licensed
or qualified and in good standing in each jurisdiction in which the nature of
the business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to obtain such
authorization, license or qualification would not result in a material adverse
change in the business, financial condition or Properties of the Company and its
Subsidiaries. Schedule 6.2 hereto identifies each Subsidiary, the
jurisdiction of its incorporation or organization, as the case may be, the
percentage of issued and outstanding shares of each class of its capital stock
or other equity interests owned by the Company and the Subsidiaries and, if such
percentage is not 100% (excluding directors' qualifying shares as required by
law), a description of each class of its authorized capital stock and other
equity interests and the number of shares of each class issued and outstanding.
All of the outstanding shares of capital stock and other equity interests of
each Subsidiary are validly issued and outstanding and fully paid and
nonassessable and all such shares and other equity interests indicated on
Schedule 6.2 as owned by the Company or a Subsidiary are owned,
beneficially and of record, by the Company or such Subsidiary free and clear of
all Liens. There are no outstanding commitments or other obligations of any
Subsidiary to issue, and no options, warrants or other rights of any Person to
acquire, any shares of any class of capital stock or other equity interests of
any Subsidiary. Each Subsidiary that is a Material Subsidiary is so noted on
Schedule 6.2 hereto. Each Material Subsidiary is a Guarantor except to the
extent Section 4.1 or Section 8.1(b) hereof does not yet require such
Subsidiary to be a Guarantor.
Section 6.3. Corporate Authority and Validity of Obligations.
(a)The Company has full right and authority to enter into this Agreement and the
other Loan Documents, to make the borrowings herein provided for, to issue its
Notes in evidence thereof, and to perform all of its obligations hereunder and
under the other Loan Documents. The Loan Documents delivered by the Company have
been duly authorized, executed and delivered by the Company and constitute valid
and binding obligations of the Company enforceable in accordance with their
terms except as enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law); and this
Agreement and the other Loan Documents do not, nor does the performance or
observance by the Company of any of the matters and things herein or therein
provided for, contravene or constitute a default under any provision of law or
any judgment, injunction, order or decree binding upon the Company or any
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<PAGE>
provision of the charter, articles of incorporation or by-laws of the Company or
any covenant, indenture or agreement of or affecting the Company or any of its
Properties, or result in the creation or imposition of any Lien on any Property
of the Company.
(b) Guarantors. Each Guarantor has full right and authority to enter
into any Loan Documents it has executed and to perform all of its obligations
thereunder. The Loan Documents delivered by each Guarantor have been duly
authorized, executed and delivered by such Guarantor and constitute valid and
binding obligations of such Guarantor enforceable in accordance with their terms
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and such Loan Documents do
not, nor does the performance or observance by such Guarantor of any of the
matters and things herein or therein provided for, contravene or constitute a
default under any provision of law or any judgment, injunction, order or decree
binding upon the Company or any Guarantor or any provision of the charter,
articles of incorporation or by-laws of the Company or any Guarantor or any
covenant, indenture or agreement of or affecting the Company or any Guarantor or
any of their Properties, or result in the creation or imposition of any Lien on
any Property of the Company or any Guarantor.
Section 6.4. Use of Proceeds; Margin Stock. The Company shall use the
proceeds of the Loans and other extensions of credit made available hereunder
solely for its general working capital purposes and for such other legal and
proper purposes as are consistent with all applicable laws. Neither the Company
nor any Subsidiary is engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System),
and no part of the proceeds of any Loan or any other extension of credit made
hereunder will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin
stock.
Section 6.5. Financial Reports. The consolidated balance sheet of the
Company and its Subsidiaries as at December 31, 1997, and the related
consolidated statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for the fiscal year then ended, and accompanying
notes thereto, which financial statements are accompanied by the audit report of
PricewaterhouseCoopers LLP, independent public accountants, and the unaudited
interim consolidated balance sheet of the Company and its Subsidiaries as at
June 30, 1998, and the related consolidated statements of income and cash
flows of the Company and its Subsidiaries for the six (6) months then
ended, heretofore furnished to the Lenders, fairly present the consolidated
financial condition of the Company and its Subsidiaries as at said dates and the
consolidated results of their operations and cash flows for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis. Neither the Company nor any Subsidiary has contingent
liabilities which are material to it other than as indicated on such financial
statements or, with respect to future periods, on the financial statements
furnished pursuant to Section 8.5 hereof.
Section 6.6. No Material Adverse Change. Since June 30, 1998,
there has been no change in the condition (financial or otherwise) or business
prospects of the Company or any Subsidiary except those occurring in the
ordinary course of business, none of which individually or in the aggregate have
been materially adverse.
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Section 6.7. Full Disclosure. The statements and information furnished
to the Lenders in connection with the negotiation of this Agreement and the
other Loan Documents and the commitments by the Lenders to provide all or part
of the financing contemplated hereby do not contain any untrue statements of a
material fact or omit a material fact necessary to make the material statements
contained herein or therein not misleading, the Lenders acknowledging that as to
any projections furnished to Lenders, the Company only represents that the same
were prepared on the basis of information and estimates the Company believed to
be reasonable.
Section 6.8. Good Title. The Company and its Subsidiaries each have
good and defensible title to their assets as reflected on the most recent
consolidated balance sheet of the Company and its Subsidiaries furnished to the
Lenders (except for sales of assets by the Company and its Subsidiaries in the
ordinary course of business), subject to no Liens other than such thereof as are
permitted by Section 8.12 hereof.
Section 6.9. Litigation and Other Controversies. There is no litigation
or governmental proceeding or labor controversy pending, nor to the knowledge of
the Company threatened, against the Company or any Subsidiary which if adversely
determined would (a) impair the validity or enforceability of, or impair
the ability of the Company to perform its obligations under, this Agreement or
any other Loan Document or (b) result in any material adverse change in
the financial condition, Properties, business or operations of the Company or
any Subsidiary.
Section 6.10. Taxes. All tax returns required to be filed by the Company
or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective Properties, income or franchises,
which are shown to be due and payable in such returns, have been paid. The
Company does not know of any proposed additional tax assessment against it or
its Subsidiaries for which adequate provision in accordance with GAAP has not
been made on its accounts. Adequate provisions in accordance with GAAP for taxes
on the books of the Company and each Subsidiary have been made for all open
years, and for its current fiscal period.
Section 6.11. Approvals. No authorization, consent, license, or
exemption from, or filing or registration with, any court or governmental
department, agency or instrumentality, nor any approval or consent of the
stockholders of the Company or any other Person, is or will be necessary to the
valid execution, delivery or performance by the Company of this Agreement or any
other Loan Document.
Section 6.12. Affiliate Transactions. Neither the Company nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
(other than with Wholly-Owned Subsidiaries) on terms and conditions which are
less favorable to the Company or such Subsidiary than would be usual and
customary in similar contracts or agreements between Persons not affiliated with
each other; provided that the foregoing shall not be deemed to apply to (i)
the Put/Call Agreement or any other contracts or agreements entered into
pursuant to the Put/Call Agreement and (ii) (if the Canadian Debt is purchased
by an Affiliate of the Company) the contracts and agreements constituting the
Canadian Debt.
Section 6.13. Investment Company; Public Utility Holding Company. Neither the
Company nor any Subsidiary is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "public
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utility holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Section 6.14. ERISA. The Company and each other member of its Controlled
Group has fulfilled its obligations under the minimum funding standards of and
is in compliance in all material respects with ERISA and the Code to the extent
applicable to it and has not incurred any liability to the PBGC or a Plan under
Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA. Neither the Company nor any Subsidiary has any
contingent liabilities with respect to any post-retirement benefits under a
Welfare Plan, other than liability for continuation coverage described in
article 6 of Title I of ERISA.
Section 6.15. Compliance with Laws. The Company and each of its
Subsidiaries are in compliance with the requirements of all federal, state and
local laws, rules and regulations applicable to or pertaining to their
Properties or business operations (including, without limitation, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act
of 1990, and laws and regulations establishing quality criteria and standards
for air, water, land and toxic or hazardous wastes and substances),
non-compliance with which could have a material adverse effect on the financial
condition, Properties, business or operations of the Company or any Subsidiary.
Neither the Company nor any Subsidiary has received notice to the effect that
its operations are not in compliance with any of the requirements of applicable
federal, state or local environmental, health and safety statutes and
regulations or are the subject of any governmental investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action could have a material adverse effect on the financial condition,
Properties, business or operations of the Company or any Subsidiary.
Section 6.16. Other Agreements. Neither the Company nor any Subsidiary
is in default under the terms of any covenant, indenture or agreement of or
affecting the Company, any Subsidiary or any of their Properties, which default
if uncured would have a material adverse effect on the financial condition,
Properties, business or operations of the Company or any Subsidiary.
Section 6.17. No Default. No Default or Event of Default has occurred and
is continuing.
Section 6.18. Year 2000 Compliance. The Company and its Subsidiaries hav
conducted a comprehensive review and assessment of their computer applications,
and have made such inquiry of their respective material suppliers, service
vendors (including data processors) and customers as the Company or relevant
Subsidiary (as the case may be) deem appropriate, with respect to any defect in
computer software, data bases, hardware, controls and peripherals related to the
occurrence of the year 2000 or the use of any date after December 31, 1999, in
connection therewith. Based on the foregoing review, assessment and inquiry, the
Company believes that no such defect could reasonably be expected to have a
material adverse effect on the financial condition, Properties, business or
operations of the Company and its Subsidiaries taken as a whole.
SECTION 7. Conditions Precedent.
The obligation of the Lenders to make any Loan or of the Agent to issue
any Letter of Credit under this Agreement is subject to the following conditions
precedent:
Section 7.1. All Advances. As of the time of the making of each extension
of credit (including the initial extension of credit) hereunder:
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(a) each of the representations and warranties set forth in
Section 6 hereof and in the other Loan Documents shall be true
and correct as of such time, except to the extent the same expressly
relate to an earlier date;
(b) the Company shall be in full compliance with all of the
terms and conditions of this Agreement and of the other Loan Documents,
and no Default or Event of Default shall have occurred and be
continuing or would occur as a result of making such extension of
credit;
(c) after giving effect to such extension of credit, (i)<-1-
32>neither the aggregate Original Dollar Amount nor the U.S. Dollar
Equivalent of all Loans under the Revolving Credit and Letters of
Credit outstanding under this Agreement shall exceed the Revolving
Credit Commitments then in effect and (ii) the aggregate
Original Dollar Amount of all Loans denominated in Alternative
Currencies shall not exceed $15,000,000;
(d) in the case of the issuance of any Letter of Credit, the
Agent shall have received a properly completed Application therefor
together with the fees called for hereby; and
(e) such extension of credit shall not violate any order,
judgment or decree of any court or other authority or any provision of
law or regulation applicable to the Agent or any Lender (including,
without limitation, Regulation U of the Board of Governors of
the Federal Reserve System) as then in effect.
The Company's request for any Loan or Letter of Credit shall constitute its
warranty as to the facts specified in subsections (a) through (d), both
inclusive, above.
Section 7.2. Initial Advance. At or prior to the making of the initial
extension of credit hereunder, the following conditions precedent shall also
have been satisfied:
(a) the Agent shall have received the following for the
account of the Lenders (each to be properly executed and completed) and
the same shall have been approved as to form and substance by the
Agent:
(i) the Notes;
(ii) the Guaranty Agreements;
(iii) copies (executed or certified, as may be
appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery of this Agreement
and the other Loan Documents to the extent the Agent or its
counsel may reasonably request; and
(iv) an incumbency certificate containing the name,
title and genuine signatures of each of the Company's
Authorized Representatives.
(b) the Agent shall have received the initial fees (if any)
called for hereby; (c) each Lender shall have received such
certifications as it may require in order
to satisfy itself as to the financial condition of the Company and its
Subsidiaries, and the lack of material contingent liabilities of the
Company and its Subsidiaries;
(d) legal matters incident to the execution and delivery of
this Agreement and the other Loan Documents and to the transactions
contemplated hereby shall be satisfactory to each Lender and its
counsel; and the Agent shall have received for the account of the
Lenders the written opinion of counsel for the Company in form and
substance satisfactory
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to the Lender and its counsel; and
(e) the Agent shall have received for the account of the
Lenders such other agreements, instruments, documents, certificates and
opinions as the Agent or the Lenders may reasonably request.
Section 7.3. Termination of Existing Credit Agreement. Each of the
Company and the Existing Lenders consent to the termination of the "Revolving
Credit Commitments" under the Existing Credit Agreement effective on the date
the conditions set forth in Section 7.2 hereof are satisfied,
notwithstanding the notice requirements for such termination set forth in
Section 3.3 of the Existing Credit Agreement. The Existing Credit
Agreement shall terminate and all amounts payable thereunder, including accrued
and unpaid facility fees payable under Section 3.1 thereof, shall be
payable, and the facility fee payable under Section 3.1 hereof shall
begin to accrue, on the date that this Agreement has been executed by all the
parties hereto and the conditions set forth in Section 7.2 hereof have
been satisfied.
Section 7.4. November 19 as Earliest Effective Date. Notwithstanding anything
herein to the contrary, this Agreement shall not in any event take effect any
earlier than November 19, 1998.
SECTION 8. Covenants.
The Company agrees that, so long as any credit is available to or in
use by the Company hereunder, except to the extent compliance in any case or
cases is waived in writing by the Required Lenders:
Section 8.1. Corporate Existence; Subsidiaries. (a) The Company shall,
and shall cause each Subsidiary to, preserve and maintain its corporate
existence. The Company will preserve and keep in force and effect, and cause
each Subsidiary to preserve and keep in force and effect, all licenses, permits
and franchises necessary to the proper conduct of its business. Notwithstanding
anything contained herein to the contrary, so long as no Default or Event of
Default has occurred and is continuing, the Company may dissolve any
Non-Material Subsidiary so long as such dissolution would not result in a
material adverse change in the business, financial condition or Properties of
the Company and its Subsidiaries or impair the rights or benefits of the Lenders
under the Loan Documents.
(b) The Company shall cause each Material Subsidiary (other than,
subject to Section 4.1, Anicom Canada), whether now or hereafter
existing, to furnish the Agent (i) a Guaranty Agreement from such
Material Subsidiary in the form or substantially in the form attached hereto as
Exhibit E hereto or in such other form as is reasonably satisfactory to the
Agent and the Required Lenders as to form and substance, and (ii)<-1-
32>documentation acceptable to the Agent similar to in form and scope to that
described in Sections 7.2(a)(ii), 7.2(a)(iii), 7.2(a)(iv), 7.2(c), 7.2(d)
and 7.2(e) but relating to such Guarantor and its Guaranty Agreement.
Section 8.2. Maintenance of Properties. The Company will maintain,
preserve and keep its Properties in good repair, working order and condition
(ordinary wear and tear excepted) and will from time to time make all needful
and proper repairs, renewals, replacements, additions and betterments thereto so
that at all times the efficiency thereof shall be fully preserved and
maintained, and will cause each Subsidiary to do so in respect of Property owned
or used by it.
Section 8.3. Taxes and Assessments. The Company will duly pay and
discharge, and will cause each Subsidiary to duly pay and discharge, all taxes,
rates, assessments, fees and governmental
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charges upon or against it or its Properties, in each case before the same
become delinquent and before penalties accrue thereon, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings
which prevent enforcement of the matter under contest and adequate reserves are
provided therefor.
Section 8.4. Insurance. The Company will insure and keep insured, and
will cause each Subsidiary to insure and keep insured, with good and responsible
insurance companies, all insurable Property owned by it which is of a character
usually insured by Persons similarly situated and operating like Properties
against loss or damage from such hazards and risks, and in such amounts, as are
insured by Persons similarly situated and operating like Properties; and the
Company will insure, and cause each Subsidiary to insure, such other hazards and
risks (including employers' and public liability risks) with good and
responsible insurance companies as and to the extent usually insured by Persons
similarly situated and conducting similar businesses. The Company will upon
request of the Agent and any Lender furnish a certificate setting forth in
summary form the nature and extent of the insurance maintained pursuant to this
Section.
Section 8.5. Financial Reports. (a) The Company will, and will cause
each Subsidiary to, maintain a standard system of accounting in accordance with
GAAP and will furnish to the Agent, each Lender and each of their duly
authorized representatives such information respecting the business and
financial condition of the Company and its Subsidiaries as the Agent or such
Lender may reasonably request; and without any request, will furnish to the
Lenders:
(i) within 50 days after the end of each of the first three
quarterly fiscal periods of the Company, a copy of the Company's Form
10-Q Report filed with the SEC;
(ii) within 120 days after the end of each fiscal year of the
Company, a copy of the Company's Form 10-K Report filed with the SEC,
including a copy of the annual audit report of the Company and the
Subsidiaries for such year with accompanying financial statements,
prepared by the Company and certified by PricewaterhouseCoopers LLP or
any other independent public accountants of recognized national
standing selected by the Company and satisfactory to the Required
Lenders, in accordance with GAAP;
(iii) not later than 10 days after the receipt thereof, a copy
of any final management letters on internal accounting controls for the
Company or any Subsidiary prepared by its independent public
accountants;
(iv) promptly after sending or filing thereof, copies of all
proxy statements, financial statements and reports which the Company
sends to its shareholders, and copies of all other regular, periodic
and special reports and all registration statements which the Company
files with the SEC or any successor thereto, or with any national
securities exchange;
(v) promptly after knowledge thereof shall have come to the
attention of any responsible officer of the Company, written notice of
any threatened or pending litigation or governmental proceeding or
labor controversy against the Company or any Subsidiary which, if
adversely determined, would materially and adversely effect the
financial condition, Properties, business or operations of the Company
or any Subsidiary or of the occurrence of any Default or Event of
Default hereunder; and
(vi) as soon as possible and in any event within 10 day
after the date on which
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(X) a Non-Material Subsidiary becomes a Material Subsidiary,
(Y) the Company or any Subsidiary establishes or acquires any
Subsidiary or (Z) any Subsidiary is dissolved or otherwise
merged out of existence, the Company shall furnish the Lenders an
updated Schedule 6.2 reflecting such event. (b) In the event the
Company is no longer required to file Form 10-Q and 10-K Reports
with the SEC, the Company need not furnish such Reports to the Lenders, but
shall nonetheless provide the Lenders the financial statements previously
contained in such Reports by the times required by subsections (a)(i) and (ii)
above.
(c) Each of the financial statements furnished to the Lenders pursuant
to clauses (a) or (b) of this Section shall be accompanied by a written
certificate in the form attached hereto as Exhibit B (the "Compliance
Certificate") signed by the chief financial officer of the Company to the effect
that to the best of the chief financial officer's knowledge and belief no
Default or Event of Default has occurred during the period covered by such
statements or, if any such Default or Event of Default has occurred during such
period, setting forth a description of such Default or Event of Default and
specifying the action, if any, taken by the Company to remedy the same. Such
certificate shall also set forth the calculations supporting such statements in
respect of Sections 8.6, 8.7, 8.8, 8.9 and 8.10 of this Agreement and
identify the Special Post-Closing Acquisition Liabilities then reflected in
computing compliance with such Section 8.6.
(d) Solely for the purposes of determining the Company's compliance
with the Existing Credit Agreement at the end of the third fiscal quarter of the
Company ended September 30, 1998, the Company's compliance with the
Existing Credit Agreement during such period shall be determined as if all
references in the Existing Credit Agreement to the Fiscal 1997 Charges (as
identified and defined therein) included not only such Fiscal 1997 Charges but
also the Fiscal 1998 Charges identified and defined in this Agreement.
Section 8.6. Current Ratio. The Company will at all times maintain a
Current Ratio of not less than 1.40 to 1.00.
Section 8.7. Interest Coverage Ratio. The Company will, as of the last
day of each fiscal quarter of the Company, maintain the ratio (the "Interest
Coverage Ratio") of EBIT for the four fiscal quarters of the Company then ended
to Interest Expense for the same four fiscal quarters then ended of not less
than 2.0 to 1.0; provided, however, that if an Acquisition permitted by
Section 8.14 hereof occurs at any time during such period, the Interest
Coverage Ratio shall be calculated on a pro forma basis to include the EBIT and
Interest Expense of the Person or assets so acquired for the entire period as if
such Acquisition had taken place on the first day of such period, all as
reasonably calculated by the Company (the expected cost savings relating to the
EBIT of the Person or assets so acquired may be incorporated in these
calculations to the extent they are readily quantifiable and verifiable, in a
manner consistent with the Company's prior pro forma calculations included with
SEC filings in connection with its prior acquisitions).
Section 8.8. Tangible Net Worth. The Company will, as of the last day
of each fiscal quarter of the Company, maintain Tangible Net Worth at not less
than the Minimum Required Amount. For purposes of this Section 8.8, the
term "Minimum Required Amount" shall mean, as of any time, the sum of: (i)
$25,000,000; plus (ii) fifty percent (50%) of Consolidated Net Income
for each fiscal quarter of the Company (if Consolidated Net Income for such
fiscal quarter is
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positive) completed on or after April 1, 1997.
Section 8.9. Debt to Earnings Ratio. The Company will, as of the last
day of each fiscal quarter of the Company, maintain the Debt to Earnings Ratio
at not greater than 3.5 to 1.0; provided, however, that if an Acquisition
permitted by Section 8.14 hereof occurs at any time during the four
fiscal quarter period over which EBITDA is measured to determine the Debt to
Earnings Ratio, such Debt to Earnings Ratio shall be calculated on a pro forma
basis to include the EBITDA of the Person or assets so required for the entire
period as if such Acquisition had taken place on the first day of such period,
all as reasonably calculated by the Company (the expected cost savings relating
to the EBITDA of the Person or assets so acquired may be incorporated in these
calculations to the extent they are readily quantifiable and verifiable and
based on reasonable assumptions).
Section 8.10. Leverage Ratio. The Company will, as of the last day of
each fiscal quarter of the Company, maintain the Leverage Ratio at not more than
0.40 to 1.00.
Section 8.11. Indebtedness for Borrowed Money. The Company will not, nor
will it permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; provided, however, that the
foregoing provisions shall not restrict nor operate to prevent:
(a) the indebtedness of the Company on the Notes and other
Obligations;
(b) Capitalized Lease Obligations in an aggregate amount
not to exceed $1,500,000 at any one time outstanding;
(c) Capitalized Lease Obligations of any Subsidiary which has
become a Subsidiary as a result of an Acquisition permitted by
Section 8.14 hereof if such Capitalized Lease Obligation was
entered into prior to the Acquisition of such Subsidiary and was not
created in contemplation of such Acquisition;
(d) purchase money indebtedness secured by Liens permitted by
Section 8.12(d) hereof in an aggregate amount not to exceed
$2,000,000 at any one time outstanding;
(e) purchase money indebtedness (other than purchase money
indebtedness permitted by Section 8.11(d) hereof) of any Subsidiary
which has become a Subsidiary as a result of an Acquisition permitted
by Section 8.14 hereof if such indebtedness was created prior to
the Acquisition of such Subsidiary and was not created in contemplation
of such Acquisition;
(f) the currently outstanding indebtedness described on
Exhibit C hereof if and so long as such indebtedness is
Subordinated Indebtedness;
(g) unsecured Subordinated Indebtedness incurred to finance
Acquisitions permitted by Section 8.14 hereof;
(h) the Canadian Debt;
(i) indebtedness under the Short-Term Credit Agreement if
and so long as the Revolving Credit Commitments are fully utilized
hereunder; and
(j) indebtedness not otherwise permitted by this Section
aggregating not more than $500,000 at any one time outstanding.
Section 8.12. Liens. The Company will not, nor will it permit any
Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by the Company or any Subsidiary; provided, however, that this
Section shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation,
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unemployment insurance, old age benefits, social security obligations,
taxes, assessments, statutory obligations or other similar charges,
good faith cash deposits in connection with tenders, contracts or
leases to which the Company or any Subsidiary is a party or other cash
deposits required to be made in the ordinary course of business,
provided in each case that the obligation is not for borrowed money and
that the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate proceedings which prevent
enforcement of the matter under contest and adequate reserves have been
established therefor;
(b) mechanics', workmen's, materialmen's, landlords',
carriers', or other similar Liens arising in the ordinary course of
business with respect to obligations which are not due or which are
being contested in good faith by appropriate proceedings which prevent
enforcement of the matter under contest;
(c) the pledge of assets for the purpose of securing an
appeal, stay or discharge in the course of any legal proceeding,
provided that the aggregate amount of liabilities of the Company and
its Subsidiaries secured by a pledge of assets permitted under this
clause, including interest and penalties thereon, if any, shall not be
in excess of $1,000,000 at any one time outstanding; and
(d) purchase money Liens securing indebtedness permitted by
Section 8.11(d) hereof in respect of equipment now owned or
hereafter acquired by the Company or any Subsidiary (not extending to
any other Property), or Liens on equipment so acquired (not extending
to any other Property) existing at the time of acquisition thereof, or
renewals, extensions and refundings of any such Liens (not extending to
any other Property), provided that the principal amount of indebtedness
secured by any such Lien shall not exceed 80% of the cost or fair
market value, whichever is less, of the Property covered by such Lien
at the time of the creation thereof or the acquisition of such
Property.
Section 8.13. Investments, Loans, Advances and Guaranties. The Company
will not, nor will it permit any Subsidiary to, directly or indirectly, make,
retain or have outstanding any investments (whether through purchase of stock or
obligations or otherwise) in, or loans or advances (other than for travel
advances and other similar cash advances made to employees in the ordinary
course of business) to, any other Person, or be or become liable as endorser,
guarantor, surety or otherwise for any debt, obligation or undertaking of any
other Person, or otherwise agree to provide funds for payment of the obligations
of another, or supply funds thereto or invest therein or otherwise assure a
creditor of another against loss or apply for or become liable to the issuer of
a letter of credit which supports an obligation of another, or subordinate any
claim or demand it may have to the claim or demand of any other Person;
provided, however, that the foregoing provisions shall not apply to nor operate
to prevent:
(a) investments in direct obligations of the United States of
America or of any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America, provided that any such obligations shall mature within one
year of the date of issuance thereof;
(b) investments in commercial paper (including as such,
investments in short-term corporate borrowings against tax-advantaged
preferred stock) rated at least P1
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by Moody's Investors Services, Inc. and at least A1 by Standard &
Poor's Corporation maturing within 270 days of the date of issuance
thereof;
(c) investments in certificates of deposit issued by any
United States commercial Agent having capital and surplus of not less
than $100,000,000 which have a maturity of one year or less;
(d) endorsement of items for deposit or collection of
commercial paper received in the ordinary course of business;
(e) Acquisitions of Subsidiaries permitted by Section
8.14 hereof; (f) investments in obligations of a state, a
territory, or a possession of the United
States, or any political subdivision of any of the foregoing or of the
District of Columbia as described in Section 103(a) of the Code
if these investments are graded in the highest major grade as
determined by at least one national rating service or are credit
enhanced by credit enhancers whose credit is rated not less than A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors Services,
Inc.;
(g) the Company's guaranty of indebtedness of Wholly-Owned
Subsidiaries incurred to finance Acquisitions permitted by Section
8.14 hereof if and so long as such guaranty is Subordinated
Indebtedness;
(h) guaranties by Subsidiaries of the Obligations;
(i) the Put/Call Agreement if and so long as the Canadian
Debt is not held by an Affiliate of the Company; and
(j) investments, loans, advances and guarantees not otherwise
permitted by this Section aggregating not more than $2,000,000 at any
one time outstanding.
In determining the amount of investments, loans, advances and guarantees
permitted under this Section, investments shall always be taken at the original
cost thereof (regardless of any subsequent appreciation or depreciation
therein), loans and advances shall be taken at the principal amount thereof then
remaining unpaid and guarantees shall be taken at the amount of obligations
guaranteed thereby.
Section 8.14. Acquisitions. The Company will not, and will not permit
any Subsidiary to, make or commit to make any Acquisitions; provided however,
that the Company and any Wholly-Owned Subsidiary each may make Acquisitions if:
(i) the Company or such Subsidiary acquires by reason of such Acquisition
either (x) assets used or useful in a business which is the same or
similar to that currently conducted by the Company or (y) the capital
stock of a corporation or any other equity interest of any partnership or other
firm engaged in such a same or similar business and after giving effect to such
Acquisition, the corporation, partnership or other such firm so acquired becomes
a Wholly-Owned Subsidiary; (ii) no Default or Event of Default exists or
would exist at the time of or after giving effect to such Acquisition; (iii)
the Company provides the Lenders a statement, certified as true and correct
by its chief financial officer, which represents and warrants that, after giving
effect to such Acquisition, the Company will, on a pro forma basis, continue to
comply through the Termination Date with Sections 8.6, 8.7, 8.8, 8.9,
8.10 and 8.11 hereof, such certificate to be accompanied by supporting financial
projections based on reasonable assumptions; (iv) the Board of Directors
or other governing body of such Person whose property or voting stock is being
so acquired has approved the terms of such Acquisition; and (v) the
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Company has provided the Lenders such financial and other information regarding
the Person whose property or voting stock is being so acquired, including
historical financial statements, and a description of such Person, as the Agent
or any Lender may reasonably request.
Section 8.15. Sales and Leasebacks. The Company will not, nor will it
permit any Subsidiary to, enter into any arrangement with any bank, insurance
company or any other lender or investor providing for the leasing by the Company
or any Subsidiary of any Property theretofore owned by it and which has been or
is to be sold or transferred by such owner to such lender or investor.
Section 8.16. Dividends and Certain Other Restricted Payments. (a)
Restricted Dividends. The Company will not during any fiscal year declare or pay
any dividends on or make any other distributions in respect of any class or
series of its capital stock (other than dividends payable solely in its capital
stock) (each such non-excepted declaration or payment of dividends being herein
collectively called a "Restricted Payment") if at the time of such Restricted
Payment or immediately after giving effect thereto, any Event of Default or
Default shall occur or be continuing.
(b) Restricted Repayments. The Company will not during any fiscal year
directly or indirectly purchase, redeem or otherwise acquire or retire any of
its capital stock (except out of the proceeds of, or in exchange for, a
substantially concurrent issue and sale of its capital stock) (each such
non-exempted purchase, redemption, retirement and distribution in respect to
capital stock being herein collectively called a "Restricted Redemption") if at
the time of such Restricted Redemption or immediately after giving effect
thereto, any Event of Default or Default shall occur or be continuing; provided
that the Company shall not directly or indirectly purchase, redeem or otherwise
acquire or retire any of its capital stock (except out of the proceeds of, or in
exchange for, a substantially concurrent issue and sale of its capital stock) in
excess of 5% of its capital stock during any fiscal year.
Section 8.17. Mergers, Consolidations and Sales. The Company will not,
nor will it permit any Subsidiary to, be a party to any merger or consolidation,
or sell, transfer, lease or otherwise dispose of all or any substantial part of
its Property (except for sales of inventory in the ordinary course of business),
or in any event sell or discount (with or without recourse) any of its notes or
accounts receivable; provided, however, that this Section shall not apply to nor
operate to prohibit (i) the merger of any Subsidiary acquired as a result
of an Acquisition permitted by Section 8.14 hereof with and into the
Company or any Wholly-Owned Subsidiary or (ii) the sale of assets which
are no longer used or useful in the ordinary course of the Company's business. A
sale or disposition of assets of the Company shall be deemed substantial for the
foregoing purposes (i) if such assets are sold below the book value of
such assets, and such assets constituted 10% or more of the total assets of the
Company or (ii) such assets constituted 20% or more of the total assets
of the Company.
Section 8.18. ERISA. The Company will, and will cause each Subsidiary
to, promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed might result in the
imposition of a Lien against any of its Properties. The Company will, and will
cause each Subsidiary to, promptly notify the Agent of (i) the occurrence
of any reportable event (as defined in ERISA) with respect to a Plan, (ii)
receipt of any notice from the PBGC of its intention to seek termination of
any Plan or appointment of a trustee therefor, (iii) its
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intention to terminate or withdraw from any Plan, and (iv) the occurrence
of any event with respect to any Plan which would result in the incurrence by
the Company or any Subsidiary of any material liability, fine or penalty, or any
material increase in the contingent liability of the Company or any Subsidiary
with respect to any post-retirement Welfare Plan benefit.
Section 8.19. Compliance with Laws. The Company will, and will cause
each Subsidiary to, comply in all respects with the requirements of all federal,
state and local laws, rules, regulations, ordinances and orders applicable to or
pertaining to the Properties or business operations of the Company or any
Subsidiary, non-compliance with which could have a material adverse effect on
the financial condition, Properties, business or operations of the Company or
any Subsidiary or could result in a Lien upon any of their Property.
Section 8.20. Burdensome Contracts With Affiliates. The Company will
not, nor will it permit any Subsidiary to, enter into any contract, agreement or
business arrangement with any of its Affiliates on terms and conditions which
are less favorable to the Company or such Subsidiary than would be usual and
customary in similar contracts, agreements or business arrangements between
Persons not affiliated with each other, other than (i) any contract, agreement
or business arrangement with any Person which becomes a Subsidiary as a result
of an Acquisition permitted by Section 8.14 hereof after the date hereof if such
contract, agreement or arrangement was entered into prior to the acquisition of
such Subsidiary and such contract, agreement or arrangement was not created in
contemplation of such Acquisition, (ii) the Put/Call Agreement and
(iii) (if the Canadian Debt is purchased by an Affiliate of the Company)
the contracts and agreements constituting the Canadian Debt.
Section 8.21. No Changes in Fiscal Year. Neither the Company nor any
Subsidiary will change its fiscal year from its present basis without the prior
written consent of the Agent.
Section 8.22. Inspection and Field Audit. The Company will, and will
cause each Subsidiary to, permit the Agent and its duly authorized
representatives and agents to visit and inspect any of the Properties, corporate
books and financial records of the Company and each Subsidiary, to examine and
make copies of the books of accounts and other financial records of the Company
and each Subsidiary, and to discuss the affairs, finances and accounts of the
Company and each Subsidiary with, and to be advised as to the same by, its
officers and independent public accountants (and by this provision the Company
authorizes such accountants to discuss with the Agent the finances and affairs
of the Company and of each Subsidiary) with reasonable notice to the Company and
at such reasonable times and reasonable intervals as the Agent may designate.
After the occurrence of an Event of Default, the Company shall pay for all costs
and expenses incurred by the Agent in connection with any such visitation or
inspection.
Section 8.23. Formation of Subsidiaries. Except for existing
Subsidiaries designated on Schedule 6.2 hereto and Subsidiaries acquired
in Acquisitions or formed to effect Acquisitions in each case permitted by
Section 8.14 hereof, the Company will not, and will not permit any
Subsidiary to, form or acquire any Subsidiary without the prior written consent
of the Agent.
Section 8.24. Subordinated Indebtedness. The Company shall not, and shall
not permit any Subsidiary to:
(a) amend or modify any of the terms or conditions relating
to any Subordinated Indebtedness;
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(b) make any voluntary prepayment on, or effect any voluntary
redemption of, any Subordinated Indebtedness (other than the prepayment
by Anicom Canada of certain indebtedness pursuant to the Put/Call
Agreement) if any Loans are outstanding at the time of or after giving
effect to such prepayment or redemption; or
(c) make any other payment on account of any Subordinated
Indebtedness which is prohibited under the terms of any instrument or
agreement subordinating such indebtedness to the Obligations.
Section 8.25. Use of Proceeds. The proceeds of the initial advance
hereunder shall be used to pay the Company's indebtedness under the Existing
Credit Agreement.
Section 8.26. Year 2000 Compliance. The Company shall take all
actions necessary and commit adequate resources to assure that its computerbased
and other systems (and those of all Subsidiaries) are able to effectively
process dates, including dates before, on and after January 1, 2000,
without experiencing any Year 2000 Problem that could cause a material
adverse effect on the business or financial affairs of the Company (or of the
Company and its Subsidiaries taken on a consolidated basis). At the request of
the Agent, the Company will provide the Agent with written assurances and
substantiations (including, but not limited to, the results of internal or
external audit reports prepared in the ordinary course of business) reasonably
acceptable to the Agent as to the capability of the Company and its Subsidiaries
to conduct its and their businesses and operations before, on and after
January 1, 2000, without experiencing a Year 2000 Problem causing
a material adverse effect on the business or financial affairs of the Company
(or of the Company and its Subsidiaries taken on a consolidated basis).
Section 8.27. European Monetary Union. (a) If, as a result of the
EMU Commencement, (i) any Alternative Currency ceases to be lawful
currency of the state issuing the same and is replaced by the Euro or (ii)
any Alternative Currency and the Euro are at the same time both recognized by
the central bank or comparable governmental authority of the state issuing such
currency as lawful currency of such state, then any amount payable hereunder by
any party hereto in such Alternative Currency (including, without limitation,
any Loan to be made under this Agreement) shall instead be payable in the Euro
and the amount so payable shall be determined by redenominating or converting
such amount into the Euro at the exchange rate officially fixed by the European
Central Bank for the purpose of implementing the EMU, provided, that to the
extent any EMU Legislation provides that an amount denominated either in the
Euro or in the applicable Alternative Currency can be paid either in Euros or in
the applicable Alternative Currency, each party to this Agreement shall be
entitled to pay or repay such amount in Euros or in the applicable Alternative
Currency. Prior to the occurrence of the event or events described in clause<-1-
32>(i) or (ii) of the preceding sentence, each amount payable hereunder in any
such Alternative Currency will, except as otherwise provided herein, continue to
be payable only in that Alternative Currency.
(b) The Company shall from time to time, at the request of the Agent,
pay to the Agent for the account of each Lender the amount of any cost or
increased cost incurred by, or of any reduction in any amount payable to or in
the effective return on its capital to, or of interest or other return foregone
by, such Lender or any holding company of such Lender as a result of the
introduction of, changeover to or operation of the Euro in any applicable state
to the extent attributable to such Lender's obligations hereunder or for the
credit which is the subject matter hereof.
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(c) With respect to the payment of any amount denominated in the Euro
or in any Alternative Currency, the Agent shall not be liable to the Company or
any of the Lenders in any way whatsoever for any delay, or the consequences of
any delay, in the crediting to any account of any amount required by this
Agreement to be paid by the Agent if the Agent shall have taken all relevant
steps to achieve, on the date required by this Agreement, the payment of such
amount in immediately available, freely transferable, cleared funds (in the Euro
Unit or, as the case may be, in any Alternative Currency) to the account with
the bank in the principal financial center in the Euro Member which the Company
or, as the case may be, any Lender shall have specified for such purpose. In
this paragraph (c), "all relevant steps" means all such steps as may be
prescribed from time to time by the regulations or operating procedures of such
clearing or settlement system as the Agent may from time to time determine for
the purpose of clearing or settling payments of the Euro.
(d) If the basis of accrual of interest or fees expressed in this
Agreement with respect to the currency of any state that becomes a Euro Member
shall be inconsistent with any convention or practice in the London interbank
market for the basis of accrual of interest or fees in respect of the Euro, such
convention or practice shall replace such expressed basis effective as of and
from the date on which such state becomes a Euro Member; provided, that if any
Loan in the currency of such state is outstanding immediately prior to such
date, such replacement shall take effect, with respect to such Loan, at the end
of the then current Interest Period.
(e) In addition, this Agreement (including, without limitation, the
definition of LIBOR Portions) will be amended to the extent determined by the
Agent (acting reasonably and in consultation with the Company) to be necessary
to reflect such EMU Commencement and change in currency and to put the Lenders
and the Company in the same position, so far as possible, that they would have
been in if such implementation and change in currency had not occurred. Except
as provided in the foregoing provisions of this Section 8.27, no such
implementation or change in currency nor any economic consequences resulting
therefrom shall (i) give rise to any right to terminate prematurely,
contest, cancel, rescind, alter, modify or renegotiate the provisions of this
Agreement or (ii) discharge, excuse or otherwise affect the performance
of any obligations of the Company under this Agreement, any Notes or any other
Loan Documents.
SECTION 9. Events of Default and Remedies.
Section 9.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) default in the payment when due of all or any part of the
principal of or interest on any Note (whether at the stated maturity
thereof or at any other time provided for in this Agreement) or of any
reimbursement obligation owing under any Application or of any fee or
other Obligation payable by the Company hereunder or under any other
Loan Document; or
(b) default in the observance or performance of any covenant
set forth in Sections 8.5, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.13,
8.14, 8.15, 8.16, 8.17, 8.24 or 8.25 hereof; or
(c) default in the observance or performance of any other
provision hereof or of any other Loan Document which is not remedied
within ten (10) days after the earlier of (i) the date on
which such failure shall first become known to any officer of the
Company
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or (ii) written notice thereof is given to the Company by the Agent or
any Lender; or
(d) any representation or warranty made by the Company
herein or in any other Loan Document, or in any statement or
certificate furnished by it pursuant hereto or thereto, or in
connection with any extension of credit made hereunder,
proves untrue in any material respect as of the
date of the issuance or making thereof; or
(e) any event occurs or condition exists (other than those
described in subsections (a) through (d) above) which is
specified as an event of default under any of the other Loan Documents,
or any of the Loan Documents shall for any reason not be or shall cease
to be in full force and effect, or any of the Loan Documents is
declared to be null and void; or
(f) default shall occur under any Indebtedness for Borrowed
Money issued, assumed or guaranteed by the Company or any Subsidiary,
or under any indenture, agreement or other instrument under which the
same may be issued, and such default shall continue for a period of
time sufficient to permit the acceleration of the maturity of any such
Indebtedness for Borrowed Money (whether or not such maturity is in
fact accelerated), or any such Indebtedness for Borrowed Money shall
not be paid when due (whether by lapse of time, acceleration or
otherwise); or
(g) any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes in an
aggregate amount in excess of $1,000,000 in excess of amounts covered
by insurance from an insurer which has acknowledged its liability
thereon shall be entered or filed against the Company or any Subsidiary
or against any of their Property and which remains unvacated, unbonded,
unstayed or unsatisfied for a period of sixty (60) days; or
(h) the Company or any member of its Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess
$500,000 which it shall have become liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or notice of intent to terminate a
Plan or Plans having aggregate Unfunded Vested Liabilities in excess of
$500,000 (collectively, a "Material Plan") shall be filed under
Title IV of ERISA by the Company or any other member of its
Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title
IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a
fiduciary of any Material Plan against the Company or any member of its
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA
and such proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any Material
Plan must be terminated; or
(i) dissolution or termination of the existence of the
Company or any Subsidiary; or
(j) the Company or any Subsidiary shall (i) have
entered involuntarily against it an order for relief under the United
States Bankruptcy Code, as amended, (ii) not pay, or admit in
writing its inability to pay, its debts generally as they become due,
(iii) make an assignment for the benefit of creditors, (iv)
apply for, seek, consent to, or acquiesce in, the
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appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any substantial part of its Property,
(v) institute any proceeding seeking to have entered against it
an order for relief under the United States Bankruptcy Code, as
amended, to adjudicate it insolvent, or seeking dissolution, winding
up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, (vi) take any corporate action in furtherance of any
matter described in parts (i) through (v) above, or (vii)
fail to contest in good faith any appointment or proceeding
described in Section 9.1(k) hereof; or
(k) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Company or any Subsidiary
or any substantial part of any of their Property, or a proceeding
described in Section 9.1(j)(v) shall be instituted against the
Company or any Subsidiary, and such appointment continues undischarged
or such proceeding continues undismissed or unstayed for a period of 60
days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of Default described
in subsection (a) through (i), both inclusive, of Section 9.1 has
occurred and is continuing, the Agent shall, upon the request of the Required
Lenders, by notice to the Company, take one or more of the following actions:
(a) terminate the obligations of the Lenders to extend any
further credit hereunder on the date (which may be the date thereof)
stated in such notice;
(b) declare the principal of and the accrued interest on the
Notes to be forthwith due and payable and thereupon the Notes,
including both principal and interest and all fees, charges and other
Obligations payable hereunder and under the other Loan Documents, shall
be and become immediately due and payable without further demand,
presentment, protest or notice of any kind; and
(c) enforce any and all rights and remedies available to it
under the Loan Documents or applicable law.
Section 9.3. Bankruptcy Defaults. When any Event of Default described
in subsection (j) or (k) of Section 9.1 has occurred and is
continuing, then the Notes, including both principal and interest, and all fees,
charges and other Obligations payable hereunder and under the other Loan
Documents, shall immediately become due and payable without presentment, demand,
protest or notice of any kind, and the obligations of the Lenders to extend
further credit pursuant to any of the terms hereof shall immediately terminate.
In addition, the Agent may exercise any and all remedies available to it under
the Loan Documents or applicable law.
Section 9.4. Collateral for Undrawn Letters of Credit. When any Event
of Default, other than an Event of Default described in subsection (j) or
(k) of Section 9.1, has occurred and is continuing, the Company shall,
upon demand of the Agent (which demand shall be made upon the request of the
Required Lenders), and when any Event of Default described in subsection
(j) or (k) of Section 9.1 has occurred the Company shall, without
notice or demand from the Agent, immediately pay to the Agent the full amount of
each Letter of Credit then outstanding, the Company agreeing to immediately make
such payment and acknowledging and agreeing that the
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Agent and the Lenders would not have an adequate remedy at law for failure of
the Company to honor any such demand and that the Agent and the Lenders shall
have the right to require the Company to specifically perform such undertaking
whether or not any draws have been made under any such Letters of Credit.
SECTION 10. The Agent.
Section 10.1. Appointment and Authorization. Each Lender hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers hereunder and under the other Loan Documents as are
designated to the Agent by the terms hereof and thereof together with such
powers as are reasonably incidental thereto. The Lenders expressly agree that
the Agent is not acting as a fiduciary of the Lenders in respect of the Loan
Documents, the Company or otherwise, and nothing herein or in any of the other
Loan Documents shall result in any duties or obligations on the Agent or any of
the Lenders except as expressly set forth herein. The Agent may resign at any
time by sending 20 days prior written notice to the Company and the Lenders. In
the event of any such resignation, the Required Lenders may appoint a new agent
after consultation with the Company, which shall succeed to all the rights,
powers and duties of the Agent hereunder and under the other Loan Documents. Any
resigning Agent shall be entitled to the benefit of all the protective
provisions hereof with respect to its acts as an agent hereunder, but no
successor Agent shall in any event be liable or responsible for any actions of
its predecessor. If the Agent resigns and no successor is appointed, the rights
and obligations of such Agent shall be automatically assumed by the Required
Lenders and the Company shall be directed to make all payments due each Lender
hereunder directly to such Lender.
Section 10.2. Rights as a Lender. The Agent has and reserves all of the
rights, powers and duties hereunder and under the other Loan Documents as any
Lender may have and may exercise the same as though it were not the Agent and
the terms "Lender" or "Lenders" as used herein and in all of such documents
shall, unless the context otherwise expressly indicates, include the Agent in
its individual capacity as a Lender.
Section 10.3. Standard of Care. The Lenders acknowledge that they have
received and approved copies of the Loan Documents and such other information
and documents concerning the transactions contemplated and financed hereby as
they have requested to receive and/or review. The Agent makes no representations
or warranties of any kind or character to the Lenders with respect to the
validity, enforceability, genuineness, perfection, value, worth or
collectibility hereof or of the Notes or any of the other Obligations or of any
of the other Loan Documents. Neither the Agent nor any director, officer,
employee, agent or representative thereof (including any security trustee
therefor) shall in any event be liable for any clerical errors or errors in
judgment, inadvertence or oversight, or for action taken or omitted to be taken
by it or them hereunder or under the other Loan Documents or in connection
herewith or therewith except for its or their own gross negligence or willful
misconduct. The Agent shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, certificate,
warranty, instruction or statement (oral or written) of anyone (including anyone
in good faith believed by it to be authorized to act on behalf of the Company),
unless it has actual knowledge of the untruthfulness of same. The Agent may
execute any of its duties hereunder by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Lenders for the default or
misconduct of any such agents or
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attorneys-in-fact selected with reasonable care. The Agent shall be entitled to
advice of counsel concerning all matters pertaining to the agencies hereby
created and its duties hereunder, and shall incur no liability to anyone and be
fully protected in acting upon the advice of such counsel. The Agent shall be
entitled to assume that no Default or Event of Default exists unless notified to
the contrary by a Lender. The Agent shall in all events be fully protected in
acting or failing to act in accord with the instructions of the Required
Lenders. The Agent shall in all cases be fully justified in failing or refusing
to act hereunder unless it shall be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by the
Agent by reason of taking or continuing to take any such action. The Agent may
treat the owner of any Note as the holder thereof until written notice of
transfer shall have been filed with the Agent signed by such owner in form
satisfactory to the Agent. Each Lender acknowledges that it has independently
and without reliance on the Agent or any other Lender and based upon such
information, investigations and inquiries as it deems appropriate made its own
credit analysis and decision to extend credit to the Company. It shall be the
responsibility of each Lender to keep itself informed as to the creditworthiness
of the Company and the Agent shall have no liability to any Lender with respect
thereto.
Section 10.4. Costs and Expenses. Each Lender agrees to reimburse the
Agent for all costs and expenses suffered or incurred by the Agent or any
security trustee in performing its duties hereunder and under the other Loan
Documents, or in the exercise of any right or power imposed or conferred upon
the Agent hereby or thereby, to the extent that the Agent is not promptly
reimbursed for same by the Company, all such costs and expenses to be borne by
the Lenders ratably in accordance with the amounts of their respective Revolving
Credit Commitments.
Section 10.5. Indemnity. The Lenders shall ratably indemnify and hold
the Agent, and its directors, officers, employees, agents and representatives
(including as such any security trustee therefor) harmless from and against any
liabilities, losses, costs and expenses suffered or incurred by them hereunder
or under the other Loan Documents or in connection with the transactions
contemplated hereby or thereby, regardless of when asserted or arising, except
to the extent they are promptly reimbursed for the same by the Company and
except to the extent that any event giving rise to a claim was caused by the
gross negligence or willful misconduct of the party seeking to be indemnified.
SECTION 11. Miscellaneous.
Section 11.1. Withholding Taxes.
(a) Payments Free of Withholding. Except as otherwise required by law
and subject to Section 11.1(b) hereof, each payment by the Company under
this Agreement and under any other Loan Document shall be made without
withholding for or on account of any present or future taxes (other than overall
net income taxes on the recipient) imposed by or within the jurisdiction in
which the Company is domiciled, any jurisdiction from which the Company makes
any payment, or (in each case) any political subdivision or taxing authority
thereof or therein. If any such withholding is so required, the Company shall
make the withholding, pay the amount withheld to the appropriate governmental
authority before penalties attach thereto or interest accrues thereon and
forthwith pay such additional amount as may be necessary to ensure that the net
amount actually received by each Lender and the Agent free and clear of such
taxes (including such taxes on such additional amount)
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is equal to the amount which that Lender or the Agent (as the case may be) would
have received had such withholding not been made. If the Agent or any Lender
pays any amount in respect of any such taxes, penalties or interest, the Company
shall reimburse the Agent or such Lender for that payment on demand in the
currency in which such payment was made. If the Company pays any such taxes,
penalties or interest, it shall deliver official tax receipts evidencing that
payment or certified copies thereof to the Lender or Agent on whose account such
withholding was made (with a copy to the Agent if not the recipient of the
original) on or before the thirtieth day after payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the
Code) shall submit to the Company and the Agent on or before the earlier of the
date the initial Borrowing is made hereunder and 30 days after the date hereof,
two duly completed and signed copies of either Form 1001 (relating to such
Lender and entitling it to a complete exemption from withholding under the Code
on all amounts to be received by such Lender, including fees, pursuant to the
Loan Documents and the Loans) or Form 4224 (relating to all amounts to be
received by such Lender, including fees, pursuant to the Loan Documents and the
Loans) of the United States Internal Revenue Service. Thereafter and from time
to time, each Lender shall submit to the Company and the Agent such additional
duly completed and signed copies of one or the other of such Forms (or such
successor forms as shall be adopted from time to time by the relevant United<-1-
32>States taxing authorities) as may be (i) requested by the Company in a
written notice, directly or through the Agent, to such Lender and (ii)<-1-
32>required under then-current United States law or regulations to avoid or
reduce United States withholding taxes on payments in respect of all amounts to
be received by such Lender, including fees, pursuant to the Loan Documents or
the Loans.
(c) Inability of Lenders to Submit Forms. If any Lender determines, as
a result of any change in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to submit to
the Company or the Agent any form or certificate that such Lender is obligated
to submit pursuant to subsection (b) of this Section 11.1 or that
such Lender is required to withdraw or cancel any such form or certificate
previously submitted or any such form or certificate otherwise becomes
ineffective or inaccurate, such Lender shall promptly notify the Company and
Agent of such fact and the Lender shall to that extent not be obligated to
provide any such form or certificate and will be entitled to withdraw or cancel
any affected form or certificate, as applicable.
Section 11.2. Non-Business Days. If any payment hereunder becomes due
and payable on a day which is not a Business Day, the due date of such payment
shall be extended to the next succeeding Business Day on which date such payment
shall be due and payable. In the case of any payment of principal falling due on
a day which is not a Business Day, interest on such principal amount shall
continue to accrue during such extension at the rate per annum then in effect,
which accrued amount shall be due and payable on the next scheduled date for the
payment of interest.
Section 11.3. No Waiver, Cumulative Remedies. No delay or failure on the
part of any Lender or on the part of any holder of any of the Obligations in the
exercise of any power or right shall operate as a waiver thereof or as an
acquiescence in any default, nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof or the exercise of
any other power or right. The rights and remedies hereunder of the Lenders and
any of the holders of
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the Obligations are cumulative to, and not exclusive of, any rights or remedies
which any of them would otherwise have.
Section 11.4. Waivers, Modifications and Amendments. Any provision
hereof or of any of the other Loan Documents may be amended, modified, waived or
released and any Default or Event of Default and its consequences may be
rescinded and annulled upon the written consent of the Required Lenders;
provided, however, that without the consent of all Lenders no such amendment,
modification or waiver shall increase the amount or extend the term of any
Lender's Revolving Credit Commitment or reduce the amount of any principal of or
interest rate applicable to, or extend the maturity of, any Obligation owed to
it or reduce the amount of the fees to which it is entitled hereunder or change
this Section or change the definition of "Required Lenders" or change the number
of Lenders required to take any action hereunder or under any of the other Loan
Documents or permit the Company to assign any of its rights hereunder or release
any Guarantor from its obligations under its Guaranty. No amendment,
modification or waiver of the Agent's protective provisions shall be effective
without the prior written consent of the Agent.
Section 11.5. Costs and Expenses. The Company agrees to pay on demand
the costs and expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of this Agreement, the other Loan Documents
and the other instruments and documents to be delivered hereunder or thereunder,
and in connection with the transactions contemplated hereby or thereby, and in
connection with any consents hereunder or waivers or amendments hereto or
thereto, including the fees and expenses of Messrs. Chapman and Cutler, counsel
for the Agent, with respect to all of the foregoing (whether or not the
transactions contemplated hereby are consummated; provided, however, in no event
shall the Company's obligation to reimburse the Agent for such fees (exclusive
of such counsel's expenses and disbursements) in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
Loan Documents to be delivered as a condition precedent to initial funding of
the credit contemplated hereby exceed $20,000. The Company further agrees to pay
to Agent and the Lenders and any other holders of the Obligations all costs and
expenses (including court costs, the allocated costs of inhouse counsel and
outside attorneys' fees), if any, incurred or paid by the Agent, the Lenders or
any other holders of the Obligations in connection with any Default or Event of
Default or in connection with the enforcement of this Agreement or any of the
other Loan Documents or any other instrument or document delivered hereunder or
thereunder. The Company further agrees to indemnify and save the Lenders, the
Agent and any security trustee for the Lenders harmless from any and all
liabilities, losses, costs and expenses incurred by the Lenders or the Agent in
connection with any action, suit or proceeding brought against the Agent, or any
security trustee or any Lender by any Person (but excluding attorneys' fees for
litigation solely between the Lenders to which the Company is not a party) which
arises out of the transactions contemplated or financed hereby or out of any
action or inaction by the Agent, any security trustee or any Lender hereunder or
thereunder, except for such thereof as is caused by the gross negligence or
willful misconduct of the party seeking to be indemnified. The provisions of
this Section and the protective provisions of Section 2 hereof shall
survive payment of the Obligations.
Section 11.6. Documentary Taxes. The Company agrees to pay on demand any
documentary, stamp or similar taxes payable in respect of this Agreement or any
other Loan
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Document, including interest and penalties, in the event any such taxes are
assessed, irrespective of when such assessment is made and whether or not any
credit is then in use or available hereunder.
Section 11.7. Survival of Representations. All representations and
warranties made herein or in any of the other Loan Documents or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and the other Loan Documents, and shall continue in full force
and effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
Section 11.8. Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the Agent and the Lenders of amounts
sufficient to protect the yield of the Agent and the Lenders with respect to the
Loans and Letters of Credit, including, but not limited to, Sections 1.3,
2.7, and 2.9 hereof, shall survive the termination of this Agreement and the
payment of the Obligations.
Section 11.9. Participations. Any Lender may grant participations in its
extensions of credit hereunder to any other Lender or other lending institution
(a "Participant"), provided that (i) no Participant shall thereby acquire
any direct rights under this Agreement, (ii) no Lender shall agree with a
Participant not to exercise any of such Lender's rights hereunder without the
consent of such Participant except for rights which under the terms hereof may
only be exercised by all Lenders and (iii) no sale of a participation in
extensions of credit shall in any manner relieve the selling Lender of its
obligations hereunder. Section 11.10. Assignment Agreements. Each Lender
may, from time to time upon at least 5 Business Days' prior written notice to
the Agent, assign to other commercial lenders part of its rights and obligations
under this Agreement (including without limitation the indebtedness evidenced by
the Notes then owned by such assigning Lender, together with an equivalent
proportion of its Revolving Credit Commitments to make Loans hereunder) pursuant
to written agreements executed by such assigning Lender, such assignee lender or
lenders, the Company and the Agent, which agreements shall specify in each
instance the portion of the indebtedness evidenced by the Notes which is to be
assigned to each such assignee lender and the portion of the Revolving Credit
Commitments of the assigning Lender to be assumed by it (the "Assignment
Agreements"); provided, however, that (i) each such assignment shall be
of a constant, and not a varying, percentage of the assigning Lender's rights
and obligations under this Agreement and the assignment shall cover the same
percentage of such Lender's Revolving Credit Commitments, Loans, Notes and
credit risk with respect to Letters of Credit; (ii) each such assignment
shall be made by a Lender which is a lender under the Short-Term Credit
Agreement and shall be made contemporaneously with an assignment of the same
percentage of such Lender's rights and obligations with respect to the
Short-Term Credit Agreement; (iii) unless the Agent otherwise consents,
the aggregate amount of the Revolving Credit Commitments, Loans, Notes and
credit risk with respect to Letters of Credit of the assigning Lender being
assigned pursuant to each such assignment (determined as of the effective date
of the relevant Assignment Agreement) shall in no event be less than $5,000,000
and shall be an integral multiple of $1,000,000; (iv) the Agent and the
Company must each consent, which consent shall not be unreasonably withheld, to
each such assignment to a party which was not an original signatory of this
Agreement; and (v) the assigning Lender must pay to the Agent a
processing and recordation fee of $3,000 and any out-of-pocket
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attorneys' fees and expenses incurred by the Agent in connection with such
Assignment Agreement. Upon the execution of each Assignment Agreement by the
assigning Lender thereunder, the assignee lender thereunder, the Company and the
Agent and payment to such assigning Lender by such assignee lender of the
purchase price for the portion of the indebtedness of the Company being acquired
by it, (i) such assignee lender shall thereupon become a "Lender" for all
purposes of this Agreement with Revolving Credit Commitments in the amounts set
forth in such Assignment Agreement and with all the rights, powers and
obligations afforded a Lender hereunder, (ii) such assigning Lender shall
have no further liability for funding the portion of its Revolving Credit
Commitments assumed by such other Lender and (iii) the address for
notices to such assignee Lender shall be as specified in the Assignment
Agreement executed by it. Concurrently with the execution and delivery of such
Assignment Agreement, the Company shall execute and deliver Notes to the
assignee Lender in the respective amounts of its Revolving Credit Commitments
under the Revolving Credit and new Notes to the assigning Lender in the
respective amounts of its Revolving Credit Commitments under the Revolving
Credit after giving effect to the reduction occasioned by such assignment, all
such Notes to constitute "Notes" for all purposes of this Agreement and of the
other Loan Documents. Section 11.11. Notices. Except as otherwise
specified herein, all notices hereunder shall be in writing (including, without
limitation, notice by telecopy) and shall be given to the relevant party at its
address or telecopier number set forth below, in the case of the Company, or on
the appropriate signature page hereof, in the case of the Lenders and the Agent,
or such other address or telecopier number as such party may hereafter specify
by notice to the Agent and the Company given by United States certified or
registered mail, by telecopy or by other telecommunication device capable of
creating a written record of such notice and its receipt. Notices hereunder to
the Company shall be addressed to:
to the Company at:
6133 North River Road, Suite 1000
Rosemont, Illinois 60018-5171
Attention: Donald C. Welchko
Telephone: (847) 518-8700
Telecopy: (847) 518-8777
with a copy (in case of notices of default) to:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Attention: Steven A. Shapiro
Telephone: (312) 902-5200
Telecopy: (312) 902-1061
to the Agent at:
Harris Trust and Savings Bank
P.O. Box 755
111 West Monroe Street
Chicago, Illinois 60690
Attention: James H. Colley
Telephone: (312) 461-6876
Telecopy: (312) 293-5041
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Each such notice, request or other communication shall be effective (i)
if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in this Section and a confirmation of such telecopy has been
received by the sender, (ii) if given by mail, five (5) days after
such communication is deposited in the mail, certified or registered with return
receipt requested, addressed as aforesaid or (iii) if given by any other
means, when delivered at the addresses specified in this Section; provided that
any notice given pursuant to Section 1 or Section 2 hereof shall
be effective only upon receipt. Section 11.12. Construction. The parties
hereto acknowledge and agree that this Agreement and the other Loan Documents
shall not be construed more favorably in favor of one than the other based upon
which party drafted the same, it being acknowledged that all parties hereto
contributed substantially to the negotiation of this Agreement and the other
Loan Documents. NOTHING CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED TO PERMIT
ANY ACT OR OMISSION WHICH IS PROHIBITED BY THE TERMS OF ANY OF THE OTHER LOAN
DOCUMENTS, THE COVENANTS AND AGREEMENTS CONTAINED HEREIN BEING IN ADDITION TO
AND NOT IN SUBSTITUTION FOR THE COVENANTS AND AGREEMENTS CONTAINED IN THE OTHER
LOAN DOCUMENTS. Section 11.13. Headings. Section headings used in this
Agreement are for convenience of reference only and are not a part of this
Agreement for any other purpose. Section 11.14. Severability of
Provisions. Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction. All rights, remedies and powers provided in this
Agreement and the other Loan Documents may be exercised only to the extent that
the exercise thereof does not violate any applicable mandatory provisions of
law, and all the provisions of this Agreement and the other Loan Documents are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and to be limited to the extent necessary so that they will not
render this Agreement or the other Loan Documents invalid or unenforceable.
Section 11.15 Counterparts. This Agreement may be executed in any number
of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument. Section<-1- 32>11.16. Entire
Understanding. This Agreement together with the other Loan Documents constitute
the entire understanding of the parties with respect to the subject matter
hereof and any prior agreements, whether written or oral, with respect thereto
are superseded hereby except for prior understandings related to fees payable to
the Agent upon the initial closing of the transactions contemplated hereby.
Section 11.17. Currency. Each reference in this Agreement to U.S. Dollars
or to an Alternative Currency (the "relevant currency") is of the essence. To
the fullest extent permitted by law, the obligation of the Company in respect of
any amount due in the relevant currency under this Agreement shall,
notwithstanding any payment in any other currency (whether pursuant to a
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judgment or otherwise), be discharged only to the extent of the amount in the
relevant currency that the Agent or Lender entitled to receive such payment may,
in accordance with normal banking procedures, purchase with the sum paid in such
other currency (after any premium and costs of exchange) on the Business Day
immediately following the day on which such party receives such payment. If the
amount in the relevant currency so purchased for any reason falls short of the
amount originally due in the relevant currency, the Company shall pay such
additional amounts, in the relevant currency, as may be necessary to compensate
for the shortfall. Any obligations of the Company not discharged by such payment
shall, to the fullest extent permitted by applicable law, be due as a separate
and independent obligation and, until discharged as provided herein, shall
continue in full force and effect. Section 11.18. Currency Equivalence.
If for the purposes of obtaining judgment in any court it is necessary to
convert a sum due from the Company on the Obligations in the currency expressed
to be payable herein or under the Notes (the "specified currency") into another
currency, the parties agree that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Agent could purchase the
specified currency with such other currency on the Business Day preceding that
on which final judgment is given. The obligation of the Company in respect of
any such sum due to the Agent or any Lender on the Obligations shall,
notwithstanding any judgment in a currency other than the specified currency, be
discharged only to the extent that on the Business Day following receipt by the
Agent or such Lender, as applicable, of any sum adjudged to be so due in such
other currency, the Agent or such Lender, as applicable, may in accordance with
normal banking procedures purchase the specified currency with such other
currency. If the amount of the specified currency so purchased is less than the
sum originally due to the Agent or such Lender in the specified currency, the
Company agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify the Agent or such Lender, as the case may be, against such loss,
and if the amount of the specified currency so purchased exceeds the amount
originally due to the Agent or such Lender in the specified currency, the Agent
or such Lender, as the case may be, agrees to remit such excess to the Company.
Section 11.19. Binding Nature, Governing Law, Etc. This Agreement shall
be binding upon the Company and its successors and assigns, and shall inure to
the benefit of the Agent and the Lenders and the benefit of their successors and
assigns, including any subsequent holder of an interest in the Obligations. The
Company may not assign its rights hereunder without the written consent of the
Lenders. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Section
11.20. Submission to Jurisdiction; Waiver of Jury Trial. The Company hereby
submits to the nonexclusive jurisdiction of the United States District Court for
the Northern District of Illinois and of any Illinois State court sitting in the
City of Chicago for purposes of all legal proceedings arising out of or relating
to this Agreement, the other Loan Documents or the transactions contemplated
hereby or thereby. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum. THE COMPANY, THE AGENT, AND EACH LENDER HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
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Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of this 4th day of November, 1998.
ANICOM, INC.
By
Name:
Title:
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Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.
Each of the Lenders hereby agrees with each other Lender that if it should
receive or obtain any payment (whether by voluntary payment, by realization upon
collateral, by the exercise of rights of set-off or banker's lien, by
counterclaim or cross action, or by the enforcement of any rights under this
Agreement, any of the other Loan Documents or otherwise) in respect of the
Obligations in a greater amount than such Lender would have received had such
payment been made to the Agent and been distributed among the Lenders as
contemplated by Section 3.4 hereof then in that event the Lender receiving such
disproportionate payment shall purchase for cash without recourse from the other
Lenders an interest in the Obligations of the Company to such Lenders in such
amount as shall result in a distribution of such payment as contemplated by
Section 3.4 hereof. In the event any payment made to a Lender and shared with
the other Lenders pursuant to the provisions hereof is ever recovered from such
Lender, the Lenders receiving a portion of such payment hereunder shall restore
the same to the payor Lender, but without interest. Amount and Percentage of
Commitments:
Revolving Credit
Commitment:
$17,500,000
HARRIS TRUST AND SAVINGS BANK
By
Its Vice President
111 West Monroe Street
Chicago, Illinois 60603
Attention: James H. Colley
Telephone: (312) 461-6876
Telecopy: (312) 293-5041
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Revolving Credit
Commitment:
$16,250,000
THE FIRST NATIONAL BANK OF CHICAGO
By
Its
One First National Plaza
Chicago, Illinois 60670
Attention: Julia A. Bristow
Telephone: (312) 732-7790
Telecopy: (312) 732-1117
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Revolving Credit
Commitment:
$16,250,000
LASALLE NATIONAL BANK
By
Its
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Marguerite A. Laughlin
Telephone: (312) 904-6150
Telecopy: (312) 904-6742
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Revolving Credit
Commitment:
$10,000,000
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
Its
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Paul R. Frey
Telephone: (312) 828-8230
Telecopy: (312) 765-2193
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EXHIBIT A
ANICOM, INC.
LONG-TERM MULTICURRENCY REVOLVING CREDIT NOTE
Chicago, Illinois
______________, 199___
On the Revolving Credit Termination Date, for value received, the
undersigned, ANICOM, INC., a Delaware corporation (the "Company"), hereby
promises to pay to the order of ____________________ (the "Lender"), at the
principal office of Harris Trust and Savings Bank in Chicago, Illinois (or in
the case of any LIBOR Portions denominated in an Alternative Currency, at such
office as the Agent has previously notified the Company in the currency of such
LIBOR Portions in accordance with Section 3.4 of the Credit Agreement),
the aggregate unpaid principal amount of all Loans owing from the Company to the
Lender under the Revolving Credit provided for in the Credit Agreement
hereinafter mentioned.
This Note evidences loans constituting part of a "Domestic Rate
Portion" and "LIBOR Portions" as such terms are defined in that certain
Long-Term Multicurrency Credit Agreement dated as of November 4, 1998,
between the Company, Harris Trust and Savings Bank, individually and as Agent
thereunder, and the other Lenders which are now or may from time to time
hereafter become parties thereto (said Credit Agreement, as the same may be
amended, modified or restated from time to time, being referred to herein as the
"Credit Agreement") made and to be made to the Company by the Lender under the
Revolving Credit provided for under the Credit Agreement, and the Company hereby
promises to pay interest at the office described above on each loan evidenced
hereby at the rates and at the times and in the manner specified therefor in the
Credit Agreement.
Each loan made under the Revolving Credit provided for in the Credit
Agreement by the Lender to the Company against this Note, any repayment of
principal hereon, the status of each such loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the currency thereof, the interest rate and Interest Period applicable thereto
shall be endorsed by the holder hereof on a schedule to this Note or recorded on
the books and records of the holder hereof (provided that such entries shall be
endorsed on a schedule to this Note prior to any negotiation hereof). The
Company agrees that in any action or proceeding instituted to collect or enforce
collection of this Note, the entries so endorsed on a schedule to this Note or
recorded on the books and records of the holder hereof shall be prima facie
evidence of the unpaid principal balance of this Note, the status of each such
loan from time to time as part of the Domestic Rate Portion or a LIBOR Portion,
and, in the case of any LIBOR Portion, the currency thereof, the interest rate
and Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of
the Credit Agreement, and this Note and the holder hereof are entitled to all of
the benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayments are required to be made hereon, all
in the events, on the terms and with the effects provided in the Credit
Agreement. All capitalized terms used herein without definition shall have the
same meanings herein as such terms are defined in the Credit Agreement.
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The Company hereby promises to pay all costs and expenses (including
attorneys' fees) suffered or incurred by the holder hereof in collecting this
Note or enforcing any rights in any collateral therefor. The Company hereby
waives presentment for payment and demand. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
ANICOM, INC.
By:
Name:
Title:
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EXHIBIT B
COMPLIANCE CERTIFICATE
To: Harris Trust and Savings Bank, as Agent
under, and the Lenders party to, the
Credit Agreement described below
This Compliance Certificate is furnished to the Agent and the Lenders
pursuant to that certain Long-Term Multicurrency Credit Agreement dated as of
November 4, 1998, by and among Anicom, Inc. (the "Company") and you (the
"Credit Agreement"). Unless otherwise defined herein, the terms used in this
Compliance Certificate have the meanings ascribed thereto in the Credit
Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _________________________________ of the
Company; 2. I have reviewed the terms of the Credit Agreement and I
have made, or have caused
to be made under my supervision, a detailed review of the transactions and
conditions of the Company and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose,
and I have no knowledge of, the existence of any condition or the occurrence of
any event which constitutes a Default or Event of Default during or at the end
of the accounting period covered by the attached financial statements or as of
the date of this Certificate, except as set forth below;
4. The financial statements required by Section 8.5 of the
Credit Agreement and being furnished to you concurrently with this Certificate
are true, correct and complete as of the date and for the periods covered
thereby; and
5. The Attachment hereto sets forth financial data and computations
evidencing the Company's compliance with certain covenants of the Credit
Agreement, all of which data and computations are, to the best of my knowledge,
true, complete and correct and have been made in accordance with the relevant
Sections of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Company has taken, is taking, or
proposes to take with respect to each such condition or event:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The foregoing certifications, together with the computations set forth
in the Attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _________ day of
__________________ 19___.
------------------------------
------------------------------
------------------------------
------------------------------
- --------------------------------------------------------------------------------
(Print or Type Name) (Title)
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ATTACHMENT TO COMPLIANCE CERTIFICATE
ANICOM, INC.
Compliance Calculations for Long-Term Multicurrency Credit Agreement
Dated as of November 4, 1998
Calculations as of _____________, 19___
---------------------------------------------------------------------------
A. CURRENT RATIO (SECTION 8.6)
1. Total current assets (including prepaid expenses) ___________
2. Total current liabilities ___________
3. Special Post-Closing Acquisition Liabilities ___________
4. Line 2 minus Line 3
("Current Ratio") ___________
6. As listed in Section 8.6, the Current Ratio
shall not be less than 1:40 : 1
7. Company is in Compliance?
(Circle Yes or No) Yes/No
B. INTEREST COVERAGE RATIO (SECTION 8.7)
1. Consolidated Net Income as defined ___________
2. Amounts deducted in arriving at
Consolidated Net Income in respect of
(a) Interest Expense ___________
(b) Federal, state and local
income taxes ___________
3. Sum of Lines 1, 2(a) and 2(b)
("EBIT") ___________
4. Interest Expense ___________
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5. Ratio of EBIT (Line 3)
to Interest Expense (Line 4) ("Interest
Coverage Ratio") :1
6. As listed in Section 8.7, for the date of this
Certificate, the Interest Coverage
Ratio shall not be less than 2.0 : 1
7. Company is in compliance?
(Circle yes or no) Yes/No
C. TANGIBLE NET WORTH (SECTION 8.8)
1. Shareholders' Equity __________
2. Less
(a) Notes receivable
from officers and
employees ____________
(b) Intangible Assets ____________
3. Line 1 minus Lines 2(a) and
2(b)
("Tangible Net Worth") __________
4. As required by Section 8.8,
Tangible Net Worth must not be less than
Minimum Required Amount
(a) Consolidated Net Income ___________
(b) .50 X Line 4(a) ___________
(c) Line 4(b) plus the $_________ ___________
Minimum Required
Amount for the immediately
preceding fiscal quarter
("Minimum Required Amount")
5. Company is in compliance? (Circle yes or no) Yes/No
==========
D. DEBT TO EARNINGS RATIO (SECTION 8.9)
1. Total Funded Debt _________
2. EBITDA (Line B3 plus amounts charged
for depreciation, amortization and
Fiscal 1998 Charges) ___________
3. Ratio of Line 1 to Line 2
("Debt to Earnings Ratio") : 1
4. As listed in Section 8.9,
Debt to Earnings Ratio
must not be greater than 3.5 : 1
5. Company is in compliance? (Circle yes or no) Yes/No
E. LEVERAGE RATIO (SECTION 8.10)
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1. Total Funded Debt ____________
2. Shareholders' Equity ____________
3. Line 1 plus Line 2 ____________
4. Total Capitalization
(from Line E3 above) ____________
5. Ratio of Line 1 to Line 4
("Leverage Ratio") :1
7. As listed in Section 8.10, for
the date of this Certificate,
the Leverage Ratio shall not
be greater than
0.40 :1
8. Company is in compliance?
(Circle yes or no) Yes/No
F. SPECIAL POST-CLOSING ACQUISITION LIABILITIES
The following summarizes the Special Post-Closing Acquisition Liabilities
used in computing compliance with the current ratio (Section 8.6):
- ------------------------------------------------------------------------------
Nature of Reserves Date Credited Amount
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EXHIBIT C
SUBORDINATED INDEBTEDNESS
BALANCE AS
INSTRUMENT INTEREST RATE OF 6/30/98 MATURITY
Note payable to Robert 8.55% $1,000,000 In an installment
Brzustewicz on March 12,
1999
Note payable to James prime $440,213 In monthly
Hinshaw installments
through July 1,
2002
Notes payable to Kenneth 8.00% $166,667 In an installment
Burgess on October 27,
1998
Note payable to Bruce 6.77% to 8.00% $300,000 On demand
Stanley
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EXHIBIT D
SUBORDINATION PROVISIONS APPLICABLE TO
SUBORDINATED DEBT
(a) The indebtedness evidenced by the subordinated notes1/* and any
renewals or extensions thereof (hereinafter called "Subordinated Indebtedness"),
shall at all times be wholly subordinate and junior in right of payment to any
and all credit and other indebtedness, obligations and liabilities of the
Company to the lenders (collectively the "Lenders") and their agent (each, an
"Agent") under or in connection with (i) that certain Multicurrency
Long-Term Credit Agreement dated as of November 4, 1998 by and among the
Company, Harris Trust and Savings Bank, individually ("Harris") and as Agent for
the Lenders thereunder and other Lenders from time to time party thereto and
(ii) that certain Short-Term Credit Agreement dated as of November 4,
1998 by and among the Company, Harris Trust and Savings Bank, individually and
as Agent for the Lenders thereunder and other Lenders from time to time party
thereto, in each case howsoever evidenced, whether now existing or hereafter
created or arising, whether direct or indirect, absolute or contingent, or joint
or several, as any of the same may be modified, supplemented or amended from
time to time (hereinafter called "Superior Indebtedness"), in the manner and
with the force and effect hereafter set forth:
(1) In the event of any liquidation, dissolution or winding
up of the Company of in the event of any execution sale, receivership,
insolvency, bankruptcy, liquidation, readjustment, reorganization or
other similar proceeding relative to the Company or its properties,
then in any such event the holders of any and all Superior Indebtedness
shall be preferred in the payment of their claims over the holder or
holders of the Subordinated Indebtedness, and such Superior
Indebtedness shall be first paid and satisfied in full before any
payment or distribution of any kind or character, whether in cash,
property or securities shall be made upon the Subordinated
Indebtedness; and in any such event any dividend or distribution of any
kind or character, whether in cash, property or securities which shall
be made upon or in respect of the Subordinated Indebtedness, or any
renewals or extensions hereof, shall be paid over to the holders of
such Superior Indebtedness, pro rata, for application in payment
thereof unless and until such Superior Indebtedness shall have been
paid and satisfied in full;
(2) Without limiting any of the other provisions hereof, in
the event that the Subordinated Indebtedness is declared or becomes due
and payable because of the occurrence of any event of default hereunder
(or under the agreement or indenture, as appropriate) or for any other
reason other than at the option of the Company, under circumstances
when the foregoing clause (1) shall not be applicable, the holders of
the
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1
* Or debentures or other designation as may be appropriate.
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Subordinated Indebtedness shall be entitled to payments only after
there shall first have been paid in full all Superior Indebtedness
outstanding at the time the Subordinated Indebtedness so becomes due
and payable because of any such event, or payment shall have been
provided for in a manner satisfactory to the holders of such Superior
Indebtedness;
(3) No payment on account of principal of, premium, if any,
or interest on the Subordinated Indebtedness shall be made, nor shall
any assets be applied to the purchase or other acquisition or
retirement of the Subordinated Indebtedness, unless full payment of
amounts then due on all Superior Indebtedness has been made or duly
provided for, and no payment on account of principal of, premium, if
any, or interest on the Subordinated Indebtedness shall be made, nor
shall any assets be applied to the purchase or other acquisition or
retirement of the Subordinated Indebtedness, if at the time of such
payment or application or immediately after giving effect thereto,
there shall exist a default in the payment of any amount due on any
Superior Indebtedness;
(4) If there shall have occurred a default (other than a
default in the payment of any amount due) with respect to any issue of
Superior Indebtedness, as defined therein or in the instrument under
which the same has been issued, permitting the holders thereof, after
notice or lapse of time, or both, to accelerate the maturity thereof,
and any such holders as constitute a sufficient number or hold a
sufficient amount of such Superior Indebtedness as to have the right to
so accelerate the maturity thereof (the "Notifying Debtholders") shall
give written notice of the default to the Company (a "Default Notice"),
then, unless and until such default shall have been cured or waived, no
payment on account of principal of, premium, if any, or interest on the
Subordinated Indebtedness shall be made, nor shall any assets be
applied to the purchase or other acquisition or retirement of the
Subordinated Indebtedness, at any time during the 180 days immediately
following the delivery of the Default Notice to the Company (the
"Blockage Period"); provided that if, during the Blockage Period the
Notifying Debtholders shall have accelerated the maturity of the
Superior Indebtedness held by such Notifying Debtholders, or shall have
taken such action as is necessary under the governing agreement or
instrument to accelerate the maturity of such Superior Indebtedness
(subject only to the expiration of a grace period not exceeding 30
days), then the Blockage Period shall be extended for any such grace
period and thereafter for so long as such acceleration shall continue
to be in effect and judicial proceedings shall be pending with respect
thereto, the Notifying Debtholders shall be in the process of
foreclosing or otherwise collecting or realizing on collateral for such
Superior Indebtedness or the Notifying Debtholders shall otherwise be
pursuing collection procedures in good faith. At the expiration of such
Blockage Period, (i) the Company shall, absent the occurrence prior to
payment thereof by the Company of any event set forth in Section 1 or 3
hereof, pay to the holders of the Subordinated Indebtedness all amounts
which would have been payable other than by reason of acceleration
during the Blockage Period and (ii) if the default referred to in the
Default Notice shall continue to exist and shall not have been waived,
then the Notifying Debtholders shall be permitted to submit a new
Default Notice respecting such event of default. If, during any
Blockage Period, a subsequent Default Notice is served respecting an
event or events of default which were in existence and known
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to such Notifying Debtholder on the first day of the pre-existing
Blockage Period, then the Blockage period triggered by the subsequent
Default Notice shall terminate at the same time as the pre-existing
Blockage Period;
(5) Any holders of Subordinated Indebtedness shall not
without the prior written consent of the holders of the Superior
Indebtedness take any collateral for any Subordinated Indebtedness,
whether from the Company or any other party, nor take any guaranties
for any Subordinated Indebtedness, from any party, in each case if and
so long as the terms of any of the Superior Indebtedness prohibit such
liens or guaranties. Without limiting the effect of any of the other
provisions of this Agreement, any interest in or lien on any assets or
properties of the Company or any other party which may (notwithstanding
the foregoing agreement) be held or hereafter acquired by or on behalf
of any holder of Subordinated Indebtedness as security for any
Subordinated Indebtedness is and shall be absolutely and
unconditionally subject and subordinate in all respects to any security
interest or lien which may be held or hereafter acquired by or on
behalf of the holders of Superior Indebtedness in the same such assets
or properties as security for any Superior Indebtedness notwithstanding
the time of attachment of any interest therein or lien thereon or the
filing of any financing statement or any other priority provided by law
or by agreement; and
(6) The holders of Subordinated Indebtedness shall not take
any action to enforce collection of the Subordinated Indebtedness or to
foreclose or otherwise realize upon any security or guaranty given to
secure or guaranty the Subordinated Indebtedness and the Company and
any such guarantor shall not make any payment in respect of the
Subordinated Indebtedness, in each case during any Blockage Period, or
otherwise unless the Company shall, 180 days prior to the taking of any
such action, have provided the holders of Superior Indebtedness with
notice of the occurrence of the default giving rise to such action. Any
provisions of this Section 6 to the contrary notwithstanding, the
restriction contained in this Section shall no longer apply upon the
first to occur of the following: (i) the institution of
bankruptcy proceedings by or against the Company; (ii) the
acceleration of the Superior Indebtedness; or (iii) the payment
or other satisfaction of all of the Superior Indebtedness. The holders
of the Subordinated Indebtedness agree to accept a cure from the
Lenders of any default with respect to any Subordinated Indebtedness
(with the same force and effect as if such cure were timely provided by
the Company or the appropriate obligor) at any time during the period
during which the holders of the Subordinated Indebtedness agree not to
act pursuant to this Section and if any such default is cured during
any such period shall be rescinded and annulled all with the same
effect as though such default had not occurred and the rate of interest
on such Subordinated Indebtedness shall accrue during such period at
the applicable predefault rate.
(7) The holders of Subordinated Indebtedness undertake and
agree for the benefit of each holder of Superior Indebtedness to
execute, verify, deliver and file any proofs of claim, consents,
assignments or other instruments which any holder of Superior
Indebtedness may at any time require in order to prove and realize upon
any rights or claims pertaining to the subordinated notes and to
effectuate the full benefit of the subordination contained herein; and
upon failure of the holder of any subordinated note so to do, any such
holder of
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Superior Indebtedness shall be deemed to be irrevocably appointed the
agent and attorney-in-fact of the holder of such note to execute,
verify, deliver and file any such proofs of claim, consents,
assignments or other instrument.
(8) No right of any holder of any Superior Indebtedness to
enforce subordination as herein provided shall at any time or in any
way be affected or impaired by any failure to act on the part of the
Company or the holders of Superior Indebtedness, or by any
noncompliance by the Company with any of the terms, provisions and
covenants of the subordinated notes or the agreement under which they
are issued, regardless of any knowledge thereof that any such holder of
Superior Indebtedness may have or be otherwise charged with.
(9) The Company agrees, for the benefit of the holders of
Superior Indebtedness, that in the event that any subordinated note is
declared due and payable before its expressed maturity because of the
occurrence of a default hereunder, (i) the Company will provide
prompt notice in writing of such happening to the holders of Superior
Indebtedness and (ii) a holder of any Superior Indebtedness may
declare the same to be immediately due and payable, regardless of the
expressed maturity thereof.
(10) To the extent that the Company makes any payment on the
Superior Indebtedness which is subsequently invalidated, declared to be
fraudulent or preferential, set aside or is required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or
Federal law, common law or equitable cause (such payment being
hereinafter referred to as a "Voided Payment"), then to the extent of
such Voided Payment that portion of the Superior Indebtedness which had
been previously satisfied by such Voided Payment shall be revived and
continue in full force and effect as if such Voided Payment has never
been made. In the event that a Voided Payment is recovered from the
holders of the Superior Indebtedness, a default in the payment of
Superior Indebtedness specified in paragraph (a)(3) of these
subordination provisions shall be deemed to have existed and to be
continuing from the date of the initial receipt by the holders of the
Superior Indebtedness of such Voided Payment until the full amount of
such Voided Payment is fully and finally restored to the holder of the
Superior Indebtedness and until such time these subordination
provisions shall be in full force and effect.
(11) In the event that any payment or distribution of assets
is made to any holder of subordinated notes in contravention of these
subordination provisions, such payment or distribution shall be
received and held by such holder in trust for the benefit of the
holders of the then outstanding Superior Indebtedness and shall,
forthwith upon receipt thereof, be paid or distributed to the holders
of the Superior Indebtedness, pro rata, for application in payment
thereof.
(12) The foregoing provisions are solely for the purpose of
defining the relative rights of the holders of Superior Indebtedness on
the one hand, and the holders of the Subordinated Indebtedness on the
other hand, and nothing herein shall impair, as between the Company and
the holders of the Subordinated Indebtedness, the obligation of the
Company, which is unconditional and absolute, to pay the principal of
and premium, if any, and interest on the Subordinated Indebtedness in
accordance with their terms, nor shall
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anything herein prevent the holders of the Subordinated Indebtedness
from exercising all remedies otherwise permitted by applicable law or
hereunder upon default hereunder, subject to the rights of the holders
of Superior Indebtedness as herein provided for.
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EXHIBIT E
GUARANTY
This Guaranty Agreement, dated as of ____________, ____, made by
____________ _________________________________, a _________________ organized
under the laws of _________________ (the "Guarantor");
WITNESSETH:
WHEREAS, Anicom, Inc., a Delaware corporation (the "Borrower"), Harris
Trust and Savings Bank ("Harris"), individually and as Agent (Harris acting as
such agent and any successor or successors to Harris in such capacity being
hereinafter referred to as the "Agent") and the lenders from time to time party
thereto (Harris and such other lenders being hereinafter referred to
collectively as the "Lenders" and individually as a "Lender") have entered into
a Multicurrency LongTerm Credit Agreement dated as of November 4, 1998 (such
Credit Agreement as the same may from time to time hereafter be modified or
amended being hereinafter referred to as the "Credit Agreement") pursuant to
which the Lenders have extended various credit facilities to the Borrower (the
Agent and the Lenders being hereinafter referred to collectively as the
"Guaranteed Creditors" and individually as a "Guaranteed Creditor"); and
WHEREAS, the Borrower owns and holds all or substantially all of the
issued and outstanding common capital stock of the Guarantor; and
WHEREAS, it is a condition to the extension of credit by the Lenders
under the Credit Agreement that the Guarantor shall have executed and delivered
this Guaranty; and
WHEREAS, the Borrower has provided and will continue to provide the
Guarantor with business, technical and financial support beneficial to the
proper conduct of the Guarantor's business and the Guarantor will obtain
benefits as a result of the extensions of credit to the Borrower under the
Credit Agreement; and, accordingly, the Guarantor desires to enter into this
Guaranty in order to satisfy the condition described in the preceding paragraph;
and
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to the Guarantor, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby makes the following representations and
warranties to the Guaranteed Creditors and hereby covenants and agrees with the
Guaranteed Creditors as follows:
1. The Guarantor hereby unconditionally and irrevocably guarantees to
the Guaranteed Creditors, the due and punctual payment of all present and future
indebtedness of the Borrower evidenced by or arising out of the Credit Documents
(as hereinafter defined), including, but not limited to, (a) the due and
punctual payment of principal of and interest on all notes issued by the
Borrower under the Credit Agreement and any and all notes issued in extension or
renewal thereof or in substitution or replacement therefor (collectively the
"Notes") as and when the same shall become due and payable, whether at stated
maturity, by acceleration or otherwise, and (b) the full and prompt performance
and payment when due of any and all other indebtedness, obligations and
liabilities, whether now existing or hereafter arising, of the Borrower to the
Guaranteed Creditors under or arising out of the Credit Agreement, the Notes,
Credit Agreement and each guaranty executed by another subsidiary of the
Borrower in connection with the Credit Agreement being hereinafter collectively
referred to as the "Credit Documents"). The indebtedness, obligations and
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liabilities described in the immediately preceding clauses (a) and (b) are
hereinafter referred to as the "Guaranteed Obligations". In case of failure by
Borrower punctually to pay any indebtedness guaranteed hereby, the Guarantor
hereby unconditionally agrees to make such payment or to cause such payment to
be made punctually as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, and as if such payment were made
by the Borrower.
2. The obligations of the Guarantor under this Guaranty shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower or of any other
guarantor under the Credit Agreement or any other Credit Document or by
operation of law or otherwise;
(b) any modification or amendment of or supplement to the
Credit Agreement or any other Credit Document;
(c) any change in the corporate existence, structure or
ownership of (including any of the foregoing arising from any merger,
consolidation, amalgamation or similar transaction), or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting, the
Borrower, any other guarantor, or any of their respective assets, or
any resulting release or discharge of any obligation of the Borrower or
of any other guarantor contained in any Credit Document (it being
understood and agreed that the term "Borrower" as used herein shall
mean and include any corporation, partnership, association or any other
entity or organization resulting from a merger, consolidation,
amalgamation or similar transaction involving the Borrower);
(d) the existence of any claim, set-off or other rights which
the Guarantor may have at any time against any Guaranteed Creditor or
any other person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or
demand or any exercise of, or failure to exercise, any rights or
remedies against the Borrower, any other guarantor, any other person or
any of their respective properties;
(f) any application of any sums by whomsoever paid or
howsoever realized to any obligation of the Borrower regardless of what
obligations of the Borrower remain unpaid;
(g) any invalidity or unenforceability relating to or against
the Borrower or any other guarantor for any reason of the Credit
Agreement or of any other Credit Document or any provision of
applicable law or regulation purporting to prohibit the payment by the
Borrower or any other guarantor of the principal of or interest on any
Note or any other amount payable by it under the Credit Documents; or
(h) any other act or omission to act or delay of any kind by
any Guaranteed Creditor or any other person or any other circumstance
whatsoever that might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the obligations of the
Guarantor hereunder.
In order to hold the Guarantor liable hereunder, there shall be no obligation on
the part of the Guaranteed Creditors, at any time, to resort for payment to the
Borrower or any other guarantor, or
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resort to any collateral, security, property, liens or other rights or remedies
whatsoever, and the Guaranteed Creditors shall have the right to enforce this
Guaranty irrespective of whether or not other proceedings or steps seeking
resort or realization upon or from any of the foregoing are pending.
3. The Guarantor's obligations hereunder shall remain in full force
and effect until all commitments by the Guaranteed Creditors to extend credit to
the Borrower are terminated and the principal of and interest on the Notes and
all other amounts payable by the Borrower under the Credit Agreement and all
other Credit Documents shall have been paid in full. If at any time any payment
of the principal of or interest on any Note or any other amount payable by the
Borrower under the Credit Documents is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of the Borrower or
of any other guarantor, or otherwise, the Guarantor's obligations hereunder with
respect to such payment shall be reinstated at such time as though such payment
had become due but had not been made at such time.
4. (a)
The Guarantor irrevocably waives acceptance hereof, presentment, demand, protest
and any notice not provided for herein, as well as any requirement that at any
time any action be taken by the Agent, any Lender or any other person against
the Borrower, another guarantor or any other person.
(b) The Guarantor hereby agrees not to exercise or enforce any right of
exoneration, contribution, reimbursement, recourse or subrogation available to
the Guarantor against the Borrower or any other guarantor, or as to any security
therefor, unless and until all commitments by the Guaranteed Creditors to extend
credit to the Borrower are terminated and the principal of and interest on the
Notes and all other amounts payable by the Borrower under the Credit Agreement
and all other Credit Documents shall have been paid in full; and the payment by
the Guarantor of any of its obligations hereunder shall not in any way entitle
the Guarantor to any right, title or interest (whether by way of subrogation or
otherwise) in and to any of the Guaranteed Obligations or any proceeds thereof
or any security therefor unless and until all commitments by the Guaranteed
Creditors to extend credit to the Borrower are terminated and the principal of
and interest on the Notes and all other amounts payable by the Borrower under
the Credit Agreement and all other Credit Documents shall have been paid in
full.
5. Notwithstanding any other provision hereof, the right of recovery
of the Guaranteed Creditors against the Guarantor hereunder shall not exceed
$1.00 less than the amount which would render the Guarantor's obligations
hereunder void or voidable under applicable law, including without limitation
fraudulent conveyance law.
6. If acceleration of the time for payment of any amount payable by
the Borrower under the Credit Agreement or any other Credit Document is stayed
upon the insolvency, bankruptcy or reorganization of the Borrower, all such
amounts otherwise subject to acceleration under the terms of the Credit
Agreement or the other Credit Documents shall nonetheless be payable by the
Guarantor forthwith on demand by the Agent made at the request of the Guaranteed
Creditors.
7. Any payment of a Guaranteed Obligation required to be made pursuant
to this Guaranty shall be made in the currency which such Guaranteed Obligation
is required to be made in pursuant to the Credit Agreement or such other Credit
Document giving rise to such Guaranteed Obligation.
8. This Guaranty shall be binding upon the Guarantor and its
successors and assigns and
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shall inure to the benefit of the Guaranteed Creditors and their successors and
assigns. Any Guaranteed Creditor may, to the extent permitted by the Credit
Agreement, sell, transfer or assign its rights in the Guaranteed Obligations
held by it, or any part thereof, or grant participations therein; and in that
event, each and every immediate and successive assignee or transferee of, or
holder or participant in, all or any part of the Guaranteed Obligations, shall
have the right to enforce this Guaranty, by suit or otherwise, for the benefit
of such assignee, transferee, holder or participant as fully as if such assignee
or transferee, holder or participant were herein by name specifically given such
rights, powers and benefits; but each Guaranteed Creditor shall have an
unimpaired right to enforce this Guaranty for its own benefit or for the benefit
of any such participant as to so much of the Guaranteed Obligations that it has
not sold, assigned or transferred.
9. The Guarantor acknowledges that executed (or conformed) copies of
the Credit Agreement and the other Credit Documents have been made available to
its principal executive officers and such officers are familiar with the
contents thereof.
10. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by the Borrower, or others (including the
Guarantor), with respect to any of the Guaranteed Obligations shall, if the
statute of limitations in favor of the Guarantor against the Guaranteed
Creditors shall have commenced to run, toll the running of such statute of
limitations, and if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
11. The records of the Agent and each Lender as to the unpaid balance
of the Guaranteed Obligations at any time and from time to time shall be prima
facie evidence thereof without further or other proof for all purposes,
including the enforcement of this Guaranty and any collateral therefor.
12. Except as otherwise required by law, each payment by the Guarantor
hereunder shall be made without withholding for or on account of any present or
future taxes (other than overall net income taxes on the recipient) imposed by
or within the jurisdiction in which the Guarantor is domiciled, any jurisdiction
from which the Guarantor makes any payment, or (in each case) any political
subdivision or taxing authority thereof or therein. If any such withholding is
so required, the Guarantor shall make the withholding, pay the amount withheld
to the appropriate governmental authority before penalties attach thereto or
interest accrues thereon and forthwith pay such additional amount as may be
necessary to ensure that the net amount actually received by each Guaranteed
Creditor free and clear of such taxes (including such taxes on such additional
amount) is equal to the amount which that Guaranteed Creditor would have
received had such withholding not been made. If any Guaranteed Creditor pays any
amount in respect of any such taxes, penalties or interest the Guarantor shall
reimburse the Guaranteed Creditor for that payment on demand in the currency in
which such payment was made. If the Guarantor pays any such taxes, penalties or
interest, it shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Guaranteed Creditor on whose account such
withholding was made (with a copy to the Agent if not the recipient of the
original) on or before the thirtieth day after payment. If any Guaranteed
Creditor determines it has received or been granted a credit against or relief
or remission for, or repayment of, any taxes paid or payable by it because of
any taxes, penalties or interest paid by the Guarantor and evidenced by such a
tax receipt, such Guaranteed Creditor shall, to the extent it can do so without
prejudice
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to the retention of the amount of such credit, relief, remission or repayment,
pay to the Guarantor as applicable, such amount as such Guaranteed Creditor
determines is attributable to such deduction or withholding and which will leave
such Guaranteed Creditor (after such payment) in no better or worse position
than it would have been in if the Guarantor had not been required to make such
deduction or withholding. Nothing herein shall interfere with the right of each
Guaranteed Creditor to arrange its tax affairs in whatever manner it thinks fit
nor oblige any Guaranteed Creditor to disclose any information relating to its
tax affairs or any computations in connection with such taxes.
13. Each reference in the Credit Agreement or any other Credit Document
to U.S. Dollars or to an alternative currency (the "relevant currency") is of
the essence. To the fullest extent permitted by law, the obligation of the
Guarantor in respect of any amount due in the relevant currency under the Credit
Agreement shall, notwithstanding any payment in any other currency (whether
pursuant to a judgment or otherwise), be discharged only to the extent of the
amount in the relevant currency that the Guaranteed Creditor entitled to receive
such payment may, in accordance with normal banking procedures, purchase with
the sum paid in such other currency (after any premium and costs of exchange) on
the business day immediately following the day on which such Guaranteed Creditor
receives such payment. If the amount of the relevant currency so purchased is
less than the sum originally due to such Guaranteed Creditor in the relevant
currency, the Guarantor agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Guaranteed Creditor against such loss, and if
the amount of the specified currency so purchased exceeds the sum of (a) the
amount originally due to the relevant Guaranteed Creditor in the specified
currency plus (b) any amounts shared with other Guaranteed Creditors as a result
of allocations of such excess as a disproportionate payment to such Guaranteed
Creditor under Section 3.4 of the Credit Agreement, such Guaranteed
Creditor agrees to remit such excess to the Guarantor.
14. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF ILLINOIS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS), in which
State it shall be performed by the Guarantor.
15. The obligation of the Guarantor hereunder shall be absolute and
unconditional under all circumstances and irrespective of the validity or the
enforceability of the Guaranteed Obligations and irrespective of any present or
future law of any government or of any agency thereof purporting to reduce,
amend or otherwise affect any of the Guaranteed Obligations. To the extent that
the Guarantor or any of its properties or revenues has or hereafter may acquire
any right of immunity from suit, judgment or execution, the Guarantor hereby
irrevocably waives such right of immunity in respect of its obligations
hereunder and in respect of any action or proceeding, wherever brought, to
enforce any judgment against the Guarantor for breach of any of such
obligations.
16. The Guarantor hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Northern District of Illinois and of
any Illinois State court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Guaranty, the Credit
Agreement, the other Credit Documents or the transactions contemplated hereby or
thereby, and consents to the service of process by registered or certified mail
out of any such court or by service of process on the Borrower (now at
_________________________________
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_________________________________________________) which the Guarantor hereby
irrevocably appoints as its agent to receive, for it and on its behalf, service
of process in any action or proceeding in Illinois. Such service shall be deemed
completed on delivery to such process agent (whether or not it is forwarded to
and received by the Guarantor) provided that notice of such service of process
is given by the Guaranteed Creditors to the Guarantor. If, for any reason, such
process agent ceases to be able to act as such, the Guarantor irrevocably agrees
to appoint a substitute process agent acceptable to the Agent and to deliver to
the Agent a copy of the new agent's acceptance of that appointment within thirty
days. Nothing contained herein shall affect the right of the Guaranteed
Creditors to serve legal process in any other manner or to bring any proceeding
hereunder in any jurisdiction where the Guarantor may be amenable to suit. The
Guarantor irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Final
judgment (a certified or exemplified copy of which shall be conclusive evidence
of the fact and of the amount of any indebtedness of the Guarantor to the
Guaranteed Creditors therein described) against the Guarantor in any such legal
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment. The Guarantor, the Agent, and each Lender
hereby irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relating to the Guaranty, any Credit Document or
the transactions contemplated hereby or thereby.
17. The Guarantor shall at all times and from time to time do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged and
delivered all and singular every such further act, deed, transfer, assignment,
assurance, document and instrument as the Agent or any Lender may reasonably
require for the better accomplishing and effectuating of this Guaranty and the
provisions contained herein, and every officer of the Agent and the Lenders and
each of them are irrevocably appointed attorneys or attorney to execute in the
name and on behalf of the Guarantor any document or instrument for the said
purpose.
18. Except as otherwise defined herein, terms used herein and defined
in the Credit Agreement shall be used herein as so defined.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement to
be executed and delivered as of the date first above written.
By
Its
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SCHEDULE 6.2
MATERIAL SUBSIDIARIES
JURISDICTION OF PERCENTAGE
NAME Incorporation Ownership
Anicom Multimedia Wiring Canada 100%
Systems, Incorporated
NON-MATERIAL SUBSIDIARIES
JURISDICTION OF PERCENTAGE
NAME Incorporation Ownership
Morgan Hill Supply Company, New York 100%
Inc.2/(
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Anicom-Carolina, Inc.* Delaware 100%
Anicom-Norfolk, Inc.* Delaware 100%
Anicom-Security, Inc.* Delaware 100%
Northern Wire & Cable, Inc.* Delaware 100%
Northern Connectivity Corp.* Michigan 100%
3022504 Nova Scotia Limited Canada 100%
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2 The company is in the process of liquidating these Subsidiaries.
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EXHIBIT 10.3
SHORT-TERM CREDIT AGREEMENT
DATED AS OF NOVEMBER 4, 1998,
AMONG
ANICOM, INC.,
THE LENDERS
PARTY HERETO,
AND
HARRIS TRUST AND SAVINGS BANK,
INDIVIDUALLY AND AS AGENT
<PAGE>
TABLE OF CONTENTS
SECTION DESCRIPTION
SECTION 1................................................THE REVOLVING CREDITS.
Section 1.1............................................The Revolving Credit.
Section 1.2......................................The Revolving Credit Notes.
Section 1.3................................Manner and Disbursement of Loans.
Section 1.4..........................Extensions of the Revolving Commitments
SECTION 2.................................INTEREST AND CHANGE IN CIRCUMSTANCES.
Section 2.1...........................................Interest Rate Options.
Section 2.2...................................Minimum LIBOR Portion Amounts
Section 2.3.........................................Computation of Interest.
Section 2.4........................................Manner of Rate Selection.
Section 2.5...................................................Change of Law.
Section 2.6....Unavailability of Deposits or Inability to Ascertain Adjusted
LIBOR.
Section 2.7......................................Taxes and Increased Costs.
Section 2.8.........................Change in Capital Adequacy Requirements.
Section 2.9................................................Funding Indemnity
Section 2.10.................................................Lending Branch.
Section 2.11..................Discretion of Lenders as to Manner of Funding.
SECTION 3....................................FEES, PREPAYMENTS AND TERMINATIONS.
Section 3.1............................................................Fees
Section 3.2...........................................Voluntary Prepayments.
Section 3.3....................................................Terminations.
Section 3.4...............................Place and Application of Payments.
Section 3.5.......................................................Notations.
SECTION 4............................................................GUARANTIES.
Section 4.1............................................Subsidiary Guaranties
SECTION 5..........................................DEFINITIONS; INTERPRETATION.
Section 5.1.....................................................Definitions.
Section 5.2..................................................Interpretation.
SECTION 6........................................REPRESENTATIONS AND WARRANTIES.
Section 6.1...................................Organization and Qualification
Section 6.2.....................................................Subsidiaries
Sectio 6.3..................Corporate Authority and Validity of Obligations
Section 6.4....................................Use of Proceeds; Margin Stock
Section 6.5................................................Financial Reports
Section 6.6.......................................No Material Adverse Change
Section 6.7..................................................Full Disclosure
Section 6.8.......................................................Good Title
Section 6.9...............................Litigation and Other Controversies
Section 6.10...........................................................Taxes
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Section 6.11.......................................................Approvals
Section 6.12..........................................Affiliate Transactions
Section 6.13..............Investment Company; Public Utility Holding Company
Section 6.14...........................................................ERISA
Section 6.15............................................Compliance with Laws
Section 6.16................................................Other Agreements
Section 6.17......................................................No Default
Section 6.18............................................Year 2000 Compliance
SECTION 7..................................................CONDITIONS PRECEDENT
Section 7.1....................................................All Advances.
Section 7.2..................................................Initial Advance
Section 7.3.........................Termination of Existing Credit Agreement
Section 7.4......................Novmber 19 as Earliest Effective Date
SECTION 8.............................................................COVENANTS
Section 8.1................................Corporate Existence; Subsidiaries
Section 8.2........................................Maintenance of Properties
Section 8.3............................................Taxes and Assessments
Section 8.4........................................................Insurance
Section 8.5................................................Financial Reports
Section 8.6....................................................Current Ratio
Section 8.7..........................................Interest Coverage Ratio
Section 8.8...............................................Tangible Net Worth
Section 8.9...........................................Debt to Earnings Ratio
Section 8.10..................................................Leverage Ratio
Section 8.11.................................Indebtedness for Borrowed Money
Section 8.12...........................................................Liens
Section 8.13.....................Investments, Loans, Advances and Guaranties
Section 8.14....................................................Acquisitions
Section 8.15............................................Sales and Leasebacks
Section 8.16.................Dividends and Certain Other Restricted Payments
Section 8.17...............................Mergers, Consolidations and Sales
Section 8.18...........................................................ERISA
Section 8.19............................................Compliance with Laws
Section 8.20............................Burdensome Contracts With Affiliates
Section 8.21.......................................No Changes in Fiscal Year
Section 8.22......................................Inspection and Field Audit
Section 8.23.......................................Formation of Subsidiaries
Section 8.24.......................................Subordinated Indebtedness
Section 8.25.................................................Use of Proceeds
Section 8.26............................................Year 2000 Compliance
SECTION 9.........................................EVENTS OF DEFAULT AND REMEDIES
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Section 9.1..............................................Events of Default.
Section 9.2........................................Non-Bankruptcy Defaults.
Section 9.3.............................................Bankruptcy Defaults
SECTION 10............................................................THE AGENT.
Section 10.1..................................Appointment and Authorization
Section 10.2.............................................Rights as a Lender
Section 10.3...............................................Standard of Care
Section 10.4.............................................Costs and Expenses
Section 10.5......................................................Indemnity
SECTION 11.......................................................MISCELLANEOUS.
Section 11.1..............................................Withholding Taxes
Section 11.2.............................................Non-Business Days.
Section 11.3................................No Waiver, Cumulative Remedies.
Section 11.4..........................Waivers, Modifications and Amendments
Section 11.5.............................................Costs and Expenses
Section 11.6.............................................Documentary Taxes.
Section 11.7...................................Survival of Representations.
Section 11.8.......................................Survival of Indemnities.
Section 11.9.................................................Participations
Section 11.10.........................................Assignment Agreements
Section 11.11.......................................................Notices
Section 11.12..................................................Construction
Section 11.13......................................................Headings
Section 11.14....................................Severability of Provisions
Section 11.15..................................................Counterparts
Section 11.16..........................................Entire Understanding
Section 11.17............................Binding Nature, Governing Law, Etc
Section 11.18..............Submission to Jurisdiction; Waiver of Jury Trial
Signature
Exhibit A - Revolving Credit Note
Exhibit B - Compliance Certificate
Exhibit C - Subordinated Indebtedness
Exhibit D - Subordination Provisions Applicable to Subordinated Debt
Exhibit E - Form of Guaranty Schedule 6.2 - Subsidiaries
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<PAGE>
SHORT-TERM CREDIT AGREEMENT
To each of the Lenders party hereto:
Ladies and Gentlemen:
The undersigned, Anicom, Inc., an Delaware corporation (the "Company"),
applies to you for your several commitments, subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, to extend credit to the Company, all as more fully hereinafter set forth.
SECTION 1. THE REVOLVING CREDITS.
Section 1.1. The Revolving Credit. Subject to the terms and conditions
hereof, each Lender severally agrees to extend a revolving credit (the
"Revolving Credit") to the Company which may be availed of by the Company from
time to time during the period from and including the date hereof to but not
including the Revolving Credit Termination Date, at which time the commitments
of the Lenders to extend credit under the Revolving Credit shall expire. The
maximum amount of the Revolving Credit which each Lender agrees to extend to the
Company shall be as set forth opposite such Lender's signature hereto under the
heading "Revolving Credit Commitment" or as otherwise provided in Section
11.10 hereof, as such amount may be reduced pursuant hereto. The Revolving
Credit may be utilized by the Company in the form of Loans, all as more fully
hereinafter set forth, provided that (i) the aggregate principal amount
of Loans under the Revolving Credit outstanding at any one time shall not exceed
the Revolving Credit Commitments and (ii) no additional Loans shall be
available under the Revolving Credit unless the commitments under the Long-Term
Credit Agreement are fully utilized. During the period from and including the
date hereof to but not including the Revolving Credit Termination Date, the
Company may use the Revolving Credit Commitments by borrowing, repaying and
reborrowing Loans in whole or in part, all in accordance with the terms and
conditions of this Agreement. For purposes of this Agreement, where a
determination of the unused or available amount of the Revolving Credit
Commitments is necessary, the Loans outstanding under the Revolving Credit shall
be deemed to utilize the Revolving Credit Commitments. The obligations of the
Lenders hereunder are several and not joint, and no Lender shall under any
circumstances be obligated to extend credit under the Revolving Credit in excess
of its Revolving Credit Commitment.
Section 1.2. The Revolving Credit Notes. Subject to the terms and
conditions hereof, the Revolving Credit may be availed of by the Company in the
form of loans (individually a "Loan" and collectively the "Loans"). Each
Borrowing of Loans under the Revolving Credit shall be made ratably by the
Lenders in accordance with their Percentages of the Revolving Credit
Commitments. Each Borrowing of Loans under the Revolving Credit shall be in an
amount of $500,000 or such greater amount which is an integral multiple of
$100,000; provided, however, that a Borrowing of Loans under the Revolving
Credit which bears interest with reference to the Adjusted LIBOR shall be in
such greater amount as is required by Section 2 hereof. All Loans made by
a Lender under the Revolving Credit shall be made against and evidenced by a
single Short-Term Revolving Credit Note of the Company (individually a "Note"
and collectively the "Notes") payable to the order of such Lender in the amount
of its Revolving Credit Commitment, with each Note to be in the form (with
appropriate insertions) attached hereto as Exhibit A. Each Note shall be
dated the date of issuance thereof, be expressed to bear interest as set forth
in Section 2 hereof, and be expressed to
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mature on the Revolving Credit Termination Date. Without regard to the principal
amount of each Note stated on its face, the actual principal amount at any time
outstanding and owing by the Company on account thereof shall be the sum of all
advances then or theretofore made thereon less all payments of principal
actually received.
Section 1.3. Manner and Disbursement of Loans. The Company shall give
written or telephonic notice to the Agent (which notice shall be irrevocable
once given and, if given by telephone, shall be promptly confirmed in writing)
by no later than 11:00 a.m. (Chicago time) on the date the Company requests that
any Borrowing of Loans be made to it under the Revolving Credit Commitments, and
the Agent shall promptly notify each Lender of the Agent's receipt of each such
notice. Each such notice shall specify the date of the Borrowing of Loans
requested (which must be a Business Day), the type of Loan being requested, and
the amount of such Borrowing. Each Borrowing of Loans shall initially constitute
part of the applicable Domestic Rate Portion except to the extent the Company
has otherwise timely elected that such Borrowing, or any part thereof,
constitute part of a LIBOR Portion as provided in Section 2 hereof. The
Company agrees that the Agent may rely upon any written or telephonic notice
given by any person the Agent in good faith believes is an Authorized
Representative without the necessity of independent investigation and, in the
event any telephonic notice conflicts with the written confirmation, such
telephonic notice shall govern if the Agent and the Lenders have acted in
reliance thereon. Not later than 1:00 p.m. (Chicago time) on the date specified
for any Borrowing of Loans to be made hereunder, each Lender shall make the
proceeds of its Loan comprising part of such Borrowing available to the Agent in
Chicago, Illinois in immediately available funds. Subject to the provisions of
Section 7 hereof, the proceeds of each Loan shall be made available to
the Company at the principal office of the Agent in Chicago, Illinois, in
immediately available funds, upon receipt by the Agent from each Lender of its
Percentage of such Borrowing. Unless the Agent shall have been notified by a
Lender prior to 1:00 p.m. (Chicago time) on the date a Borrowing is to be made
hereunder that such Lender does not intend to make the proceeds of its Loan
available to the Agent, the Agent may assume that such Lender has made such
proceeds available to the Agent on such date and the Agent may in reliance upon
such assumption make available to the Company a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Lender
and the Agent has made such amount available to the Company, the Agent shall be
entitled to receive such amount from such Lender forthwith upon the Agent's
demand, together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Company and ending
on but excluding the date the Agent recovers such amount at a rate per annum
equal to the effective rate charged to the Agent for overnight federal funds
transactions with member banks of the federal reserve system for each day as
determined by the Agent (or in the case of a day which is not a Business Day,
then for the preceding day). If such amount is not received from such Lender by
the Agent immediately upon demand, the Company will, on demand, repay to the
Agent the proceeds of such Loan attributable to such Lender with interest
thereon at a rate per annum equal to the interest rate applicable to the
relevant Loan, but without such payment being considered a payment or prepayment
of a LIBOR Portion, so that the Company will have no liability under Section
2.9 hereof with respect to such payment.
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Section 1.4. Extensions of the Revolving Commitments. The Company may
advise the Agent in writing of its desire to extend the Revolving Credit
Termination Date for an additional 364 days; provided (i) such
request is made no earlier than 60 days and not later than 30 days prior to the
date on which such Revolving Credit Termination Date is scheduled to occur,
(ii) not more than one such request for the extension of a Termination
Date may be made in any one calendar year and (iii) in no event shall the
Revolving Credit Termination Date be extended beyond June 30, 2003. The
Agent shall promptly notify the Lenders of each such request. Each Lender shall
notify the Agent in writing within 30 days after such Lender receives
such notice from the Agent, whether such Lender in its sole discretion agrees to
such extension (each such Lender agreeing to such extension being hereinafter
referred to as a "Consenting Lender"). In the event that a Lender shall fail to
so notify the Agent within such 30day period, whether it agrees to such
extension, such Lender shall be deemed to have refused to grant the requested
extension. Upon receipt by the Agent of the consent of all the Lenders within
such 30day period, the Revolving Credit Termination Date or Dates shall be
automatically extended for 364 days. In the event the Company and all the
Lenders do not consent to the requested extension of the Revolving Credit
Termination Date, such Revolving Credit Termination Date shall take place as
scheduled.
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES.
Section 2.1. Interest Rate Options.
(a) Portions. Subject to the terms and conditions of this Section -
2, portions of the principal indebtedness evidenced by the Notes (all of the
indebtedness evidenced by the Notes bearing interest at the same rate for the
same period of time being hereinafter referred to as a "Portion") may, at the
option of the Company, bear interest with reference to the Domestic Rate
("Domestic Rate Portions") or with reference to the Adjusted LIBOR ("LIBOR
Portions"), and Portions may be converted from time to time from one basis to
another. All of the indebtedness evidenced by a particular Class of Notes which
is not part of a LIBOR Portion shall constitute a single Domestic Rate Portion.
All of the indebtedness evidenced by Notes of the same type which bears interest
with reference to a particular Adjusted LIBOR for a particular Interest Period
shall constitute a single LIBOR Portion. There shall not be more than five
(5) LIBOR Portions applicable to the Notes outstanding at any one time,
and each Lender shall have a ratable interest in each Portion based on its
Percentage. Anything contained herein to the contrary notwithstanding, the
obligation of the Lenders to create, continue or effect by conversion any LIBOR
Portion shall be conditioned upon the fact that at the time no Default or Event
of Default shall have occurred and be continuing. The Company hereby promises to
pay interest on each Portion at the rates and times specified in this
Section 2.
(b) Domestic Rate Portion. Each Domestic Rate Portion shall bear
interest at the rate per annum determined by adding the Applicable Margin to the
Domestic Rate as in effect from time to time, provided that if a Domestic Rate
Portion or any part thereof is not paid when due (whether by lapse of time,
acceleration or otherwise) such Portion shall bear interest, whether before or
after judgment, until payment in full thereof at the rate per annum determined
by adding 2% to the interest rate which would otherwise be applicable thereto
from time to time. Interest on each Domestic Rate Portion shall be payable
quarterly in arrears on the last day of each March, June, September and December
in each year (commencing September 30, 1998) and at maturity of the
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<PAGE>
applicable Notes, and interest after maturity (whether by lapse of time,
acceleration or otherwise) shall be due and payable upon demand. Any change in
the interest rate on the Domestic Rate Portions resulting from a change in the
Domestic Rate shall be effective on the date of the relevant change in the
Domestic Rate.
(c) LIBOR Portions. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding the
Applicable LIBOR Margin to the Adjusted LIBOR for such Interest Period, provided
that if any LIBOR Portion is not paid when due (whether by lapse of time,
acceleration or otherwise) such Portion shall bear interest, whether before or
after judgment, until payment in full thereof through the end of the Interest
Period then applicable thereto at the rate per annum determined by adding 2% to
the interest rate which would otherwise be applicable thereto, and effective at
the end of such Interest Period such LIBOR Portion shall automatically be
converted into and added to the applicable Domestic Rate Portion and shall
thereafter bear interest at the interest rate applicable to such Domestic Rate
Portion after default. Interest on each LIBOR Portion shall be due and payable
on the last day of each Interest Period applicable thereto and, with respect to
any Interest Period applicable to a LIBOR Portion in excess of 3 months, on the
date occurring every 3 months after the date such Interest Period began and at
the end of such Interest Period, and interest after maturity (whether by lapse
of time, acceleration or otherwise) shall be due and payable upon demand. The
Company shall notify the Agent on or before 11:00 a.m. (Chicago time) on the
third Business Day preceding the end of an Interest Period applicable to a LIBOR
Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in which
event the Company shall notify the Agent of the new Interest Period selected
therefor, and in the event the Company shall fail to so notify the Agent, such
LIBOR Portion shall automatically be converted into and added to the applicable
Domestic Rate Portion as of and on the last day of such Interest Period. The
Agent shall promptly notify each Lender of each notice received from the Company
pursuant to the foregoing provision.
Section 2.2. Minimum LIBOR Portion Amounts. Each LIBOR Portion shall be
in an amount equal to $1,000,000 or such greater amount which is an integral
multiple of $500,000.
Section 2.3. Computation of Interest. All interest on the Loans
constituting part of the Domestic Rate Portion shall be computed on the basis of
a year of 365 or 366 days, as the case may be, for the actual number of days
elapsed. All interest on the Loans constituting all or part of a LIBOR Portion
shall be computed on the basis of a year of 360 days for the actual number of
days elapsed.
Section 2.4. Manner of Rate Selection. The Company shall notify
the Agent by 11:00 a.m. (Chicago time) at least 3 Business Days prior to the
date upon which the Company requests that any LIBOR Portion be created or that
any part of the applicable Domestic Rate Portion be converted into a LIBOR
Portion (each such notice to specify in each instance the amount thereof and the
Interest Period selected therefor), and the Agent shall promptly notify each
Lender of each notice received from the Company pursuant to the foregoing
provision. If any request is made to convert a LIBOR Portion into another type
of Portion available hereunder, such conversion shall only be made so as to
become effective as of the last day of the Interest Period applicable thereto.
All requests for the creation, continuance and conversion of Portions under this
Agreement shall be irrevocable. Such requests may be written or oral and the
Agent is hereby authorized to honor
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telephonic requests for creations, continuances and conversions received by it
from any person the Agent in good faith believes to be an Authorized
Representative without the necessity of independent investigation, the Company
hereby indemnifying the Agent and the Lenders from any liability or loss ensuing
from so acting.
Section 2.5. Change of Law. Notwithstanding any other provisions of
this Agreement or any Note, if at any time any Lender shall determine in good
faith that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for such Lender to create or continue
to maintain any LIBOR Portion, it shall promptly so notify the Agent (which
shall in turn promptly notify the Company and the other Lenders) and the
obligation of such Lender to create, continue or maintain any such LIBOR Portion
under this Agreement shall terminate until it is no longer unlawful for such
Lender to create, continue or maintain such LIBOR Portion. The Company, on
demand, shall, if the continued maintenance of any such LIBOR Portion is
unlawful, thereupon prepay the outstanding principal amount of the affected
LIBOR Portion, together with all interest accrued thereon and all other amounts
payable to affected Lender with respect thereto under this Agreement; provided,
however, that the Company may elect to convert the principal amount of the
affected Portion into another type of Portion available hereunder, subject to
the terms and conditions of this Agreement.
Section 2.6. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR. Notwithstanding any other provision of this Agreement or any
Note, if prior to the commencement of any Interest Period, the Required Lenders
shall determine in good faith that deposits in the amount of any LIBOR Portion
scheduled to be outstanding during such Interest Period are not readily
available to such Lenders in the relevant market or, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining Adjusted LIBOR Rate, then such Lenders shall promptly give notice
thereof to the Agent (which shall in turn promptly notify the Company and the
other Lenders) and the obligations of the Lenders to create, continue or effect
by conversion any such LIBOR Portion in such amount and for such Interest Period
shall terminate until deposits in such amount and for the Interest Period
selected by the Company shall again be readily available in the relevant market
and adequate and reasonable means exist for ascertaining Adjusted LIBOR Rate, as
the case may be.
Section 2.7. Taxes and Increased Costs. With respect to any LIBOR
Portion, if any Lender shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, treaty, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority having
jurisdiction over such Lender or its lending branch or the LIBOR Portions
contemplated by this Agreement (whether or not having the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in
or for the account of, or loans by, or any other acquisition of funds
or disbursements by, such Lender which is not in any instance already
accounted for in computing the interest rate applicable to such LIBOR
Portion;
(ii) subject such Lender, any LIBOR Portion or a Note to the
extent it evidences
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<PAGE>
such a Portion to any tax (including, without limitation, any United
States interest equalization tax or similar tax however named
applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge, stamp tax,
fee, deduction or withholding in respect of this Agreement, any LIBOR
Portion or a Note to the extent it evidences such a Portion, except
such taxes as may be measured by the overall net income or gross
receipts of such Lender or its lending branches and imposed by the
jurisdiction, or any political subdivision or taxing authority thereof,
in which such Lender's principal executive office or its lending branch
is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to such Lender hereunder or under a Note
to the extent it evidences any LIBOR Portion (other than by a change in
taxation of the overall net income or gross receipts of such Lender or
its lending branches); or
(iv) impose on such Lender any penalty with respect to the
foregoing or any other condition regarding this Agreement, any LIBOR
Portion, or its disbursement, or a Note to the extent it evidences any
LIBOR Portion;
and such Lender shall determine in good faith that the result of any of the
foregoing is to increase the cost (whether by incurring a cost or adding to a
cost) to such Lender of creating or maintaining any LIBOR Portion hereunder or
to reduce the amount of principal or interest received or receivable by such
Lender (without benefit of, or credit for, any prorations, exemption, credits or
other offsets available under any such laws, treaties, regulations, guidelines
or interpretations thereof), then the Company shall pay on demand to the Agent
for the account of such Lender from time to time as specified by such Lender
such additional amounts as such Lender shall reasonably determine are sufficient
to compensate and indemnify it for such increased cost or reduced amount;
provided, however, that the Company shall not be obligated to pay any such
amount or amounts to the extent such additional cost or payment was incurred or
paid by such Lender more than ninety (90) days prior to the date of the
delivery of the certificate referred to in the immediately following sentence
(nothing herein to impair or otherwise affect the Company's liability hereunder
for costs or payments subsequently incurred or paid by such Lender). If a Lender
makes such a claim for compensation, it shall provide to the Company (with a
copy to the Agent) a certificate setting forth the computation of the increased
cost or reduced amount as a result of any event mentioned herein in reasonable
detail and such certificate shall be conclusive if reasonably determined.
Section 2.8. Change in Capital Adequacy Requirements. If any Lender
shall determine that the adoption after the date hereof of any applicable law,
rule or regulation regarding capital adequacy, or any change in any existing
law, rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by such Lender
(or any of its branches) or any corporation controlling such Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's or such
corporation's capital, as the case may be, as a consequence of such Lender's
obligations hereunder or for the credit which is the subject matter hereof to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance
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(taking into consideration such Lender's or such corporation's policies with
respect to liquidity and capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, within fifteen (15) days after
demand by such Lender, the Company shall pay to the Agent for the account of
such Lender such additional amount or amounts reasonably determined by such
Lender as will compensate such Lender for such reduction; provided, however,
that the Company shall not be obligated to compensate such Lender to the extent
its rate of return was so reduced more than ninety (90) .days prior to the
date of such demand (nothing herein to impair or otherwise affect the Company's
liability hereunder to compensate for subsequent reductions in such Lender's
rate of return).
Section 2.9. Funding Indemnity. In the event any Lender shall incur any
loss, cost or expense (including, without limitation, any loss (including loss
of profit), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or contracted to be acquired by
such Lender to fund or maintain its part of any LIBOR Portion or the relending
or reinvesting of such deposits or other funds or amounts paid or prepaid to
such Lender) as a result of:
(i) any payment of a LIBOR Portion on a date other than the
last day of the then applicable Interest Period for any reason, whether
before or after default, and whether or not such payment is required by
any provisions of this Agreement; or
(ii) any failure by the Company to create, borrow, continue or
effect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement;
then, upon the demand of such Lender, the Company shall pay to the Agent for the
account of such Lender such amount as will reimburse such Lender for such loss,
cost or expense. If a Lender requests such a reimbursement, it shall provide to
the Company (with a copy to the Agent) a certificate setting forth the
computation of the loss, cost or expense giving rise to the request for
reimbursement in reasonable detail and such certificate shall be conclusive if
reasonably determined; provided, however, that the Company shall not be
obligated to pay any such amount or amounts to the extent such loss, cost or
expense was incurred by such Lender more than ninety (90) days prior to
the date of the delivery of such certificate (nothing herein to impair or
otherwise affect the Company's liability hereunder to compensate for any
subsequent loss, cost, or expense incurred by such Lender).
Section 2.10. Lending Branch. Each Lender may, at its option, elect to
make, fund or maintain its pro rata share of the Loans hereunder at the
branches, offices, subsidiaries or affiliates specified on the signature pages
hereof or on any Assignment Agreement executed and delivered pursuant to
Section 11.10 hereof or at such of its branches, offices, subsidiaries or
affiliates as such Lender may from time to time elect. All the terms of this
Agreement shall only apply to any such branch, office, subsidiary or affiliates
and the Loans and Notes issued hereunder shall be deemed held by each Lender for
the benefit of any such branch, office, subsidiary or affiliate. To the extent
reasonably possible, a Lender shall designate an alternate branch or funding
office with respect to its pro rata share of the LIBOR Portions to reduce any
liability of the Company to such Lender under Section 2.7 hereof or to
avoid the unavailability of an interest rate option under Section 2.6
hereof, so long as such designation is not otherwise disadvantageous to the
Lender.
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Section 2.11. Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Notes in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including, without
limitation, determinations under Sections 2.6, 2.7 and 2.9 hereof) shall
be made as if each Lender had actually funded and maintained each LIBOR Portion
during each Interest Period applicable thereto through the purchase of deposits
in the relevant market in the amount of its pro rata share of such LIBOR
Portion, having a maturity corresponding to such Interest Period, and bearing an
interest rate equal to the LIBOR Rate, as the case may be, for such Interest
Period. SECTION 3. FEES, PREPAYMENTS AND TERMINATIONS.
Section 3.1. Fees.
(a) Facility Fee. For the period from and including the date hereof to
but not including the Revolving Credit Termination Date, the Company shall pay
to the Agent for the account of the Lenders a facility fee at the rate of 1/10
of 1% (0.10%) per annum (computed on the basis of a year of 360 days for the
actual number of days elapsed) on the average daily amount of the Revolving
Credit Commitments (whether or not in use). Such facility fee shall be payable
quarterly in arrears on the last day of each March, June, September and December
in each year (commencing December 31, 1998) and on the Revolving Credit
Termination Date.
(b) Agent's Fee. On July 30, 1999 and on the date occurring on
each anniversary of such date when any credit, or commitment to extend credit,
is outstanding hereunder, the Company shall pay to the Agent, for its own use
and benefit, an Agent's fee as mutually agreed upon by the Company and the
Agent.
Section 3.2. Voluntary Prepayments. The Company shall have the
privilege of prepaying the Notes in whole or in part (but if in part, then in a
minimum amount of $500,000 or such greater amount which is an integral multiple
of $100,000 as to any particular class of Notes being prepaid) at any time upon
notice to the Agent prior to 11:00 a.m. (Chicago time) on the date fixed
for prepayment (such notice if received subsequent to 11:00 a.m. (Chicago time)
on a given day to be treated as though received at the opening of business on
the next Business Day), of which the Agent shall promptly so notify the Lenders,
by paying to the Agent for the account of the Lenders the principal amount to be
prepaid and (i) if such a prepayment prepays the Notes in full and is
accompanied by the termination in whole of the Revolving Credit Commitments,
accrued interest thereon to the date of prepayment and (ii) any amounts
due to the Lenders under Section 2.9 hereof.
Section 3.3. Terminations. The Company shall have the
right at any time and from time to time, upon 5 Business Days' prior notice to
the Agent (which shall promptly so notify the Lenders), to ratably terminate
without premium or penalty and in whole or in part (but if in part, then in an
aggregate amount not less than $1,000,000 or such greater amount which is an
integral multiple of $500,000) the Revolving Credit Commitments; provided,
however, that the Revolving Credit Commitments may not be reduced to an amount
less than the aggregate principal amount of the Loans then outstanding.
Section 3.4. Place and Application of Payments. All payments of
principal, interest, fees and all other Obligations payable hereunder and under
the other Loan Documents shall be made to the Agent at its office at 111 West
Monroe Street, Chicago, Illinois (or at such other place as the
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Agent may specify) on the date any such payment is due and payable. Payments
received by the Agent after 11:00 a.m. (Chicago time) shall be deemed received
as of the opening of business on the next Business Day. All such payments shall
be made in lawful money of the United States of America, in immediately
available funds at the place of payment, without set-off or counterclaim and
without reduction for, and free from, any and all present or future taxes,
levies, imposts, duties, fees, charges, deductions, withholdings, restrictions
and conditions of any nature imposed by any government or any political
subdivision or taxing authority thereof (but excluding any taxes imposed on or
measured by the net income of any Lender). Except as herein provided, all
payments shall be received by the Agent for the ratable account of the Lenders
and shall be promptly distributed by the Agent ratably to the Lenders. Principal
payments (including prepayments) on the Notes shall first be applied to the
Domestic Rate Portion of such Notes until payment in full thereof, with any
balance applied to LIBOR Portions of such Notes in the order in which their
Interest Periods expire.
Anything contained herein to the contrary notwithstanding, all payments
and collections received in respect of the Obligations, in each instance, by the
Agent or any of the Lenders after the occurrence of an Event of Default shall be
remitted to the Agent and distributed as follows:
(a) first, to the payment of any outstanding costs and
expenses incurred by the Agent in protecting, preserving or enforcing
rights under this Agreement or any of the other Loan Documents, and in
any event including all costs and expenses of a character which the
Company has agreed to pay under Section 11.4 hereof (such funds
to be retained by the Agent for its own account unless it has
previously been reimbursed for such costs and expenses by the Lenders,
in which event such amounts shall be remitted to the Lenders to
reimburse them for payments theretofore made to the Agent);
(b) second, to the payment of any outstanding interest or
other fees or amounts due under this Agreement or any of the other Loan
Documents other than for principal, pro rata as among the Agent and the
Lenders in accord with the amount of such interest and other fees or
amounts owing each;
(c) third, to the payment of the principal of the Notes, pro
rata as among the Lenders in accord with the then respective unpaid
principal balances of the Notes;
(d) fourth, to the Agent and the Lenders pro rata in accord
with the amounts of any other indebtedness, obligations or liabilities
of the Company owing to them and secured by the Collateral Documents
unless and until all such indebtedness, obligations and liabilities
have been fully paid and satisfied; and
(e) fifth, to the Company or to whoever the Agent reasonably
determines to be lawfully entitled thereto.
Section 3.5. Notations. Each Loan made against a Note, the status of
all amounts evidenced by a Note as constituting part of the Domestic Rate
Portion or a LIBOR Portion, and, in the case of any LIBOR Portion, the rates of
interest and Interest Periods applicable to such Portion shall be recorded by
the relevant Lender on its books and records or, at its option in any instance,
endorsed on a schedule to the applicable Note of such Lender and the unpaid
principal balance and status, rates and Interest Periods so recorded or endorsed
by such Lender shall be prima facie evidence in any court or other proceeding
brought to enforce such Note of the principal
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amount remaining unpaid thereon, the status of the Loan or Loans evidenced
thereby and the interest rates and Interest Periods applicable thereto; provided
that the failure of a Lender to record any of the foregoing shall not limit or
otherwise affect the obligation of the Company to repay the principal amount of
each Note together with accrued interest thereon.
SECTION 4. GUARANTIES.
Section 4.1. Subsidiary Guaranties. The Loans and other Obligations shall be
guaranteed by each Material Subsidiary pursuant to a written guaranty from such
Material Subsidiary in form and substance reasonably acceptable to the Required
Lenders; provided that no such guaranty shall be required from Anicom Canada so
long as 65% of the capital stock of Anicom Canada is pledged to secure the
obligations under the Pledge Agreement.
SECTION 5. DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein shall have the
following meanings: "Acquisition" means (i) the acquisition of all or any
substantial part of the assets, property or business of any other person, firm
or corporation, or (ii) any acquisition of a majority of common stock, warrants
or other equity securities of any firm or corporation. "Adjusted LIBOR" means a
rate per annum determined by the Agent in accordance with the following formula:
Adjusted LIBOR = LIBOR
----------------------
100%-Reserve Percentage
"Reserve Percentage" means, for the purpose of computing Adjusted
LIBOR, the maximum rate of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental or other special reserves)
imposed by the Board of Governors of the Federal Reserve System (or any
successor) under Regulation D on Eurocurrency liabilities (as such term is
defined in Regulation D) for the applicable Interest Period as of the first day
of such Interest Period, but subject to any amendments to such reserve
requirement by such Board or its successor, and taking into account any
transitional adjustments thereto becoming effective during such Interest Period.
For purposes of this definition, LIBOR Portions shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or credit
for prorations, exemptions or offsets under Regulation D. "LIBOR" means, for
each Interest Period, (a) the LIBOR Index Rate for such Interest Period,
if such rate is available, and (b) if the LIBOR Index Rate cannot be
determined, the arithmetic average of the rates of interest per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) at which deposits in U.S.
Dollars in immediately available funds are offered to the Agent at 11:00 a.m.
(London, England time) 2 Business Days before the beginning of such Interest
Period by 3 or more major banks in the interbank eurodollar market selected by
the Agent for a period equal to such Interest Period and in an amount equal or
comparable to the applicable LIBOR Portion scheduled to be outstanding from the
Agent during such Interest Period. "LIBOR Index Rate" means, for any Interest
Period, the rate per annum (rounded upwards, if necessary, to the next higher
one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a
period equal to such Interest Period which appears on the Telerate Page 3750 as
of 11:00 a.m. (London, England time) on the date 2 Business Days before the
commencement of such Interest Period. "Telerate Page 3750" means the display
designated as "Page 3750" on the Telerate Service (or such other page as
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may replace Page 3750 on that service or such other service as may be nominated
by the British Bankers' Association as the information vendor for the purpose of
displaying British Banker's Association Interest Settlement Rates for U.S.
Dollar deposits). Each determination of LIBOR made by the Agent shall be
conclusive and binding on the Company and the Lenders absent manifest error.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for the purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise.
"Agent" means Harris Trust and Savings Bank and any successor thereto
appointed pursuant to Section 10.1 hereof.
"Agreement" means this Credit Agreement, as the same may be amended,
modified or restated from time to time in accordance with the terms hereof.
"Anicom Canada" means Anicom Multimedia Wiring Systems Incorporated, a
corporation organized under the laws of Nova Scotia, Canada.
"Applicable Margin" shall mean with respect to each type of Portion
specified below the rate specified for such Obligation in the chart below,
subject to quarterly adjustment as hereinafter provided:
When Following Applicable Applicable
Status Exists For any Margin Margin For
Margin For Domestic Rate LIBOR
Determination Date Portion Is: Portions Is:
Level I Status (0.50%) .50%
Level II Status (0.50%) .75%
Level III Status (0.50%) .875%
Level IV Status (0.25%) 1.00%
provided, however, that all of the foregoing percentages set forth in the chart
above are subject to the following:
(i) on or before the date that is ten (10) Business
Days after the latest date by which the Company is required to deliver
a Compliance Certificate to the Agent for a given quarterly accounting
period pursuant to Section 8.5(c) hereof (each date that is ten
Business
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Days after the latest date by which the Company is required to deliver
a Compliance Certificate to the Agent being herein referred to as the
"Margin Determination Date"), the Agent shall determine whether Level I
Status, Level II Status, Level III Status or Level IV Status exists as
of the close of the applicable quarterly accounting period (each, a
"quarterly test period") and shall also determine the Interest Coverage
Ratio and Debt to Earnings Ratio as of such close, in each case based
upon such Compliance Certificate and the financial statements delivered
to the Agent under Section 8.5 hereof for such quarterly test
period, and shall promptly notify the Company of such determination and
of any change in the Applicable Margin resulting therefrom;
(ii) the Applicable Margin for the Loans shall be the rate set
forth in the chart above, after giving effect to adjustments pursuant
to clause (iii) of this proviso below, unless the Interest
Coverage Ratio as of the close of such quarterly test period is less
than 2.5 to<-1- 32>1.0. In such event, the Applicable Margin for the
Loans in each case shall be .0625% above the rate otherwise specified
hereunder (after giving effect to adjustments pursuant to such clause
(iii) hereof);
(iii) the Applicable Margin for the Loans shall be the rate set
forth in the chart above, after giving effect to adjustments pursuant
to clause (ii) of this proviso above, unless the Debt to
Earnings Ratio as of the close of the relevant quarterly test period is
greater than 2.75 to 1.0. In such event, the Applicable Margin for the
Loans in each case shall be .25% above the rate otherwise specified
hereunder (after giving effect to adjustments pursuant to such clause
(ii) hereof);
(iv) any change in the Applicable Margin (except for such a
change pursuant to clause (iii) hereof) shall be effective as of
such Margin Determination Date, with such new Applicable Margin to
continue in effect until the next Margin Determination Date. If the
Company has not delivered a Compliance Certificate by the date such
Compliance Certificate is required to be delivered under Section
8.5 hereof, until a Compliance Certificate is delivered before the
next Margin Determination Date, the Applicable Margin shall be the
Applicable Margin for Level IV Status as if the Debt to Earnings Ratio
as calculated for purposes of clause (iii) above were greater
than 2.75 to 1.0. If the Company subsequently delivers a Compliance
Certificate before the next Margin Determination Date, the Applicable
Margin established by such Compliance Certificate shall take effect
from the date ten (10) Business Days after the date of such
delivery and remain effective until the next Margin Determination Date;
and
(v) the initial Applicable Margin in effect through the first
Margin Determination Date shall be the Applicable Margin for Level I
Status. "Assignment Agreements" is defined in Section 11.10
hereof. "Authorized Representative" means those persons shown on the
list of officers provided by
the Company pursuant to Section 7.2(a) hereof or on any update of any
such list provided by the Company to the Agent, or any further or different
officer of the Company so named by any Authorized Representative of the Company
in a written notice to the Agent.
"Borrowing" means the total of Loans of a single type made to the
Company by all the Lenders on a single date, and if such Loans are to be part of
a LIBOR Portion, for a single Interest
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Period. Borrowings of Loans are made and maintained ratably from each of the
Lenders according to their Percentages of the applicable Commitments.
"Business Day" means any day other than a Saturday or Sunday on which
banks are not authorized or required to close in Chicago, Illinois and, when
used with respect to LIBOR Portions, a day on which banks are also dealing in
United States Dollar deposits in London, England and Nassau, Bahamas.
"Canadian Debt" means the indebtedness of Anicom Canada arising from a
loan made by the Canadian Lender in an aggregate principal amount equal to the
U.S. Dollar equivalent of $35,000,000 to finance a like amount of the purchase
price payable by Anicom Canada for the Texcan Acquisition.
"Canadian Lender" means a commercial bank in Canada.
"Capital Lease" means any lease of Property which in accordance with
GAAP is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means the amount of the liability shown
on the balance sheet of any Person in respect of a Capital Lease determined in
accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Company" is defined in the introductory paragraph hereof.
"Compliance Certificate" is defined in Section 8.5 hereof.
"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Company and its Subsidiaries for such period computed on a
consolidated basis in accordance with GAAP, including without limitation
interest income and, without limiting the foregoing, after deduction from gross
income of all expenses and reserves, including reserves for all taxes on or
measured by income, but excluding any extraordinary profits and also excluding
any taxes on such profits.
"Convertible Preferred Stock" shall mean the Series B
Convertible Preferred Stock issued by the Company on September 21, 1998.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Current Ratio" means, as of any time the same is to be determined, the
ratio of current assets of the Company and its Subsidiaries to current
liabilities of the Company and its Subsidiaries, all as determined on a
consolidated basis in accordance with GAAP consistently applied, but, in any
event subject to the following restrictions and limitations:
(a) current liabilities for such purposes shall include all
loans outstanding hereunder or under the Long-Term Credit Agreement
which mature within one year of such date of determination;
(b) current liabilities for such purposes shall exclude all
Special Post-Closing Acquisition Liabilities; and
(c) current assets for such purposes shall include all
prepaid expenses. "Debt to Earnings Ratio" means, as of any time the
same is to be determined, the ratio of
Total Funded Debt at such time to EBITDA for the four fiscal quarters of the
Company then ended.
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"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"Domestic Rate" means, for any day, the greater of (i) the rate
of interest announced by the Agent from time to time as its prime commercial
rate, as in effect on such day (it being understood and agreed that such rate
may not be the Agent's best or lowest rate); and (ii) the sum of (x)
the rate determined by the Agent to be the average (rounded upwards, if
necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to the
Agent at approximately 10:00 a.m. (Chicago time) (or as soon thereafter
as is practicable) on such day (or, if such day is not a Business Day, on the
immediately preceding Business Day) by two or more Federal funds brokers
selected by the Agent for the sale to the Agent at face value of Federal funds
in an amount equal or comparable to the principal amount owed to the Agent for
which such rate is being determined, plus (y) 1/2 of 1%.
"Domestic Rate Portions" is defined in Section >2.1(a) hereof.
"EBIT" means, for any period, Consolidated Net Income for such period
plus all amounts deducted in arriving at such Consolidated Net Income amount for
such period for Interest Expense and for foreign, federal, state and local
income tax expense.
"EBITDA" means, for any period, EBIT for such period plus all amounts
deducted in arriving at such EBIT in respect of all (i) amounts properly charged
for depreciation of fixed assets and amortization of Capital Leases and
intangible assets during such period on the books of the Company and its
Subsidiaries and (ii) (to the extent such period includes the third fiscal
quarter of the fiscal year the Company ended on or about December 31,
1998) all the Fiscal 1998 Charges during such period, all as determined in
accordance with GAAP.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Event of Default" means any event or condition identified as such in
Section 9.1 hereof.
"Existing Lenders" means Harris Trust and Savings Bank, The First
National Bank of Chicago and LaSalle National Bank.
"Existing Credit Agreement" means the Short-Term Credit Agreement dated
as of June 30, 1998, among the Company, Harris Trust and Savings Bank, as
Agent and the Existing Lenders, as amended and supplemented.
"Fiscal 1998 Charges" means up to $5,158,000 of the charges taken by
the Company against its earnings in the third fiscal quarter of its fiscal year
ended on or about December 31, 1998 for the Company's costs (including internal
costs) related to the Texcan Acquisition (including the consolidation of
redundant facilities).
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its Subsidiaries on a basis consistent
with the preparation of the Company's most recent financial statements furnished
to the Lenders pursuant to Section 6.5 hereof.
"Guarantor" means each Material Subsidiary (other than, subject to
Section 4.1, Anicom Canada) of the Company that executes and delivers to
the Agent a Guaranty Agreement.
"Guaranty Agreement" means each guaranty issued by a Material
Subsidiary to the Agent guaranteeing all or any Obligations.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any
manner by such Person representing money
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borrowed (including by the issuance of debt securities), (ii) all
indebtedness for the deferred purchase price of property or services (other than
trade accounts payable arising in the ordinary course of business which are not
more than sixty (60) days past due), (iii) all indebtedness
secured by any Lien upon Property of such Person, whether or not such Person has
assumed or become liable for the payment of such indebtedness, (iv) all
Capitalized Lease Obligations of such Person and (v) all obligations of
such Person on or with respect to letters of credit, bankers' acceptances and
other extensions of credit whether or not representing obligations for borrowed
money.
"Intangible Assets" means, as of any time the same is to be determined,
goodwill, patents, trademarks, copyrights and franchises of the Company and its
Subsidiaries (including, without limitation, unamortized debt discount and
expense, organization costs and deferred research and development expense)
determined on a consolidated basis in accordance with GAAP.
"Interest Expense" means, with reference to any period, the sum of all
interest charges (including imputed interest charges with respect to Capitalized
Lease Obligations and all amortization of debt discount and expense) of the
Company and its Subsidiaries for such period as computed on a consolidated basis
in accordance with GAAP.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date
with respect to such LIBOR Portion and ending 1, 2, 3 or 6 months thereafter as
selected by the Company in its notice as provided herein; provided that, all of
the foregoing provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless in the case of an Interest Period
for a LIBOR Portion the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity
date of the relevant Notes;
(iii) the interest rate to be applicable to each Portion for
each Interest Period shall apply from and including the first day of
such Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto the Company will be unable to make a principal payment
scheduled to be made during such Interest Period without paying part of
a LIBOR Portion on a date other than the last day of the Interest
Period applicable thereto.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the month
in which an Interest Period is to end, then such Interest Period shall end on
the last Business Day of such month.
"Lender" means Harris Trust and Savings Bank, the other signatories
hereto (other than the Company) and all other lenders becoming parties hereto
pursuant to Section 11.10 hereof.
"Leverage Ratio" means, as of any time the same is to be determined,
the ratio of Total
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Funded Debt of the Company and its Subsidiaries to Total Capitalization of the
Company and its Subsidiaries, all as determined on a consolidated basis in
accordance with GAAP.
"Level I Status" shall mean, for any Margin Determination Date,
that as of the close of the quarterly test period with reference to which such
Margin Determination Date was set, the Pricing Leverage Ratio is less than or
equal to 10%.
"Level II Status" shall mean, for any Margin Determination Date, that
as of the close of the quarterly test period with reference to which such Margin
Determination Date was set, the Pricing Leverage Ratio is greater than 10% but
less than or equal to 20%.
"Level III Status" shall mean, for any Margin Determination Date, that
as of the close of the quarterly test period with reference to which such Margin
Determination Date was set, the Pricing Leverage Ratio is greater than 20% but
less than or equal to 30%.
"Level IV Status" shall mean, for any Margin Determination Date, that
as of the close of the quarterly test period with reference to which such Margin
Determination Date was set, the Pricing Leverage Ratio is greater than 30%.
"LIBOR Portions" means and includes LIBOR Portions, unless the context
in which such term is used shall otherwise require.
"LIBOR Portions" is defined in Section 2.1(a) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.
"Loan Documents" means this Agreement, the Notes, the Assignment
Agreements and each other instrument or document to be delivered hereunder or
thereunder or otherwise in connection therewith.
"Loans" is defined is Section 1.2 hereof.
"Long-Term Credit Agreement" means that certain LongTerm Multicurrency
Credit Agreement dated as of even date herewith among the Company, Harris Trust
and Savings Bank, individually and as agent, The First National Bank of Chicago,
LaSalle National Bank, Bank of America National Trust and Savings Association
and the other lenders from time to time party thereto, as amended and
supplemented from time to time.
"Material Subsidiary" means any Subsidiary which has, as of the close
of any completed fiscal year of the Company (commencing with the Company's
fiscal year ending December 31, 1996), EBITDA for any such fiscal year (directly
and together with its subsidiaries) greater than 7% of the EBITDA of the Company
and its Subsidiaries for any such fiscal year on a consolidated basis in
accordance with GAAP.
"Non-Material Subsidiary" means each Subsidiary other than a Material
Subsidiary.
"Notes" is defined in Section 1.2 hereof.
"Obligations" means all obligations of the Company to pay principal and
interest on the Loans, all fees and charges payable hereunder, and all other
payment obligations of the Company arising under or in relation to any Loan
Document, in each case whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever evidenced,
held or acquired.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any
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or all of its functions under ERISA.
"Percentage" means, for each Lender, the percentage of the Revolving
Credit Commitments represented by such Lender's Revolving Credit Commitment or,
if the Revolving Credit Commitments have been terminated, the percentage held by
such Lender of the aggregate principal amount of all outstanding Obligations.
"Person" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title
IV of ERISA or subject to the minimum funding standards under Section
412 of the Code that either (i) is maintained by a member of the
Controlled Group for employees of a member of the Controlled Group, or (ii)
is maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"Pledge Agreement" means that certain Pledge Agreement dated as of even
date herewith between the Company and the Agent.
"Portion" is defined in Section 2.1(a) hereof.
"Pricing Leverage Ratio" means, as of any time the same is to be
determined, the ratio of Total Funded Debt to Total Capitalization of the
Company and its Subsidiaries, all as determined on a consolidated basis in
accordance with GAAP.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Put/Call Agreement" means any contract whereby the Company obligates
itself to purchase the Canadian Debt from the Canadian Lender.
"Required Lenders" means, as of the date of determinations thereof,
those Lenders holding at least 66-2/3% of the Revolving Credit Commitments or,
in the event that no Revolving Credit Commitments are outstanding hereunder,
holding at least 66-2/3% in aggregate principal amount of the Loans.
"Revolving Credit" is defined in Section 1.1 hereof.
"Revolving Credit Commitments" means the commitments of the Lenders to
extend credit under the Revolving Credit in the amounts set forth opposite their
signatures hereto under the heading "Revolving Credit Commitment" and opposite
their signatures on Assignment Agreements delivered pursuant to Section
11.10 hereof under the heading "Revolving Credit Commitment", as such amounts
may be reduced pursuant hereto.
"Revolving Credit Note" is defined in Section 1.2 hereof.
"Revolving Credit Termination Date" means June 30, 1999, or such
earlier date on which the Revolving Credit Commitments are terminated in whole
pursuant to Section 3.3, 9.2 or 9.3 hereof, or in such later date to
which the Revolving Credit Termination Date is extended pursuant to Section 1.4
hereof.
"Shareholders' Equity" means, as of any time the same is to be
determined, the sum (without duplication) of (i) shareholders' equity
(including all capital stock, additional
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paid-in-capital and retained earnings after deducting treasury stock, but
excluding minority interests in subsidiaries) which would appear on the balance
sheet of the Company and its Subsidiaries plus (to the extent not included in
such Shareholders' Equity) (ii) the Convertible Preferred Stock, all as
determined on a consolidated basis in accordance with GAAP.
"SEC" means the Securities and Exchange Commission or any successor
agency thereto.
"Special Post-Closing Acquisition Liabilities" means as of any time,
those liabilities established by the Company after making an Acquisition which
survive such Acquisition associated with the Property or Person so acquired, or
the employees of such Person, to the extent (i) such liabilities are reflected
as a current liability in accordance with GAAP on a consolidated balance sheet
of the Company and its Subsidiaries, (ii) the creation of such liabilities is
offset by a concurrent debit of like amount in accordance with GAAP to the
goodwill of the Company and its Subsidiaries and (iii) such liabilities have
been reasonably described in the most recent Compliance Certificate submitted to
the Agent.
"Subordinated Indebtedness" means, as of any time the same is to be
determined, indebtedness of the Company or any Subsidiary subordinated in right
of payment to the Obligations, pursuant to documentation containing interest
rates, payment terms, maturities, amortization schedules, covenants, defaults,
remedies, subordination provisions and other material terms in form and
substance satisfactory to the Lenders. The Lenders further acknowledge and agree
that subordination provisions in the form or substantially the form annexed
hereto as Exhibit D constitute subordination provisions satisfactory in
form and substance to the Lenders.
"Subsidiary" means any corporation or other Person more than 50% of the
outstanding ordinary voting shares or other equity interests of which is at the
time directly or indirectly owned by the Company, by one or more of its
Subsidiaries, or by the Company and one or more of its Subsidiaries.
"Tangible Net Worth" means, as of any time the same is to be
determined, Shareholders' Equity less the sum of (i) all notes receivable
from officers and employees of the Company and its Subsidiaries and (ii)
Intangible Assets.
"Texcan" means, collectively, Texcan Cables, Inc., a Nevada
corporation, Texcan Cables International, Inc., a Nevada corporation and Texcan
Cables Limited, a Canadian corporation.
"Texcan Acquisition" means the acquisition of all or substantially all
of the assets of Texcan by Anicom Canada on September 21, 1998 pursuant
to that certain Asset Purchase Agreement dated as of September 21, 1998
between the Company, Anicom Canada and Texcan.
"Total Capitalization" means the sum of Total Funded Debt and
Shareholders' Equity.
"Total Funded Debt" means, at any time the same is to be determined,
the aggregate of all Indebtedness for Borrowed Money of the Company and its
Subsidiaries at such time, plus all Indebtedness for Borrowed Money of any other
Person which is directly or indirectly guaranteed by the Company or any of its
Subsidiaries or which the Company or any of its Subsidiaries has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which the Company or any of its Subsidiaries has otherwise assured a creditor
against loss.
"Unfunded Vested Liabilities" means, for any Plan at any time, the
amount (if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent
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valuation date for such Plan, but only to the extent that such excess represents
a potential liability of a member of the Controlled Group to the PBGC or the
Plan under Title IV of ERISA.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of the issued
and outstanding shares of capital stock (other than directors' qualifying shares
as required by law) or other equity interests are owned by the Company and/or
one or more Wholly-Owned Subsidiaries within the meaning of this definition.
"Year 2000 Problem" means any significant risk that computer hardware,
software, or equipment containing embedded microchips essential to the business
or operations of the Company or any of the Subsidiaries will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as efficiently and reliably as in the case of times or time periods
occurring before January 1, 2000, including the making of accurate leap
year calculations.
Section 5.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The words
"hereof", "herein", and "hereunder" and words of like import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All references to time of day herein are references
to Chicago, Illinois time unless otherwise specifically provided. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, it shall be done in
accordance with GAAP except where such principles are inconsistent with the
specific provisions of this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Agent and the Lenders as
follows:
Section 6.1. Organization and Qualification. The Company is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Delaware, has full and adequate corporate power to own its
Property and conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying.
Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has full and adequate power to
own its Property and conduct its business as now conducted, and is duly licensed
or qualified and in good standing in each jurisdiction in which the nature of
the business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to obtain such
authorization, license or qualification would not result in a material adverse
change in the business, financial condition or Properties of the Company and its
Subsidiaries. Schedule 6.2 hereto identifies each Subsidiary, the
jurisdiction of its incorporation or organization, as the case may be, the
percentage of issued and outstanding shares of each class of its capital stock
or other equity interests owned by the Company and the Subsidiaries and, if such
percentage is not 100% (excluding directors' qualifying shares as required by
law), a description of each class of its authorized capital stock and other
equity interests and the number of shares of each class issued and outstanding.
All of the outstanding shares of capital stock
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and other equity interests of each Subsidiary are validly issued and outstanding
and fully paid and nonassessable and all such shares and other equity interests
indicated on Schedule 6.2 as owned by the Company or a Subsidiary are
owned, beneficially and of record, by the Company or such Subsidiary free and
clear of all Liens. There are no outstanding commitments or other obligations of
any Subsidiary to issue, and no options, warrants or other rights of any Person
to acquire, any shares of any class of capital stock or other equity interests
of any Subsidiary. Each Subsidiary that is a Material Subsidiary is so noted on
Schedule 6.2 hereto. Each Material Subsidiary is a Guarantor except to
the extent Section 4.1 or Section 8.1(b) hereof does not yet
require such Subsidiary to be a Guarantor.
Section 6.3. Corporate Authority and Validity of Obligations. (a) The Company
has full right and authority to enter into this Agreement and the other Loan
Documents, to make the borrowings herein provided for, to issue its Notes in
evidence thereof, and to perform all of its obligations hereunder and under the
other Loan Documents. The Loan Documents delivered by the Company have been duly
authorized, executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable in accordance with their terms
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and this Agreement and the
other Loan Documents do not, nor does the performance or observance by the
Company of any of the matters and things herein or therein provided for,
contravene or constitute a default under any provision of law or any judgment,
injunction, order or decree binding upon the Company or any provision of the
charter, articles of incorporation or by-laws of the Company or any covenant,
indenture or agreement of or affecting the Company or any of its Properties, or
result in the creation or imposition of any Lien on any Property of the Company.
(b) Guarantors. Each Guarantor has full right and authority to enter
into any Loan Documents it has executed and to perform all of its obligations
thereunder. The Loan Documents delivered by each Guarantor have been duly
authorized, executed and delivered by such Guarantor and constitute valid and
binding obligations of such Guarantor enforceable in accordance with their terms
except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and such Loan Documents do
not, nor does the performance or observance by such Guarantor of any of the
matters and things herein or therein provided for, contravene or constitute a
default under any provision of law or any judgment, injunction, order or decree
binding upon the Company or any Guarantor or any provision of the charter,
articles of incorporation or by-laws of the Company or any Guarantor or any
covenant, indenture or agreement of or affecting the Company or any Guarantor or
any of their Properties, or result in the creation or imposition of any Lien on
any Property of the Company or any Guarantor.
Section 6.4. Use of Proceeds; Margin Stock. The Company shall use the
proceeds of the Loans and other extensions of credit made available hereunder
solely for its general working capital purposes and for such other legal and
proper purposes as are consistent with all applicable laws. Neither the Company
nor any Subsidiary is engaged in the business of extending credit for the
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purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System),
and no part of the proceeds of any Loan or any other extension of credit made
hereunder will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin
stock.
Section 6.5. Financial Reports. The consolidated balance sheet of the
Company and its Subsidiaries as at December 31, 1997, and the related
consolidated statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for the fiscal year then ended, and accompanying
notes thereto, which financial statements are accompanied by the audit report of
PricewaterhouseCoopers LLP, independent public accountants, and the unaudited
interim consolidated balance sheet of the Company and its Subsidiaries as at
June 30, 1998, and the related consolidated statements of income and cash
flows of the Company and its Subsidiaries for the six (6) months then
ended, heretofore furnished to the Lenders, fairly present the consolidated
financial condition of the Company and its Subsidiaries as at said dates and the
consolidated results of their operations and cash flows for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis. Neither the Company nor any Subsidiary has contingent
liabilities which are material to it other than as indicated on such financial
statements or, with respect to future periods, on the financial statements
furnished pursuant to Section 8.5 hereof.
Section 6.6. No Material Adverse Change. Since June 30, 1998,
there has been no change in the condition (financial or otherwise) or business
prospects of the Company or any Subsidiary except those occurring in the
ordinary course of business, none of which individually or in the aggregate have
been materially adverse.
Section 6.7. Full Disclosure. The statements and information furnished
to the Lenders in connection with the negotiation of this Agreement and the
other Loan Documents and the commitments by the Lenders to provide all or part
of the financing contemplated hereby do not contain any untrue statements of a
material fact or omit a material fact necessary to make the material statements
contained herein or therein not misleading, the Lenders acknowledging that as to
any projections furnished to Lenders, the Company only represents that the same
were prepared on the basis of information and estimates the Company believed to
be reasonable.
Section 6.8. Good Title. The Company and its Subsidiaries each have
good and defensible title to their assets as reflected on the most recent
consolidated balance sheet of the Company and its Subsidiaries furnished to the
Lenders (except for sales of assets by the Company and its Subsidiaries in the
ordinary course of business), subject to no Liens other than such thereof as are
permitted by Section 8.12 hereof.
Section 6.9. Litigation and Other Controversies. There is no litigation
or governmental proceeding or labor controversy pending, nor to the knowledge of
the Company threatened, against the Company or any Subsidiary which if adversely
determined would (a) impair the validity or enforceability of, or impair
the ability of the Company to perform its obligations under, this Agreement or
any other Loan Document or (b) result in any material adverse change in
the financial condition, Properties, business or operations of the Company or
any Subsidiary.
Section 6.10. Taxes. All tax returns required to be filed by the Company or
any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective Properties, income or
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franchises, which are shown to be due and payable in such returns, have been
paid. The Company does not know of any proposed additional tax assessment
against it or its Subsidiaries for which adequate provision in accordance with
GAAP has not been made on its accounts. Adequate provisions in accordance with
GAAP for taxes on the books of the Company and each Subsidiary have been made
for all open years, and for its current fiscal period.
Section 6.11. Approvals. No authorization, consent, license, or
exemption from, or filing or registration with, any court or governmental
department, agency or instrumentality, nor any approval or consent of the
stockholders of the Company or any other Person, is or will be necessary to the
valid execution, delivery or performance by the Company of this Agreement or any
other Loan Document.
Section 6.12. Affiliate Transactions. Neither the Company nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
(other than with Wholly-Owned Subsidiaries) on terms and conditions which are
less favorable to the Company or such Subsidiary than would be usual and
customary in similar contracts or agreements between Persons not affiliated with
each other; provided that the foregoing shall not be deemed to apply to (i)
the Put/Call Agreement or any other contracts or agreements entered into
pursuant to the Put/Call Agreement and (ii) (if the Canadian Debt is
purchased by an Affiliate of the Company) the contracts and agreements
constituting the Canadian Debt.
Section 6.13. Investment Company; Public Utility Holding Company.
Neither the Company nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 6.14. ERISA. The Company and each other member of its Controlled
Group has fulfilled its obligations under the minimum funding standards of and
is in compliance in all material respects with ERISA and the Code to the extent
applicable to it and has not incurred any liability to the PBGC or a Plan under
Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA. Neither the Company nor any Subsidiary has any
contingent liabilities with respect to any post-retirement benefits under a
Welfare Plan, other than liability for continuation coverage described in
article 6 of Title I of ERISA.
Section 6.15. Compliance with Laws. The Company and each of its
Subsidiaries are in compliance with the requirements of all federal, state and
local laws, rules and regulations applicable to or pertaining to their
Properties or business operations (including, without limitation, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act
of 1990, and laws and regulations establishing quality criteria and standards
for air, water, land and toxic or hazardous wastes and substances),
non-compliance with which could have a material adverse effect on the financial
condition, Properties, business or operations of the Company or any Subsidiary.
Neither the Company nor any Subsidiary has received notice to the effect that
its operations are not in compliance with any of the requirements of applicable
federal, state or local environmental, health and safety statutes and
regulations or are the subject of any governmental investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action could have a
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material adverse effect on the financial condition, Properties, business or
operations of the Company or any Subsidiary.
Section 6.16. Other Agreements. Neither the Company nor any Subsidiary
is in default under the terms of any covenant, indenture or agreement of or
affecting the Company, any Subsidiary or any of their Properties, which default
if uncured would have a material adverse effect on the financial condition,
Properties, business or operations of the Company or any Subsidiary.
Section 6.17. No Default. No Default or Event of Default has occurred and is
continuing.
Section 6.18. Year 2000 Compliance. The Company and its Subsidiaries have
conducted a comprehensive review and assessment of their computer applications,
and have made such inquiry of their respective material suppliers, service
vendors (including data processors) and customers as the Company or relevant
Subsidiary (as the case may be) deem appropriate, with respect to any defect in
computer software, data bases, hardware, controls and peripherals related to the
occurrence of the year 2000 or the use of any date after December 31, 1999, in
connection therewith. Based on the foregoing review, assessment and inquiry, the
Company believes that no such defect could reasonably be expected to have a
material adverse effect on the financial condition, Properties, business or
operations of the Company and its Subsidiaries taken as a whole.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of the Lenders to make any Loan under this Agreement is
subject to the following conditions precedent:
Section 7.1. All Advances. As of the time of the making of each extension
of credit (including the initial extension of credit) hereunder:
(a) each of the representations and warranties set forth in
Section 6 hereof and in the other Loan Documents shall be true
and correct as of such time, except to the extent the same expressly
relate to an earlier date;
(b) the Company shall be in full compliance with all of the
terms and conditions of this Agreement and of the other Loan Documents,
and no Default or Event of Default shall have occurred and be
continuing or would occur as a result of making such extension of
credit;
(c) after giving effect to such extension of credit the
aggregate principal amount of all Loans under the Revolving Credit
outstanding under this Agreement shall not exceed the Revolving Credit
Commitments;
(d) the Commitments under the Long-Term Credit Agreement are
fully utilized; and
(e) such extension of credit shall not violate any order,
judgment or decree of any court or other authority or any provision of
law or regulation applicable to the Agent or any Lender (including,
without limitation, Regulation U of the Board of Governors of
the Federal Reserve System) as then in effect.
The Company's request for any Loan shall constitute its warranty as to the facts
specified in subsections (a) through (d), both inclusive, above.
Section 7.2. Initial Advance. At or prior to the making of the initial
extension of credit hereunder, the following conditions precedent shall also
have been satisfied:
(a) the Agent shall have received the following for the
account of the Lenders
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(each to be properly executed and completed) and the same shall have
been approved as to form and substance by the Agent:
(i) the Notes;
(ii) the Guaranty Agreements;
(iii) copies (executed or certified, as may be
appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery of this Agreement
and the other Loan Documents to the extent the Agent or its
counsel may reasonably request; and
(iv) an incumbency certificate containing the name,
title and genuine signatures of each of the Company's
Authorized Representatives.
(b) the Agent shall have received the initial fees (if any)
called for hereby; (c) each Lender shall have received such
certifications as it may require in order
to satisfy itself as to the financial condition of the Company and its
Subsidiaries, and the lack of material contingent liabilities of the
Company and its Subsidiaries;
(d) legal matters incident to the execution and delivery of
this Agreement and the other Loan Documents and to the transactions
contemplated hereby shall be satisfactory to each Lender and its
counsel; and the Agent shall have received for the account of the
Lenders the written opinion of counsel for the Company in form and
substance satisfactory to the Lender and its counsel; and
(e) the Agent shall have received for the account of the
Lenders such other agreements, instruments, documents, certificates and
opinions as the Agent or the Lenders may reasonably request.
Section 7.3. Termination of Existing Credit Agreement. Each of the
Company and the Existing Lenders consent to the termination of the "Revolving
Credit Commitments" under the Existing Credit Agreement effective on the date
the conditions set forth in Section 7.2 hereof are satisfied,
notwithstanding the notice requirements for such termination set forth in
Section 3.3 of the Existing Credit Agreement. The Existing Credit
Agreement shall terminate and all amounts payable thereunder, including accrued
and unpaid facility fees payable under Section 3.1 thereof, shall be
payable, and the facility fee payable under Section 3.1 hereof shall
begin to accrue, on the date that this Agreement has been executed by all the
parties hereto and the conditions set forth in Section 7.2 hereof have
been satisfied.
Section 7.4. November 19 as Earliest Effective Date. Notwithstanding
anything herein to the contrary, this Agreement shall not in any event take
effect any earlier than November 19, 1998.
SECTION 8. COVENANTS.
The Company agrees that, so long as any credit is available to or in
use by the Company hereunder, except to the extent compliance in any case or
cases is waived in writing by the Required Lenders:
Section 8.1. Corporate Existence; Subsidiaries. (a) The Company shall,
and shall cause each Subsidiary to, preserve and maintain its corporate
existence. The Company will preserve and keep in force and effect, and cause
each Subsidiary to preserve and keep in force and effect, all licenses, permits
and franchises necessary to the proper conduct of its business. Notwithstanding
anything contained herein to the contrary, so long as no Default or Event of
Default has occurred
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and is continuing, the Company may dissolve any Non-Material Subsidiary so long
as such dissolution would not result in a material adverse change in the
business, financial condition or Properties of the Company and its Subsidiaries
or impair the rights or benefits of the Lenders under the Loan Documents.
(b) The Company shall cause each Material Subsidiary (other than,
subject to Section 4.1, Anicom Canada), whether now or hereafter
existing, to furnish the Agent (i) a Guaranty Agreement from such
Material Subsidiary in the form or substantially in the form attached hereto as
Exhibit E hereto or in such other form as is reasonably satisfactory to the
Agent and the Required Lenders as to form and substance, and (ii)
documentation acceptable to the Agent similar to in form and scope to that
described in Sections 7.2(a)(ii), 7.2(a)(iii), 7.2(a)(iv), 7.2(c), 7.2(d)
and 7.2(e) but relating to such Guarantor and its Guaranty Agreement.
Section 8.2. Maintenance of Properties. The Company will maintain,
preserve and keep its Properties in good repair, working order and condition
(ordinary wear and tear excepted) and will from time to time make all needful
and proper repairs, renewals, replacements, additions and betterments thereto so
that at all times the efficiency thereof shall be fully preserved and
maintained, and will cause each Subsidiary to do so in respect of Property owned
or used by it.
Section 8.3. Taxes and Assessments. The Company will duly pay and
discharge, and will cause each Subsidiary to duly pay and discharge, all taxes,
rates, assessments, fees and governmental charges upon or against it or its
Properties, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves are provided therefor.
Section 8.4. Insurance. The Company will insure and keep insured, and
will cause each Subsidiary to insure and keep insured, with good and responsible
insurance companies, all insurable Property owned by it which is of a character
usually insured by Persons similarly situated and operating like Properties
against loss or damage from such hazards and risks, and in such amounts, as are
insured by Persons similarly situated and operating like Properties; and the
Company will insure, and cause each Subsidiary to insure, such other hazards and
risks (including employers' and public liability risks) with good and
responsible insurance companies as and to the extent usually insured by Persons
similarly situated and conducting similar businesses. The Company will upon
request of the Agent and any Lender furnish a certificate setting forth in
summary form the nature and extent of the insurance maintained pursuant to this
Section.
Section 8.5. Financial Reports. (a) The Company will, and will cause
each Subsidiary to, maintain a standard system of accounting in accordance with
GAAP and will furnish to the Agent, each Lender and each of their duly
authorized representatives such information respecting the business and
financial condition of the Company and its Subsidiaries as the Agent or such
Lender may reasonably request; and without any request, will furnish to the
Lenders:
(i) within 50 days after the end of each of the first three
quarterly fiscal periods of the Company, a copy of the Company's Form
10-Q Report filed with the SEC;
(ii) within 120 days after the end of each fiscal year of the
Company, a copy of the Company's Form 10-K Report filed with the SEC,
including a copy of the annual audit report of the Company and the
Subsidiaries for such year with accompanying financial
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statements, prepared by the Company and certified by
PricewaterhouseCoopers LLP or any other independent public accountants
of recognized national standing selected by the Company and
satisfactory to the Required Lenders, in accordance with GAAP;
(iii) not later than 10 days after the receipt thereof, a copy
of any final management letters on internal accounting controls for the
Company or any Subsidiary prepared by its independent public
accountants;
(iv) promptly after sending or filing thereof, copies of all
proxy statements, financial statements and reports which the Company
sends to its shareholders, and copies of all other regular, periodic
and special reports and all registration statements which the Company
files with the SEC or any successor thereto, or with any national
securities exchange;
(v) promptly after knowledge thereof shall have come to the
attention of any responsible officer of the Company, written notice of
any threatened or pending litigation or governmental proceeding or
labor controversy against the Company or any Subsidiary which, if
adversely determined, would materially and adversely effect the
financial condition, Properties, business or operations of the Company
or any Subsidiary or of the occurrence of any Default or Event of
Default hereunder; and
(vi) as soon as possible and in any event within 10 days after
the date on which (X) a Non-Material Subsidiary becomes a
Material Subsidiary, (Y) the Company or any Subsidiary
establishes or acquires any Subsidiary or (Z) any Subsidiary is
dissolved or otherwise merged out of existence, the Company shall
furnish the Lenders an updated Schedule 6.2 reflecting such event. (b)
In the event the Company is no longer required to file Form 10-Q and
10-K Reports
with the SEC, the Company need not furnish such Reports to the Lenders, but
shall nonetheless provide the Lenders the financial statements previously
contained in such Reports by the times required by subsections (a)(i) and (ii)
above.
(c) Each of the financial statements furnished to the Lenders pursuant
to clauses (a) or (b) of this Section shall be accompanied by a written
certificate in the form attached hereto as Exhibit B (the "Compliance
Certificate") signed by the chief financial officer of the Company to the effect
that to the best of the chief financial officer's knowledge and belief no
Default or Event of Default has occurred during the period covered by such
statements or, if any such Default or Event of Default has occurred during such
period, setting forth a description of such Default or Event of Default and
specifying the action, if any, taken by the Company to remedy the same. Such
certificate shall also set forth the calculations supporting such statements in
respect of Sections 8.6, 8.7, 8.8, 8.9 and 8.10 of this Agreement and
identify the Special Post-Closing Acquisition Liabilities then reflected in
computing compliance with such Section 8.6.
(d) Solely for purposes of determining the Company's compliance with
the Existing Credit Agreement at the end of the third fiscal quarter of the
Company ended September 30, 1998, the Company's compliance with the
Existing Credit Agreement during such period shall be determined as if all
references in the Existing Credit Agreement to the Fiscal 1997 Charges (as
identified and defined therein) included not only such Fiscal 1997 Charges but
also the Fiscal 1998 Charges identified and defined in this Agreement.
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Section 8.6. Current Ratio. The Company will at all times maintain a Current
Ratio of not less than 1.40 to 1.00.
Section 8.7. Interest Coverage Ratio. The Company will, as of the last
day of each fiscal quarter of the Company, maintain the ratio (the "Interest
Coverage Ratio") of EBIT for the four fiscal quarters of the Company then ended
to Interest Expense for the same four fiscal quarters then ended of not less
than 2.0 to 1.0; provided, however, that if an Acquisition permitted by
Section 8.14 hereof occurs at any time during such period, the Interest
Coverage Ratio shall be calculated on a pro forma basis to include the EBIT and
Interest Expense of the Person or assets so acquired for the entire period as if
such Acquisition had taken place on the first day of such period, all as
reasonably calculated by the Company (any expected cost savings relating to the
EBIT of the Person or assets so acquired may be incorporated in these
calculations to the extent they are readily quantifiable and verifiable, in a
manner consistent with the Company's prior pro forma calculations included with
SEC filings in connection with its prior acquisitions).
Section 8.8. Tangible Net Worth. The Company will, as of the last day
of each fiscal quarter of the Company, maintain Tangible Net Worth at not less
than the Minimum Required Amount. For purposes of this Section 8.8, the
term "Minimum Required Amount" shall mean, as of any time, the sum of: (i)
32>$25,000,000; plus (ii)fifty percent (50%) of Consolidated Net Income
for each fiscal quarter of the Company (if Consolidated Net Income for such
fiscal quarter is positive) completed on or after April 1, 1997.
Section 8.9. Debt to Earnings Ratio. The Company will, as of the last
day of each fiscal quarter of the Company, maintain the Debt to Earnings Ratio
at not greater than 3.5 to 1.0; provided, however, that if an Acquisition
permitted by Section 8.14 hereof occurs at any time during the four
fiscal quarter period over which EBITDA is measured to determine the Debt to
Earnings Ratio, such Debt to Earnings Ratio shall be calculated on a pro forma
basis to include the EBITDA of the Person or assets so required for the entire
period as if such Acquisition had taken place on the first day of such period,
all as reasonably calculated by the Company (the expected cost savings relating
to the EBITDA of the Person or assets so acquired may be incorporated in these
calculations to the extent they are readily quantifiable and verifiable and
based on reasonable assumptions.
Section 8.10. Leverage Ratio. The Company will, as of the last day of each
fiscal quarter of the Company, maintain the Leverage Ratio at not more than 0.40
to 1.00.
Section 8.11. Indebtedness for Borrowed Money. The Company will not, nor
will it permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; provided, however, that the
foregoing provisions shall not restrict nor operate to prevent:
(a) the indebtedness of the Company on the Notes and other
Obligations;
(b) Capitalized Lease Obligations in an aggregate amount not
to exceed $1,500,000 at any one time outstanding;
(c) Capitalized Lease Obligations of any Subsidiary which has
become a Subsidiary as a result of an Acquisition permitted by
Section 8.14 hereof if such Capitalized Lease Obligation was
entered into prior to the Acquisition of such Subsidiary and was not
created in contemplation of such Acquisition;
(d) purchase money indebtedness secured by Liens permitted by
Section 8.12(d) hereof in an aggregate amount not to exceed
$2,000,000 at any one time outstanding;
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(e) purchase money indebtedness (other than purchase money
indebtedness permitted by Section 8.11(d) hereof) of any Subsidiary
which has become a Subsidiary as a result of an Acquisition permitted
by Section 8.14 hereof if such indebtedness was created prior to
the Acquisition of such Subsidiary and was not created in contemplation
of such Acquisition;
(f) the currently outstanding indebtedness described on
Exhibit C hereof if and so long as such indebtedness is
Subordinated Indebtedness;
(g) unsecured Subordinated Indebtedness incurred to finance
Acquisitions permitted by Section 8.14 hereof;
(h) the Canadian Debt;
(i) indebtedness under the Long-Term Credit Agreement; and
(j) indebtedness not otherwise permitted by this Section
aggregating not more than $500,000 at any one time outstanding.
Section 8.12. Liens. The Company will not, nor will it permit any
Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by the Company or any Subsidiary; provided, however, that this
Section shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other similar
charges, good faith cash deposits in connection with tenders, contracts
or leases to which the Company or any Subsidiary is a party or other
cash deposits required to be made in the ordinary course of business,
provided in each case that the obligation is not for borrowed money and
that the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate proceedings which prevent
enforcement of the matter under contest and adequate reserves have been
established therefor;
(b) mechanics', workmen's, materialmen's, landlords',
carriers', or other similar Liens arising in the ordinary course of
business with respect to obligations which are not due or which are
being contested in good faith by appropriate proceedings which prevent
enforcement of the matter under contest;
(c) the pledge of assets for the purpose of securing an
appeal, stay or discharge in the course of any legal proceeding,
provided that the aggregate amount of liabilities of the Company and
its Subsidiaries secured by a pledge of assets permitted under this
clause, including interest and penalties thereon, if any, shall not be
in excess of $1,000,000 at any one time outstanding; and
(d) purchase money Liens securing indebtedness permitted by
Section 8.11(d) hereof in respect of equipment now owned or
hereafter acquired by the Company or any Subsidiary (not extending to
any other Property), or Liens on equipment so acquired (not extending
to any other Property) existing at the time of acquisition thereof, or
renewals, extensions and refundings of any such Liens (not extending to
any other Property), provided that the principal amount of indebtedness
secured by any such Lien shall not exceed 80% of the cost or fair
market value, whichever is less, of the Property covered by such Lien
at the time of the creation thereof or the acquisition of such
Property.
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Section 8.13. Investments, Loans, Advances and Guaranties. The Company
will not, nor will it permit any Subsidiary to, directly or indirectly, make,
retain or have outstanding any investments (whether through purchase of stock or
obligations or otherwise) in, or loans or advances (other than for travel
advances and other similar cash advances made to employees in the ordinary
course of business) to, any other Person, or be or become liable as endorser,
guarantor, surety or otherwise for any debt, obligation or undertaking of any
other Person, or otherwise agree to provide funds for payment of the obligations
of another, or supply funds thereto or invest therein or otherwise assure a
creditor of another against loss or apply for or become liable to the issuer of
a letter of credit which supports an obligation of another, or subordinate any
claim or demand it may have to the claim or demand of any other Person;
provided, however, that the foregoing provisions shall not apply to nor operate
to prevent:
(a) investments in direct obligations of the United States of
America or of any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America, provided that any such obligations shall mature within one
year of the date of issuance thereof;
(b) investments in commercial paper (including as such,
investments in short-term corporate borrowings against tax-advantaged
preferred stock) rated at least P1 by Moody's Investors Services, Inc.
and at least A1 by Standard & Poor's Corporation maturing within
270 days of the date of issuance thereof;
(c) investments in certificates of deposit issued by any
United States commercial Agent having capital and surplus of not less
than $100,000,000 which have a maturity of one year or less;
(d) endorsement of items for deposit or collection of
commercial paper received in the ordinary course of business;
(e) Acquisitions of Subsidiaries permitted by Section
8.14 hereof; (f) investments in obligations of a state, a
territory, or a possession of the United
States, or any political subdivision of any of the foregoing or of the
District of Columbia as described in Section 103(a) of the Code
if these investments are graded in the highest major grade as
determined by at least one national rating service or are credit
enhanced by credit enhancers whose credit is rated not less than A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors Services,
Inc.;
(g) the Company's guaranty of indebtedness of Wholly-Owned
Subsidiaries incurred to finance Acquisitions permitted by Section
8.14 hereof if and so long as such guaranty is Subordinated
Indebtedness;
(h) guaranties by Subsidiaries of the Obligations;
(i) the Put/Call Agreement if and so long as the Canadian
Debt is not held by an Affiliate of the Company; and
(j) investments, loans, advances and guarantees not otherwise
permitted by this Section aggregating not more than $2,000,000 at any
one time outstanding.
In determining the amount of investments, loans, advances and guarantees
permitted under this Section, investments shall always be taken at the original
cost thereof (regardless of any subsequent appreciation or depreciation
therein), loans and advances shall be taken at the principal amount
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thereof then remaining unpaid and guarantees shall be taken at the amount of
obligations guaranteed thereby.
Section 8.14. Acquisitions. The Company will not, and will not permit
any Subsidiary to, make or commit to make any Acquisitions; provided however,
that the Company and any Wholly-Owned Subsidiary each may make Acquisitions if:
(i)the Company or such Subsidiary acquires by reason of such Acquisition
either (x) assets used or useful in a business which is the same or
similar to that currently conducted by the Company or (y) the capital
stock of a corporation or any other equity interest of any partnership or other
firm engaged in such a same or similar business and after giving effect to such
Acquisition, the corporation, partnership or other such firm so acquired becomes
a Wholly-Owned Subsidiary; (ii) no Default or Event of Default exists or
would exist at the time of or after giving effect to such Acquisition; (iii)
the Company provides the Lenders a statement, certified as true and correct
by its chief financial officer, which represents and warrants that, after giving
effect to such Acquisition, the Company will, on a pro forma basis, continue to
comply through the Termination Date with Sections 8.6, 8.7, 8.8, 8.9,
8.10 and 8.11 hereof, such certificate to be accompanied by supporting financial
projections based on reasonable assumptions; (iv) the Board of Directors
or other governing body of such Person whose property or voting stock is being
so acquired has approved the terms of such Acquisition; and (v) the
Company has provided the Lenders such financial and other information regarding
the Person whose property or voting stock is being so acquired, including
historical financial statements, and a description of such Person, as the Agent
or any Lender may reasonably request.
Section 8.15. Sales and Leasebacks. The Company will not, nor will it
permit any Subsidiary to, enter into any arrangement with any bank, insurance
company or any other lender or investor providing for the leasing by the Company
or any Subsidiary of any Property theretofore owned by it and which has been or
is to be sold or transferred by such owner to such lender or investor.
Section 8.16. Dividends and Certain Other Restricted Payments. (a)
Restricted Payments. The Company will not during any fiscal year (i)
declare or pay any dividends on or make any other distributions in respect of
any class or series of its capital stock (other than dividends payable solely in
its capital stock) (each such non-excepted declaration or payment of dividends,
being herein collectively called a "Restricted Payment") if at the time of such
Restricted Payment or immediately after giving effect thereto, any Event of
Default or Default shall occur or be continuing.
(b) Restricted Repayments. The Company will not during any fiscal year
directly or indirectly purchase, redeem or otherwise acquire or retire any of
its capital stock (except out of the proceeds of, or in exchange for, a
substantially concurrent issue and sale of its capital stock) (each such
non-exempted purchase, redemption, retirement and distribution in respect to
capital stock being herein collectively called a "Restricted Redemption") if at
the time of such Restricted Redemption or immediately after giving effect
thereto, any Event of Default or Default shall occur or be continuing; provided
that the Company shall not directly or indirectly purchase, redeem or otherwise
acquire or retire any of its capital stock (except out of the proceeds of, or in
exchange for, a substantially concurrent issue and sale of its capital stock) in
excess of 5% of its capital stock during any fiscal year.
Section 8.17. Mergers, Consolidations and Sales. The Company will not, nor
will it permit
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any Subsidiary to, be a party to any merger or consolidation, or sell, transfer,
lease or otherwise dispose of all or any substantial part of its Property
(except for sales of inventory in the ordinary course of business), or in any
event sell or discount (with or without recourse) any of its notes or accounts
receivable; provided, however, that this Section shall not apply to nor operate
to prohibit (i) the merger of any Subsidiary acquired as a result of an
Acquisition permitted by Section 8.14 hereof with and into the Company or
any Wholly-Owned Subsidiary or (ii) the sale of assets which are no
longer used or useful in the ordinary course of the Company's business. A sale
or disposition of assets of the Company shall be deemed substantial for the
foregoing purposes (i) if such assets are sold below the book value of
such assets, and such assets constituted 10% or more of the total assets of the
Company or (ii) such assets constituted 20% or more of the total assets
of the Company.
Section 8.18. ERISA. The Company will, and will cause each Subsidiary
to, promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed might result in the
imposition of a Lien against any of its Properties. The Company will, and will
cause each Subsidiary to, promptly notify the Agent of (i) the occurrence
of any reportable event (as defined in ERISA) with respect to a Plan, (ii)
32>receipt of any notice from the PBGC of its intention to seek termination of
any Plan or appointment of a trustee therefor, (iii) its intention to
terminate or withdraw from any Plan, and (iv) >the occurrence of any event
with respect to any Plan which would result in the incurrence by the Company or
any Subsidiary of any material liability, fine or penalty, or any material
increase in the contingent liability of the Company or any Subsidiary with
respect to any post-retirement Welfare Plan benefit.
Section 8.19. Compliance with Laws. The Company will, and will cause
each Subsidiary to, comply in all respects with the requirements of all federal,
state and local laws, rules, regulations, ordinances and orders applicable to or
pertaining to the Properties or business operations of the Company or any
Subsidiary, non-compliance with which could have a material adverse effect on
the financial condition, Properties, business or operations of the Company or
any Subsidiary or could result in a Lien upon any of their Property.
Section 8.20. Burdensome Contracts With Affiliates. The Company will
not, nor will it permit any Subsidiary to, enter into any contract, agreement or
business arrangement with any of its Affiliates on terms and conditions which
are less favorable to the Company or such Subsidiary than would be usual and
customary in similar contracts, agreements or business arrangements between
Persons not affiliated with each other, other than any contract, agreement or
business arrangement with any Person which becomes a Subsidiary as a result of
an Acquisition permitted by Section 8.14 hereof after the date hereof if such
contract, agreement or arrangement was entered into prior to the acquisition of
such Subsidiary and such contract, agreement or arrangement was not created in
contemplation of such Acquisition (i) the Put/Call Agreement and (ii)
(if the Canadian Debt is purchased by an Affiliate of the Company) the
contracts and agreements constituting the Canadian Debt.
Section 8.21. No Changes in Fiscal Year. Neither the Company nor any
Subsidiary will change its fiscal year from its present basis without the prior
written consent of the Agent.
Section 8.22. Inspection and Field Audit. The Company will, and will cause
each Subsidiary to, permit the Agent and its duly authorized representatives and
agents to visit and inspect any of
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the Properties, corporate books and financial records of the Company and each
Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Company and each Subsidiary, and to discuss the
affairs, finances and accounts of the Company and each Subsidiary with, and to
be advised as to the same by, its officers and independent public accountants
(and by this provision the Company authorizes such accountants to discuss with
the Agent the finances and affairs of the Company and of each Subsidiary) with
reasonable notice to the Company and at such reasonable times and reasonable
intervals as the Agent may designate. After the occurrence of an Event of
Default, the Company shall pay for all costs and expenses incurred by the Agent
in connection with any such visitation or inspection.
Section 8.23. Formation of Subsidiaries. Except for existing
Subsidiaries designated on Schedule 6.2 hereto and Subsidiaries acquired
in Acquisitions or formed to effect Acquisitions in each case permitted by
Section 8.14 hereof, the Company will not, and will not permit any
Subsidiary to, form or acquire any Subsidiary without the prior written consent
of the Agent.
Section 8.24. Subordinated Indebtedness. The Company shall not, and shall
not permit any Subsidiary to:
(a) amend or modify any of the terms or conditions
relating to any Subordinat Indebtedness;
(b) make any voluntary prepayment on, or effect any voluntary
redemption of, any Subordinated Indebtedness (other than the prepayment
by Anicom Canada of certain indebtedness pursuant to the Put/Call
Agreement) if any Loans are outstanding at the time of or after giving
effect to such prepayment or redemption; or
(c) make any other payment on account of any Subordinated
Indebtedness which is prohibited under the terms of any instrument or
agreement subordinating such indebtedness to the Obligations.
Section 8.25. Use of Proceeds. The proceeds of the initial advance hereunder
shall be used to pay the Company's indebtedness under the Existing Credit
Agreement.
Section 8.26. Year 2000 Compliance. The Company shall take all
actions necessary and commit adequate resources to assure that its computerbased
and other systems (and those of all Subsidiaries) are able to effectively
process dates, including dates before, on and after January 1, 2000,
without experiencing any Year 2000 Problem that could cause a material
adverse effect on the business or financial affairs of the Company (or of the
Company and its Subsidiaries taken on a consolidated basis). At the request of
the Agent, the Company will provide the Agent with written assurances and
substantiations (including, but not limited to, the results of internal or
external audit reports prepared in the ordinary course of business) reasonably
acceptable to the Agent as to the capability of the Company and its Subsidiaries
to conduct its and their businesses and operations before, on and after
January 1, 2000, without experiencing a Year 2000 Problem causing
a material adverse effect on the business or financial affairs of the Company
(or of the Company and its Subsidiaries taken on a consolidated basis).
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) default in the payment when due of all or any part of
the principal of or
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interest on any Note (whether at the stated maturity thereof or at any
other time provided for in this Agreement) or of any fee or other
Obligation payable by the Company hereunder or under any other Loan
Document; or
(b) default in the observance or performance of any covenant
set forth in Sections 8.5, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.13,
8.14, 8.15, 8.16, 8.17, 8.24 or 8.25 hereof; or
(c) default in the observance or performance of any other
provision hereof or of any other Loan Document which is not remedied
within ten (10) days after the earlier of (i) the date on
which such failure shall first become known to any officer of the
Company or (ii) written notice thereof is given to the Company
by the Agent or any Lender; or
(d) any representation or warranty made by the Company herein
or in any other Loan Document, or in any statement or certificate
furnished by it pursuant hereto or thereto, or in connection with any
extension of credit made hereunder, proves untrue in any material
respect as of the date of the issuance or making thereof; or
(e) any event occurs or condition exists (other than those
described in subsections (a) through (d) above) which is
specified as an event of default under any of the other Loan Documents,
or any of the Loan Documents shall for any reason not be or shall cease
to be in full force and effect, or any of the Loan Documents is
declared to be null and void; or
(f) default shall occur under any Indebtedness for Borrowed
Money issued, assumed or guaranteed by the Company or any Subsidiary,
or under any indenture, agreement or other instrument under which the
same may be issued, and such default shall continue for a period of
time sufficient to permit the acceleration of the maturity of any such
Indebtedness for Borrowed Money (whether or not such maturity is in
fact accelerated), or any such Indebtedness for Borrowed Money shall
not be paid when due (whether by lapse of time, acceleration or
otherwise); or
(g) any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes in an
aggregate amount in excess of $1,000,000 in excess of amounts covered
by insurance from an insurer which has acknowledged its liability
thereon shall be entered or filed against the Company or any Subsidiary
or against any of their Property and which remains unvacated, unbonded,
unstayed or unsatisfied for a period of sixty (60) days; or
(h) the Company or any member of its Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess
$500,000 which it shall have become liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or notice of intent to terminate a
Plan or Plans having aggregate Unfunded Vested Liabilities in excess of
$500,000 (collectively, a "Material Plan") shall be filed under
Title IV of ERISA by the Company or any other member of its
Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title
IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Material Plan or a proceeding shall be instituted by a
fiduciary of any Material Plan against the Company or any member of its
Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA
and such proceeding shall
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not have been dismissed within 30 days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or
(i) dissolution or termination of the existence of the
Company or any Subsidiary; or
(j) the Company or any Subsidiary shall (i) have
entered involuntarily against it an order for relief under the United
States Bankruptcy Code, as amended, (ii) not pay, or admit in
writing its inability to pay, its debts generally as they become due,
(iii) make an assignment for the benefit of creditors, (iv)
32>apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official
for it or any substantial part of its Property, (v) institute
any proceeding seeking to have entered against it an order for relief
under the United States Bankruptcy Code, as amended, to adjudicate it
insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, (vi) take any corporate action in furtherance of any
matter described in parts (i) through (v) above, or (vii)
32>fail to contest in good faith any appointment or proceeding
described in Sectio 9.1(k) hereof; or
(k) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Company or any Subsidiary
or any substantial part of any of their Property, or a proceeding
described in Section 9.1(j)(v) shall be instituted against the
Company or any Subsidiary, and such appointment continues undischarged
or such proceeding continues undismissed or unstayed for a period of 60
days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of Default described in
subsection (a) through (i), both inclusive, of Section 9.1 has occurred and is
continuing, the Agent shall, upon the request of the Required Lenders, by notice
to the Company, take one or more of the following actions:
(a) terminate the obligations of the Lenders to extend any
further credit hereunder on the date (which may be the date thereof)
stated in such notice;
(b) declare the principal of and the accrued interest on the
Notes to be forthwith due and payable and thereupon the Notes,
including both principal and interest and all fees, charges and other
Obligations payable hereunder and under the other Loan Documents, shall
be and become immediately due and payable without further demand,
presentment, protest or notice of any kind; and
(c) enforce any and all rights and remedies available to it
under the Loan Documents or applicable law.
Section 9.3. Bankruptcy Defaults. When any Event of Default described
in subsection (j) or (k) of Section 9.1 has occurred and is
continuing, then the Notes, including both principal and interest, and all fees,
charges and other Obligations payable hereunder and under the other Loan
Documents, shall immediately become due and payable without presentment, demand,
protest or notice of any kind, and the obligations of the Lenders to extend
further credit pursuant to any of the
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terms hereof shall immediately terminate. In addition, the Agent may exercise
any and all remedies available to it under the Loan Documents or applicable law.
SECTION 10. THE AGENT.
Section 10.1. Appointment and Authorization. Each Lender hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers hereunder and under the other Loan Documents as are
designated to the Agent by the terms hereof and thereof together with such
powers as are reasonably incidental thereto. The Lenders expressly agree that
the Agent is not acting as a fiduciary of the Lenders in respect of the Loan
Documents, the Company or otherwise, and nothing herein or in any of the other
Loan Documents shall result in any duties or obligations on the Agent or any of
the Lenders except as expressly set forth herein. The Agent may resign at any
time by sending 20 days prior written notice to the Company and the Lenders. In
the event of any such resignation, the Required Lenders may appoint a new agent
after consultation with the Company, which shall succeed to all the rights,
powers and duties of the Agent hereunder and under the other Loan Documents. Any
resigning Agent shall be entitled to the benefit of all the protective
provisions hereof with respect to its acts as an agent hereunder, but no
successor Agent shall in any event be liable or responsible for any actions of
its predecessor. If the Agent resigns and no successor is appointed, the rights
and obligations of such Agent shall be automatically assumed by the Required
Lenders and the Company shall be directed to make all payments due each Lender
hereunder directly to such Lender.
Section 10.2. Rights as a Lender. The Agent has and reserves all of the
rights, powers and duties hereunder and under the other Loan Documents as any
Lender may have and may exercise the same as though it were not the Agent and
the terms "Lender" or "Lenders" as used herein and in all of such documents
shall, unless the context otherwise expressly indicates, include the Agent in
its individual capacity as a Lender.
Section 10.3. Standard of Care. The Lenders acknowledge that they have
received and approved copies of the Loan Documents and such other information
and documents concerning the transactions contemplated and financed hereby as
they have requested to receive and/or review. The Agent makes no representations
or warranties of any kind or character to the Lenders with respect to the
validity, enforceability, genuineness, perfection, value, worth or
collectibility hereof or of the Notes or any of the other Obligations or of any
of the other Loan Documents. Neither the Agent nor any director, officer,
employee, agent or representative thereof (including any security trustee
therefor) shall in any event be liable for any clerical errors or errors in
judgment, inadvertence or oversight, or for action taken or omitted to be taken
by it or them hereunder or under the other Loan Documents or in connection
herewith or therewith except for its or their own gross negligence or willful
misconduct. The Agent shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, certificate,
warranty, instruction or statement (oral or written) of anyone (including anyone
in good faith believed by it to be authorized to act on behalf of the Company),
unless it has actual knowledge of the untruthfulness of same. The Agent may
execute any of its duties hereunder by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Lenders for the default or
misconduct of any such agents or attorneys-in-fact selected with reasonable
care. The Agent shall be entitled to advice of counsel concerning all matters
pertaining to the agencies hereby created and its duties hereunder, and shall
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incur no liability to anyone and be fully protected in acting upon the advice of
such counsel. The Agent shall be entitled to assume that no Default or Event of
Default exists unless notified to the contrary by a Lender. The Agent shall in
all events be fully protected in acting or failing to act in accord with the
instructions of the Required Lenders. The Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by the Agent by reason of taking or continuing to take any
such action. The Agent may treat the owner of any Note as the holder thereof
until written notice of transfer shall have been filed with the Agent signed by
such owner in form satisfactory to the Agent. Each Lender acknowledges that it
has independently and without reliance on the Agent or any other Lender and
based upon such information, investigations and inquiries as it deems
appropriate made its own credit analysis and decision to extend credit to the
Company. It shall be the responsibility of each Lender to keep itself informed
as to the creditworthiness of the Company and the Agent shall have no liability
to any Lender with respect thereto.
Section 10.4. Costs and Expenses. Each Lender agrees to reimburse the
Agent for all costs and expenses suffered or incurred by the Agent or any
security trustee in performing its duties hereunder and under the other Loan
Documents, or in the exercise of any right or power imposed or conferred upon
the Agent hereby or thereby, to the extent that the Agent is not promptly
reimbursed for same by the Company, all such costs and expenses to be borne by
the Lenders ratably in accordance with the amounts of their respective Revolving
Credit Commitments.
Section 10.5. Indemnity. The Lenders shall ratably indemnify and hold
the Agent, and its directors, officers, employees, agents and representatives
(including as such any security trustee therefor) harmless from and against any
liabilities, losses, costs and expenses suffered or incurred by them hereunder
or under the other Loan Documents or in connection with the transactions
contemplated hereby or thereby, regardless of when asserted or arising, except
to the extent they are promptly reimbursed for the same by the Company and
except to the extent that any event giving rise to a claim was caused by the
gross negligence or willful misconduct of the party seeking to be indemnified.
SECTION 11. MISCELLANEOUS.
Section 11.1. Withholding Taxes. (a) Payments Free of Withholding.
Except as otherwise required by law and subject to Section 11.1(b)
hereof, each payment by the Company under this Agreement and under any other
Loan Document shall be made without withholding for or on account of any present
or future taxes (other than overall net income taxes on the recipient) imposed
by or within the jurisdiction in which the Company is domiciled, any
jurisdiction from which the Company makes any payment, or (in each case) any
political subdivision or taxing authority thereof or therein. If any such
withholding is so required, the Company shall make the withholding, pay the
amount withheld to the appropriate governmental authority before penalties
attach thereto or interest accrues thereon and forthwith pay such additional
amount as may be necessary to ensure that the net amount actually received by
each Lender and the Agent free and clear of such taxes (including such taxes on
such additional amount) is equal to the amount which that Lender or the Agent
(as the case may be) would have received had such withholding not been made. If
the Agent or any Lender pays any amount in respect of any such taxes, penalties
or interest, the Company shall
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reimburse the Agent or such Lender for that payment on demand in the currency in
which such payment was made. If the Company pays any such taxes, penalties or
interest, it shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Lender or Agent on whose account such
withholding was made (with a copy to the Agent if not the recipient of the
original) on or before the thirtieth day after payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the
Code) shall submit to the Company and the Agent on or before the earlier of the
date the initial Borrowing is made hereunder and 30 days after the date hereof,
two duly completed and signed copies of either Form 1001 (relating to such
Lender and entitling it to a complete exemption from withholding under the Code
on all amounts to be received by such Lender, including fees, pursuant to the
Loan Documents and the Loans) or Form 4224 (relating to all amounts to be
received by such Lender, including fees, pursuant to the Loan Documents and the
Loans) of the United States Internal Revenue Service. Thereafter and from time
to time, each Lender shall submit to the Company and the Agent such additional
duly completed and signed copies of one or the other of such Forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may be (i) requested by the Company in a
written notice, directly or through the Agent, to such Lender and (ii)
required under then-current United States law or regulations to avoid or
reduce United States withholding taxes on payments in respect of all amounts to
be received by such Lender, including fees, pursuant to the Loan Documents or
the Loans.
(c) Inability of Lenders to Submit Forms. If any Lender determines, as
a result of any change in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to submit to
the Company or the Agent any form or certificate that such Lender is obligated
to submit pursuant to subsection (b) of this Section 11.1 or that
such Lender is required to withdraw or cancel any such form or certificate
previously submitted or any such form or certificate otherwise becomes
ineffective or inaccurate, such Lender shall promptly notify the Company and
Agent of such fact and the Lender shall to that extent not be obligated to
provide any such form or certificate and will be entitled to withdraw or cancel
any affected form or certificate, as applicable.
Section 11.2. Non-Business Days. If any payment hereunder becomes due
and payable on a day which is not a Business Day, the due date of such payment
shall be extended to the next succeeding Business Day on which date such payment
shall be due and payable. In the case of any payment of principal falling due on
a day which is not a Business Day, interest on such principal amount shall
continue to accrue during such extension at the rate per annum then in effect,
which accrued amount shall be due and payable on the next scheduled date for the
payment of interest.
Section 11.3. No Waiver, Cumulative Remedies. No delay or failure on the
part of any Lender or on the part of any holder of any of the Obligations in the
exercise of any power or right shall operate as a waiver thereof or as an
acquiescence in any default, nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof or the exercise of
any other power or right. The rights and remedies hereunder of the Lenders and
any of the holders of the Obligations are cumulative to, and not exclusive of,
any rights or remedies which any of them would otherwise have.
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Section 11.4. Waivers, Modifications and Amendments. Any provision
hereof or of any of the other Loan Documents may be amended, modified, waived or
released and any Default or Event of Default and its consequences may be
rescinded and annulled upon the written consent of the Required Lenders;
provided, however, that without the consent of all Lenders no such amendment,
modification or waiver shall increase the amount or extend the term of any
Lender's Revolving Credit Commitment or reduce the amount of any principal of or
interest rate applicable to, or extend the maturity of, any Obligation owed to
it or reduce the amount of the fees to which it is entitled hereunder or change
this Section or change the definition of "Required Lenders" or change the number
of Lenders required to take any action hereunder or under any of the other Loan
Documents or permit the Company to assign any of its rights hereunder or release
any Guarantor from its obligations under its Guaranty. No amendment,
modification or waiver of the Agent's protective provisions shall be effective
without the prior written consent of the Agent.
Section 11.5. Costs and Expenses. The Company agrees to pay on demand
the costs and expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of this Agreement, the other Loan Documents
and the other instruments and documents to be delivered hereunder or thereunder,
and in connection with the transactions contemplated hereby or thereby, and in
connection with any consents hereunder or waivers or amendments hereto or
thereto, including the fees and expenses of Messrs. Chapman and Cutler, counsel
for the Agent, with respect to all of the foregoing (whether or not the
transactions contemplated hereby are consummated; provided, however, in no event
shall the Company's obligation to reimburse the Agent for such fees (exclusive
of such counsel's expenses and disbursements) in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
Loan Documents to be delivered as a condition precedent to initial funding of
the credit contemplated hereby exceed $20,000. The Company further agrees to pay
to Agent and the Lenders and any other holders of the Obligations all costs and
expenses (including court costs, the allocated costs of inhouse counsel and
outside attorneys' fees), if any, incurred or paid by the Agent, the Lenders or
any other holders of the Obligations in connection with any Default or Event of
Default or in connection with the enforcement of this Agreement or any of the
other Loan Documents or any other instrument or document delivered hereunder or
thereunder. The Company further agrees to indemnify and save the Lenders, the
Agent and any security trustee for the Lenders harmless from any and all
liabilities, losses, costs and expenses incurred by the Lenders or the Agent in
connection with any action, suit or proceeding brought against the Agent, or any
security trustee or any Lender by any Person (but excluding attorneys' fees for
litigation solely between the Lenders to which the Company is not a party) which
arises out of the transactions contemplated or financed hereby or out of any
action or inaction by the Agent, any security trustee or any Lender hereunder or
thereunder, except for such thereof as is caused by the gross negligence or
willful misconduct of the party seeking to be indemnified. The provisions of
this Section and the protective provisions of Section 2 hereof shall
survive payment of the Obligations.
Section 11.6. Documentary Taxes. The Company agrees to pay on demand any
documentary, stamp or similar taxes payable in respect of this Agreement or any
other Loan Document, including interest and penalties, in the event any such
taxes are assessed, irrespective of when such assessment is made and whether or
not any credit is then in use or available hereunder.
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Section 11.7. Survival of Representations. All representations and
warranties made herein or in any of the other Loan Documents or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and the other Loan Documents, and shall continue in full force
and effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
Section 11.8. Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the Agent and the Lenders of amounts
sufficient to protect the yield of the Agent and the Lenders with respect to the
Loans, including, but not limited to, Sections 2.7, and 2.9 hereof, shall
survive the termination of this Agreement and the payment of the Obligations.
Section 11.9. Participations. Any Lender may grant participations in its
extensions of credit hereunder to any other Lender or other lending institution
(a "Participant"), provided that (i) no Participant shall thereby acquire
any direct rights under this Agreement, (ii) no Lender shall agree with a
Participant not to exercise any of such Lender's rights hereunder without the
consent of such Participant except for rights which under the terms hereof may
only be exercised by all Lenders and (iii) no sale of a participation in
extensions of credit shall in any manner relieve the selling Lender of its
obligations hereunder. Section 11.10. Assignment Agreements. Each Lender
may, from time to time upon at least 5 Business Days' prior written notice to
the Agent, assign to other commercial lenders part of its rights and obligations
under this Agreement (including without limitation the indebtedness evidenced by
the Notes then owned by such assigning Lender, together with an equivalent
proportion of its Revolving Credit Commitments to make Loans hereunder) pursuant
to written agreements executed by such assigning Lender, such assignee lender or
lenders, the Company and the Agent, which agreements shall specify in each
instance the portion of the indebtedness evidenced by the Notes which is to be
assigned to each such assignee lender and the portion of the Revolving Credit
Commitments of the assigning Lender to be assumed by it (the "Assignment
Agreements"); provided, however, that (i) each such assignment shall be
of a constant, and not a varying, percentage of the assigning Lender's rights
and obligations under this Agreement and the assignment shall cover the same
percentage of such Lender's Revolving Credit Commitments, Loans and Notes;
(ii) each such assignment shall be made by a Lender which is a lender
under the Short-Term Credit Agreement and shall be made contemporaneously with
an assignment of the same percentage of such Lender's rights and obligations
with respect to the Short-Term Credit Agreement; (iii) unless the Agent
otherwise consents, the aggregate amount of the Revolving Credit Commitments,
Loans and Notes of the assigning Lender being assigned pursuant to each such
assignment (determined as of the effective date of the relevant Assignment
Agreement) shall in no event be less than $5,000,000 and shall be an integral
multiple of $1,000,000; (iv) the Agent and the Company must each consent,
which consent shall not be unreasonably withheld, to each such assignment to a
party which was not an original signatory of this Agreement; and (v) the
assigning Lender must pay to the Agent a processing and recordation fee of
$3,000 and any out-of-pocket attorneys' fees and expenses incurred by the Agent
in connection with such Assignment Agreement. Upon the execution of each
Assignment Agreement by the assigning Lender thereunder, the assignee lender
thereunder, the Company and the Agent and payment to such assigning Lender by
such assignee lender of the purchase price for the portion of the indebtedness
of the Company being
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acquired by it, (i) such assignee lender shall thereupon become a
"Lender" for all purposes of this Agreement with Revolving Credit Commitments in
the amounts set forth in such Assignment Agreement and with all the rights,
powers and obligations afforded a Lender hereunder, (ii) such assigning
Lender shall have no further liability for funding the portion of its Revolving
Credit Commitments assumed by such other Lender and (iii) the address for
notices to such assignee Lender shall be as specified in the Assignment
Agreement executed by it. Concurrently with the execution and delivery of such
Assignment Agreement, the Company shall execute and deliver Notes to the
assignee Lender in the respective amounts of its Revolving Credit Commitments
under the Revolving Credit and new Notes to the assigning Lender in the
respective amounts of its Revolving Credit Commitments under the Revolving
Credit after giving effect to the reduction occasioned by such assignment, all
such Notes to constitute "Notes" for all purposes of this Agreement and of the
other Loan Documents. Section 11.11. Notices. Except as otherwise
specified herein, all notices hereunder shall be in writing (including, without
limitation, notice by telecopy) and shall be given to the relevant party at its
address or telecopier number set forth below, in the case of the Company, or on
the appropriate signature page hereof, in the case of the Lenders and the Agent,
or such other address or telecopier number as such party may hereafter specify
by notice to the Agent and the Company given by United States certified or
registered mail, by telecopy or by other telecommunication device capable of
creating a written record of such notice and its receipt. Notices hereunder to
the Company shall be addressed to:
to the Company at:
6133 North River Road, Suite 1000
Rosemont, Illinois 60018-5171
Attention: Donald C. Welchko
Telephone: (847) 518-8700
Telecopy: (847) 518-8777
with a copy (in case of notices of default) to:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Attention: Steven A. Shapiro
Telephone: (312) 902-5200
Telecopy: (312) 902-1061
to the Agent at:
Harris Trust and Savings Bank
P.O. Box 755
111 West Monroe Street
Chicago, Illinois 60690
Attention: James H. Colley
Telephone: (312) 461-6876
Telecopy: (312) 293-5041
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Each such notice, request or other communication shall be effective (i)
if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in this Section and a confirmation of such telecopy has been
received by the sender, (ii) if given by mail, five (5) days after
such communication is deposited in the mail, certified or registered with return
receipt requested, addressed as aforesaid or (iii) if given by any other
means, when delivered at the addresses specified in this Section; provided that
any notice given pursuant to Section 1 or Section 2 hereof shall
be effective only upon receipt. Section 11.12. Construction. The parties
hereto acknowledge and agree that this Agreement and the other Loan Documents
shall not be construed more favorably in favor of one than the other based upon
which party drafted the same, it being acknowledged that all parties hereto
contributed substantially to the negotiation of this Agreement and the other
Loan Documents. NOTHING CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED TO PERMIT
ANY ACT OR OMISSION WHICH IS PROHIBITED BY THE TERMS OF ANY OF THE OTHER LOAN
DOCUMENTS, THE COVENANTS AND AGREEMENTS CONTAINED HEREIN BEING IN ADDITION TO
AND NOT IN SUBSTITUTION FOR THE COVENANTS AND AGREEMENTS CONTAINED IN THE OTHER
LOAN DOCUMENTS. Section 11.13. Headings. Section headings used in this
Agreement are for convenience of reference only and are not a part of this
Agreement for any other purpose. Section 11.14. Severability of
Provisions. Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction. All rights, remedies and powers provided in this
Agreement and the other Loan Documents may be exercised only to the extent that
the exercise thereof does not violate any applicable mandatory provisions of
law, and all the provisions of this Agreement and the other Loan Documents are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and to be limited to the extent necessary so that they will not
render this Agreement or the other Loan Documents invalid or unenforceable.
Section 11.15 Counterparts. This Agreement may be executed in any number
of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument. Section 11.16. Entire
Understanding. This Agreement together with the other Loan Documents constitute
the entire understanding of the parties with respect to the subject matter
hereof and any prior agreements, whether written or oral, with respect thereto
are superseded hereby except for prior understandings related to fees payable to
the Agent upon the initial closing of the transactions contemplated hereby.
Section 11.17. Binding Nature, Governing Law, Etc. This Agreement shall
be binding upon the Company and its successors and assigns, and shall inure to
the benefit of the Agent and the Lenders and the benefit of their successors and
assigns, including any subsequent holder of an interest in the Obligations. The
Company may not assign its rights hereunder without the written
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consent of the Lenders. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 11.18. Submission to Jurisdiction; Waiver of Jury Trial. The
Company hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Northern District of Illinois and of any Illinois State
court sitting in the City of Chicago for purposes of all legal proceedings
arising out of or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby. The Company irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. THE COMPANY, THE AGENT, AND EACH LENDER HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY.
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<PAGE>
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of this 4th day of November, 1998.
ANICOM, INC.
By
Name:
Title:
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Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.
Each of the Lenders hereby agrees with each other Lender that if it
should receive or obtain any payment (whether by voluntary payment, by
realization upon collateral, by the exercise of rights of set-off or banker's
lien, by counterclaim or cross action, or by the enforcement of any rights under
this Agreement, any of the other Loan Documents or otherwise) in respect of the
Obligations in a greater amount than such Lender would have received had such
payment been made to the Agent and been distributed among the Lenders as
contemplated by Section 3.4 hereof then in that event the Lender receiving such
disproportionate payment shall purchase for cash without recourse from the other
Lenders an interest in the Obligations of the Company to such Lenders in such
amount as shall result in a distribution of such payment as contemplated by
Section 3.4 hereof. In the event any payment made to a Lender and shared with
the other Lenders pursuant to the provisions hereof is ever recovered from such
Lender, the Lenders receiving a portion of such payment hereunder shall restore
the same to the payor Lender, but without interest. Amount and Percentage of
Commitments:
Revolving Credit
Commitment:
$17,500,000
HARRIS TRUST AND SAVINGS BANK
By
Its Vice President
111 West Monroe Street
Chicago, Illinois 60603
Attention: James H. Colley
Telephone: (312) 461-6876
Telecopy: (312) 293-5041
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Revolving Credit
Commitment:
$16,250,000
THE FIRST NATIONAL BANK OF CHICAGO
By
Its
One First National Plaza
Chicago, Illinois 60670
Attention: Julia A. Bristow
Telephone: (312) 732-7790
Telecopy: (312) 732-1117
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Revolving Credit
Commitment:
$16,250,000
LASALLE NATIONAL BANK
By
Its
135 South LaSalle Street
Chicago, Illinois 60603
Attention: Marguerite A. Laughlin
Telephone: (312) 904-6150
Telecopy: (312) 904-6742
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Revolving Credit
Commitment:
$10,000,000
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
Its
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Paul R. Frey
Telephone: (312) 828-8230
Telecopy: (312) 765-2193
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EXHIBIT A
ANICOM, INC.
SHORT-TERM REVOLVING CREDIT NOTE
Chicago, Illinois
$------------------------------------
__________, 199___
On the Revolving Credit Termination Date, for value received, the
undersigned, ANICOM, INC., a Delaware corporation (the "Company"), hereby
promises to pay to the order of ____________________ (the "Lender"), at the
principal office of Harris Trust and Savings Bank in Chicago, Illinois, the
principal sum of (i) ________________________________ and no/100 Dollars
($_________________), or (ii) such lesser amount as may at the time of the
maturity hereof, whether by acceleration or otherwise, be the aggregate unpaid
principal amount of all Loans owing from the Company to the Lender under the
Revolving Credit provided for in the Credit Agreement hereinafter mentioned.
This Note evidences loans constituting part of a "Domestic Rate
Portion" and "LIBOR Portions" as such terms are defined in that certain
Short-Term Credit Agreement dated as of November 4, 1998, between the
Company, Harris Trust and Savings Bank, individually and as Agent thereunder,
and the other Lenders which are now or may from time to time hereafter become
parties thereto (said Credit Agreement, as the same may be amended, modified or
restated from time to time, being referred to herein as the "Credit Agreement")
made and to be made to the Company by the Lender under the Revolving Credit
provided for under the Credit Agreement, and the Company hereby promises to pay
interest at the office described above on each loan evidenced hereby at the
rates and at the times and in the manner specified therefor in the Credit
Agreement.
Each loan made under the Revolving Credit provided for in the Credit
Agreement by the Lender to the Company against this Note, any repayment of
principal hereon, the status of each such loan from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and, in the case of any LIBOR Portion,
the interest rate and Interest Period applicable thereto shall be endorsed by
the holder hereof on a schedule to this Note or recorded on the books and
records of the holder hereof (provided that such entries shall be endorsed on a
schedule to this Note prior to any negotiation hereof). The Company agrees that
in any action or proceeding instituted to collect or enforce collection of this
Note, the entries so endorsed on a schedule to this Note or recorded on the
books and records of the holder hereof shall be prima facie evidence of the
unpaid principal balance of this Note, the status of each such loan from time to
time as part of the Domestic Rate Portion or a LIBOR Portion, and, in the case
of any LIBOR Portion, the interest rate and Interest Period applicable thereto.
This Note is issued by the Company under the terms and provisions of
the Credit Agreement, and this Note and the holder hereof are entitled to all of
the benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayments are required to be made hereon, all
in the events, on the terms and with the effects provided in the Credit
Agreement. All capitalized terms used herein without definition shall have the
same meanings herein as such terms are defined in the Credit
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Agreement.
The Company hereby promises to pay all costs and expenses (including
attorneys' fees) suffered or incurred by the holder hereof in collecting this
Note or enforcing any rights in any collateral therefor. The Company hereby
waives presentment for payment and demand. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
ANICOM, INC.
By:
Name:
Title:
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EXHIBIT B
COMPLIANCE CERTIFICATE
To: Harris Trust and Savings Bank, as Agent
under, and the Lenders party to, the
Credit Agreement described below
This Compliance Certificate is furnished to the Agent and the Lenders
pursuant to that certain Short-Term Credit Agreement dated as of November 4,
1998, by and among Anicom, Inc. (the "Company") and you (the "Credit
Agreement"). Unless otherwise defined herein, the terms used in this Compliance
Certificate have the meanings ascribed thereto in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _________________________________ of the
Company; 2. I have reviewed the terms of the Credit Agreement and I
have made, or have caused
to be made under my supervision, a detailed review of the transactions and
conditions of the Company and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose,
and I have no knowledge of, the existence of any condition or the occurrence of
any event which constitutes a Default or Event of Default during or at the end
of the accounting period covered by the attached financial statements or as of
the date of this Certificate, except as set forth below;
4. The financial statements required by Section 8.5 of the
Credit Agreement and being furnished to you concurrently with this Certificate
are true, correct and complete as of the date and for the periods covered
thereby; and
5. The Attachment hereto sets forth financial data and computations
evidencing the Company's compliance with certain covenants of the Credit
Agreement, all of which data and computations are, to the best of my knowledge,
true, complete and correct and have been made in accordance with the relevant
Sections of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Company has taken, is taking, or
proposes to take with respect to each such condition or event:
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
The foregoing certifications, together with the computations set forth
in the Attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _________ day of
__________________ 19___.
...................................,
...................................
(Print or Type Name)
(Title)
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ATTACHMENT TO COMPLIANCE CERTIFICATE
ANICOM, INC.
Compliance Calculations for Credit Agreement
Dated as of November 4, 1998
Calculations as of _____________, 19___
- ---------------------------------------------------------------------------
A. CURRENT RATIO (SECTION 8.6)
1. Total current assets (including ............
prepaid expenses)
2. Total current liabilities ............
3. Special Post-Closing Acquisition ............
Liabilities
4. Line 2 minus Line 3 ............
5. Ratio of Line 1 to Line 4
("Current Ratio")
6. As listed in Section 8.6, the Current Ratio
shall not be less than 1:40 : 1
--------------
7. Company is in Compliance?
(Circle Yes or No) Yes/No
B. INTEREST COVERAGE RATIO (SECTION 8.7)
1. Consolidated Net Income as defined .............
2. Amounts deducted in arriving at
Consolidated Net Income in respect of
(a) Interest Expense .............
(b) Federal, state and local
income taxes .............
3. Sum of Lines 1, 2(a) and 2(b)
("EBIT")
4. Interest Expense
5. Ratio of EBIT (Line 3)
to Interest Expense (Line 4) ("Interest
Coverage Ratio") : 1
==============
6. As listed in Section 8.7, for
the date of this Certificate,
the Interest Coverage
Ratio shall not be less than
2.0 : 1
7. Company is in compliance?
(Circle yes or no)
Yes/No
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C. TANGIBLE NET WORTH (SECTION 8.8) 1. Shareholders' Equity
-----------
2. Less
(a) Notes receivable
from officers and
employees
(b) Intangible Assets ...........
3. Line 1 minus Lines 2(a) and 2(b)
("Tangible Net Worth")
-----------
4. As required by Section 8.8,
Tangible Net Worth must not be less than
Minimum Required Amount
(a) Consolidated Net Income .............
(b) .50 X Line 4(a) .............
(c) Line 4(b) plus the $________ _______
Minimum Required
Amount for the immediately
preceding fiscal quarter
("Minimum Required Amount")
5. Company is in compliance? (Circle yes or no) Yes/No
D. DEBT TO EARNINGS RATIO (SECTION 8.9)
1. Total Funded Debt ...........
2. EBITDA (Line B3 plus amounts charged
for depreciation, amortization and
Fiscal 1998 Charges) ...........
3. Ratio of Line 1 to Line 2
("Debt to Earnings Ratio")
: 1
============
4. As listed in Section8.9,
Debt to Earnings Ratio
must not be greater than
3.5 : 1
============
5. Company is in compliance? (Circle yes or no)
Yes/No
E. LEVERAGE RATIO (SECTION 8.10)
1. Total Funded Debt .............
2. Shareholders' Equity
3. Line 1 plus Line
4. Total Capitalization
(from Line E3 above) .............
5. Ratio of Line 1 to Line 4
("Leverage Ratio") :1
7. As listed in Section 8.10, for
the date of this Certificate,
the Leverage Ratio shall not
be greater than
0.40 :1
8. Company is in compliance?
(Circle yes or no) Yes/No
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F. SPECIAL POST-CLOSING ACQUISITION LIABILITIES.
The following summarizes the Special Post-Closing Acquisition Liabilities
used in computing compliance with the current ratio (Section 8.6):______________
________________________________________________________________________________
________________________________________________________________________________
NATURE OF RESERVE DATE CREATED AMOUNT
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EXHIBIT C
SUBORDINATED INDEBTEDNESS
INTEREST BALANCE AS
INSTRUMENT RATE OF 6/30/98 MATURITY
Note payable to Robert Brzustewicz 8.55% $1,000,00 In an installment on
March >12, 1999
Note payable to James Hinshaw prime $440,213 In monthly installments
through July 1, 2002
Notes payable to Kenneth Burgess 8.00% $166,667 In an installment on
October 27, 1998
Note payable to Bruce Stanley 6.77% to $300,000 On demand
8.00%
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EXHIBIT D
SUBORDINATION PROVISIONS APPLICABLE TO
SUBORDINATED DEBT
(a) The indebtedness evidenced by the subordinated notes1/* and any
renewals or extensions thereof (hereinafter called "Subordinated Indebtedness"),
shall at all times be wholly subordinate and junior in right of payment to any
and all credit and other indebtedness, obligations and liabilities of the
Company to the lenders (collectively the "Lenders") and their agent (each, an
"Agent") under or in connection with (i) that certain Long-Term Credit
Agreement dated as of November 4, 1998 by and among the Company, Harris
Trust and Savings Bank, individually ("Harris") and as Agent for the Lenders
thereunder and other Lenders from time to time party thereto and (ii)
that certain Short-Term Credit Agreement dated as of November 4, 1998
by and among the Company, Harris Trust and Savings Bank, individually and as
Agent for the Lenders thereunder and other Lenders from time to time party
thereto, in each case howsoever evidenced, whether now existing or hereafter
created or arising, whether direct or indirect, absolute or contingent, or joint
or several, as any of the same may be modified, supplemented or amended from
time to time (hereinafter called "Superior Indebtedness"), in the manner and
with the force and effect hereafter set forth:
(1) In the event of any liquidation, dissolution or winding
up of the Company of in the event of any execution sale, receivership,
insolvency, bankruptcy, liquidation, readjustment, reorganization or
other similar proceeding relative to the Company or its properties,
then in any such event the holders of any and all Superior Indebtedness
shall be preferred in the payment of their claims over the holder or
holders of the Subordinated Indebtedness, and such Superior
Indebtedness shall be first paid and satisfied in full before any
payment or distribution of any kind or character, whether in cash,
property or securities shall be made upon the Subordinated
Indebtedness; and in any such event any dividend or distribution of any
kind or character, whether in cash, property or securities which shall
be made upon or in respect of the Subordinated Indebtedness, or any
renewals or extensions hereof, shall be paid over to the holders of
such Superior Indebtedness, pro rata, for application in payment
thereof unless and until such Superior Indebtedness shall have been
paid and satisfied in full;
(2) Without limiting any of the other provisions hereof, in
the event that the Subordinated Indebtedness is declared or becomes due
and payable because of the occurrence of any event of default hereunder
(or under the agreement or indenture, as appropriate) or for any other
reason other than at the option of the Company, under circumstances
when the foregoing clause (1) shall not be applicable, the
holders of the Subordinated Indebtedness shall be entitled to payments
only after there shall first have been paid in full all Superior
Indebtedness outstanding at the time the Subordinated Indebtedness
- --------
1
* Or debentures or other designation as may be appropriate.
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so becomes due and payable because of any such event, or payment shall
have been provided for in a manner satisfactory to the holders of such
Superior Indebtedness;
(3) No payment on account of principal of, premium, if any,
or interest on the Subordinated Indebtedness shall be made, nor shall
any assets be applied to the purchase or other acquisition or
retirement of the Subordinated Indebtedness, unless full payment of
amounts then due on all Superior Indebtedness has been made or duly
provided for, and no payment on account of principal of, premium, if
any, or interest on the Subordinated Indebtedness shall be made, nor
shall any assets be applied to the purchase or other acquisition or
retirement of the Subordinated Indebtedness, if at the time of such
payment or application or immediately after giving effect thereto,
there shall exist a default in the payment of any amount due on any
Superior Indebtedness;
(4) If there shall have occurred a default (other than a
default in the payment of any amount due) with respect to any issue of
Superior Indebtedness, as defined therein or in the instrument under
which the same has been issued, permitting the holders thereof, after
notice or lapse of time, or both, to accelerate the maturity thereof,
and any such holders as constitute a sufficient number or hold a
sufficient amount of such Superior Indebtedness as to have the right to
so accelerate the maturity thereof (the "Notifying Debtholders") shall
give written notice of the default to the Company (a "Default Notice"),
then, unless and until such default shall have been cured or waived, no
payment on account of principal of, premium, if any, or interest on the
Subordinated Indebtedness shall be made, nor shall any assets be
applied to the purchase or other acquisition or retirement of the
Subordinated Indebtedness, at any time during the 180 days immediately
following the delivery of the Default Notice to the Company (the
"Blockage Period"); provided that if, during the Blockage Period the
Notifying Debtholders shall have accelerated the maturity of the
Superior Indebtedness held by such Notifying Debtholders, or shall have
taken such action as is necessary under the governing agreement or
instrument to accelerate the maturity of such Superior Indebtedness
(subject only to the expiration of a grace period not exceeding 30
days), then the Blockage Period shall be extended for any such grace
period and thereafter for so long as such acceleration shall continue
to be in effect and judicial proceedings shall be pending with respect
thereto, the Notifying Debtholders shall be in the process of
foreclosing or otherwise collecting or realizing on collateral for such
Superior Indebtedness or the Notifying Debtholders shall otherwise be
pursuing collection procedures in good faith. At the expiration of such
Blockage Period, (i) the Company shall, absent the occurrence
prior to payment thereof by the Company of any event set forth in
Section 1 or 3 hereof, pay to the holders of the Subordinated
Indebtedness all amounts which would have been payable other than by
reason of acceleration during the Blockage Period and (ii) if
the default referred to in the Default Notice shall continue to exist
and shall not have been waived, then the Notifying Debtholders shall be
permitted to submit a new Default Notice respecting such event of
default. If, during any Blockage Period, a subsequent Default Notice is
served respecting an event or events of default which were in existence
and known to such Notifying Debtholder on the first day of the
pre-existing Blockage Period, then the Blockage period triggered by the
subsequent Default Notice shall terminate at the same time
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as the pre-existing Blockage Period;
(5) Any holders of Subordinated Indebtedness shall not
without the prior written consent of the holders of the Superior
Indebtedness take any collateral for any Subordinated Indebtedness,
whether from the Company or any other party, nor take any guaranties
for any Subordinated Indebtedness, from any party, in each case if and
so long as the terms of any of the Superior Indebtedness prohibit such
liens or guaranties. Without limiting the effect of any of the other
provisions of this Agreement, any interest in or lien on any assets or
properties of the Company or any other party which may (notwithstanding
the foregoing agreement) be held or hereafter acquired by or on behalf
of any holder of Subordinated Indebtedness as security for any
Subordinated Indebtedness is and shall be absolutely and
unconditionally subject and subordinate in all respects to any security
interest or lien which may be held or hereafter acquired by or on
behalf of the holders of Superior Indebtedness in the same such assets
or properties as security for any Superior Indebtedness notwithstanding
the time of attachment of any interest therein or lien thereon or the
filing of any financing statement or any other priority provided by law
or by agreement; and
(6) The holders of Subordinated Indebtedness shall not take
any action to enforce collection of the Subordinated Indebtedness or to
foreclose or otherwise realize upon any security or guaranty given to
secure or guaranty the Subordinated Indebtedness and the Company and
any such guarantor shall not make any payment in respect of the
Subordinated Indebtedness, in each case during any Blockage Period, or
otherwise unless the Company shall, 180 days prior to the taking of any
such action, have provided the holders of Superior Indebtedness with
notice of the occurrence of the default giving rise to such action. Any
provisions of this Section 6 to the contrary notwithstanding, the
restriction contained in this Section shall no longer apply upon the
first to occur of the following: (i) the institution of
bankruptcy proceedings by or against the Company; (ii) the
acceleration of the Superior Indebtedness; or (iii) the payment
or other satisfaction of all of the Superior Indebtedness. The holders
of the Subordinated Indebtedness agree to accept a cure from the
Lenders of any default with respect to any Subordinated Indebtedness
(with the same force and effect as if such cure were timely provided by
the Company or the appropriate obligor) at any time during the period
during which the holders of the Subordinated Indebtedness agree not to
act pursuant to this Section and if any such default is cured during
any such period shall be rescinded and annulled all with the same
effect as though such default had not occurred and the rate of interest
on such Subordinated Indebtedness shall accrue during such period at
the applicable predefault rate.
(7) The holders of Subordinated Indebtedness undertake and
agree for the benefit of each holder of Superior Indebtedness to
execute, verify, deliver and file any proofs of claim, consents,
assignments or other instruments which any holder of Superior
Indebtedness may at any time require in order to prove and realize upon
any rights or claims pertaining to the subordinated notes and to
effectuate the full benefit of the subordination contained herein; and
upon failure of the holder of any subordinated note so to do, any such
holder of Superior Indebtedness shall be deemed to be irrevocably
appointed the agent and attorney-in-fact of the holder of such note to
execute, verify, deliver and file any such proofs
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of claim, consents, assignments or other instrument.
(8) No right of any holder of any Superior Indebtedness to
enforce subordination as herein provided shall at any time or in any
way be affected or impaired by any failure to act on the part of the
Company or the holders of Superior Indebtedness, or by any
noncompliance by the Company with any of the terms, provisions and
covenants of the subordinated notes or the agreement under which they
are issued, regardless of any knowledge thereof that any such holder of
Superior Indebtedness may have or be otherwise charged with.
(9) The Company agrees, for the benefit of the holders of
Superior Indebtedness, that in the event that any subordinated note is
declared due and payable before its expressed maturity because of the
occurrence of a default hereunder, (i) the Company will provide
prompt notice in writing of such happening to the holders of Superior
Indebtedness and (ii) a holder of any Superior Indebtedness may
declare the same to be immediately due and payable, regardless of the
expressed maturity thereof.
(10) To the extent that the Company makes any payment on the
Superior Indebtedness which is subsequently invalidated, declared to be
fraudulent or preferential, set aside or is required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or
Federal law, common law or equitable cause (such payment being
hereinafter referred to as a "Voided Payment"), then to the extent of
such Voided Payment that portion of the Superior Indebtedness which had
been previously satisfied by such Voided Payment shall be revived and
continue in full force and effect as if such Voided Payment has never
been made. In the event that a Voided Payment is recovered from the
holders of the Superior Indebtedness, a default in the payment of
Superior Indebtedness specified in paragraph (a)(3) of these
subordination provisions shall be deemed to have existed and to be
continuing from the date of the initial receipt by the holders of the
Superior Indebtedness of such Voided Payment until the full amount of
such Voided Payment is fully and finally restored to the holder of the
Superior Indebtedness and until such time these subordination
provisions shall be in full force and effect.
(11) In the event that any payment or distribution of assets
is made to any holder of subordinated notes in contravention of these
subordination provisions, such payment or distribution shall be
received and held by such holder in trust for the benefit of the
holders of the then outstanding Superior Indebtedness and shall,
forthwith upon receipt thereof, be paid or distributed to the holders
of the Superior Indebtedness, pro rata, for application in payment
thereof.
(12) The foregoing provisions are solely for the purpose of
defining the relative rights of the holders of Superior Indebtedness on
the one hand, and the holders of the Subordinated Indebtedness on the
other hand, and nothing herein shall impair, as between the Company and
the holders of the Subordinated Indebtedness, the obligation of the
Company, which is unconditional and absolute, to pay the principal of
and premium, if any, and interest on the Subordinated Indebtedness in
accordance with their terms, nor shall anything herein prevent the
holders of the Subordinated Indebtedness from exercising all remedies
otherwise permitted by applicable law or hereunder upon default
hereunder, subject to the rights of the holders of Superior
Indebtedness as herein provided for.
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EXHIBIT E
GUARANTY
This Guaranty Agreement, dated as of ____________, ____, made by
____________ _________________________________, a _________________ organized
under the laws of _________________ (the "Guarantor");
WITNESSETH:
WHEREAS, Anicom, Inc., a Delaware corporation (the "Borrower"), Harris
Trust and Savings Bank ("Harris"), individually and as Agent (Harris acting as
such agent and any successor or successors to Harris in such capacity being
hereinafter referred to as the "Agent"), and the lenders from time to time party
thereto (Harris and such other lenders being hereinafter referred to
collectively as the "Lenders" and individually as a "Lender") have entered into
a ShortTerm Credit Agreement dated as of November 4, 1998 (such Credit
Agreement as the same may from time to time hereafter be modified or amended
being hereinafter referred to as the "Credit Agreement") pursuant to which the
Lenders have extended various credit facilities to the Borrower (the Agent and
the Lenders being hereinafter referred to collectively as the "Guaranteed
Creditors" and individually as a "Guaranteed Creditor"); and
WHEREAS, the Borrower owns and holds all or substantially all of the
issued and outstanding common capital stock of the Guarantor; and
WHEREAS, it is a condition to the extension of credit by the Lenders
under the Credit Agreement that the Guarantor shall have executed and delivered
this Guaranty; and
WHEREAS, the Borrower has provided and will continue to provide the
Guarantor with business, technical and financial support beneficial to the
proper conduct of the Guarantor's business and the Guarantor will obtain
benefits as a result of the extensions of credit to the Borrower under the
Credit Agreement; and, accordingly, the Guarantor desires to enter into this
Guaranty in order to satisfy the condition described in the preceding paragraph;
and
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to the Guarantor, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby makes the following representations and
warranties to the Guaranteed Creditors and hereby covenants and agrees with the
Guaranteed Creditors as follows:
1. The Guarantor hereby unconditionally and irrevocably guarantees to
the Guaranteed Creditors, the due and punctual payment of all present and future
indebtedness of the Borrower evidenced by or arising out of the Credit Documents
(as hereinafter defined), including, but not limited to, (a) the due and
punctual payment of principal of and interest on all notes issued by the
Borrower under the Credit Agreement and any and all notes issued in extension or
renewal thereof or in substitution or replacement therefor (collectively the
"Notes") as and when the same shall become due and payable, whether at stated
maturity, by acceleration or otherwise, and (b) the full and prompt performance
and payment when due of any and all other indebtedness, obligations and
liabilities, whether now existing or hereafter arising, of the Borrower to the
Guaranteed Creditors under or arising out of the Credit Agreement (the Notes,
Credit Agreement and each guaranty executed by another subsidiary of the
Borrower in connection with the Credit Agreement being hereinafter collectively
referred to as the "Credit Documents"). The indebtedness, obligations and
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liabilities described in the immediately preceding clauses (a) and (b)
are hereinafter referred to as the "Guaranteed Obligations". In case of failure
by Borrower punctually to pay any indebtedness guaranteed hereby, the Guarantor
hereby unconditionally agrees to make such payment or to cause such payment to
be made punctually as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, and as if such payment were made
by the Borrower.
2. The obligations of the Guarantor under this Guaranty shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower or of any other
guarantor under the Credit Agreement or any other Credit Document or by
operation of law or otherwise;
(b) any modification or amendment of or supplement to the
Credit Agreement or any other Credit Document;
(c) any change in the corporate existence, structure or
ownership of (including any of the foregoing arising from any merger,
consolidation, amalgamation or similar transaction), or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting, the
Borrower, any other guarantor, or any of their respective assets, or
any resulting release or discharge of any obligation of the Borrower or
of any other guarantor contained in any Credit Document (it being
understood and agreed that the term "Borrower" as used herein shall
mean and include any corporation, partnership, association or any other
entity or organization resulting from a merger, consolidation,
amalgamation or similar transaction involving the Borrower);
(d) the existence of any claim, set-off or other rights which
the Guarantor may have at any time against any Guaranteed Creditor or
any other person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or
demand or any exercise of, or failure to exercise, any rights or
remedies against the Borrower, any other guarantor, any other person or
any of their respective properties;
(f) any application of any sums by whomsoever paid or
howsoever realized to any obligation of the Borrower regardless of what
obligations of the Borrower remain unpaid;
(g) any invalidity or unenforceability relating to or against
the Borrower or any other guarantor for any reason of the Credit
Agreement or of any other Credit Document or any provision of
applicable law or regulation purporting to prohibit the payment by the
Borrower or any other guarantor of the principal of or interest on any
Note or any other amount payable by it under the Credit Documents; or
(h) any other act or omission to act or delay of any kind by
any Guaranteed Creditor or any other person or any other circumstance
whatsoever that might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the obligations of the
Guarantor hereunder.
In order to hold the Guarantor liable hereunder, there shall be no obligation on
the part of the Guaranteed Creditors, at any time, to resort for payment to the
Borrower or any other guarantor, or
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resort to any collateral, security, property, liens or other rights or remedies
whatsoever, and the Guaranteed Creditors shall have the right to enforce this
Guaranty irrespective of whether or not other proceedings or steps seeking
resort or realization upon or from any of the foregoing are pending.
3. The Guarantor's obligations hereunder shall remain in full force
and effect until all commitments by the Guaranteed Creditors to extend credit to
the Borrower are terminated and the principal of and interest on the Notes and
all other amounts payable by the Borrower under the Credit Agreement and all
other Credit Documents shall have been paid in full. If at any time any payment
of the principal of or interest on any Note or any other amount payable by the
Borrower under the Credit Documents is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of the Borrower or
of any other guarantor, or otherwise, the Guarantor's obligations hereunder with
respect to such payment shall be reinstated at such time as though such payment
had become due but had not been made at such time.
4. (a)
The Guarantor irrevocably waives acceptance hereof, presentment, demand, protest
and any notice not provided for herein, as well as any requirement that at any
time any action be taken by the Agent, any Lender or any other person against
the Borrower, another guarantor or any other person.
(b) The Guarantor hereby agrees not to exercise or enforce any right of
exoneration, contribution, reimbursement, recourse or subrogation available to
the Guarantor against the Borrower or any other guarantor, or as to any security
therefor, unless and until all commitments by the Guaranteed Creditors to extend
credit to the Borrower are terminated and the principal of and interest on the
Notes and all other amounts payable by the Borrower under the Credit Agreement
and all other Credit Documents shall have been paid in full; and the payment by
the Guarantor of any of its obligations hereunder shall not in any way entitle
the Guarantor to any right, title or interest (whether by way of subrogation or
otherwise) in and to any of the Guaranteed Obligations or any proceeds thereof
or any security therefor unless and until all commitments by the Guaranteed
Creditors to extend credit to the Borrower are terminated and the principal of
and interest on the Notes and all other amounts payable by the Borrower under
the Credit Agreement and all other Credit Documents shall have been paid in
full.
5. Notwithstanding any other provision hereof, the right of recovery
of the Guaranteed Creditors against the Guarantor hereunder shall not exceed
$1.00 less than the amount which would render the Guarantor's obligations
hereunder void or voidable under applicable law, including without limitation
fraudulent conveyance law.
6. If acceleration of the time for payment of any amount payable by
the Borrower under the Credit Agreement or any other Credit Document is stayed
upon the insolvency, bankruptcy or reorganization of the Borrower, all such
amounts otherwise subject to acceleration under the terms of the Credit
Agreement or the other Credit Documents shall nonetheless be payable by the
Guarantor forthwith on demand by the Agent made at the request of the Guaranteed
Creditors.
7. Any payment of a Guaranteed Obligation required to be made pursuant
to this Guaranty shall be made in the currency which such Guaranteed Obligation
is required to be made in pursuant to the Credit Agreement or such other Credit
Document giving rise to such Guaranteed Obligation.
8. This Guaranty shall be binding upon the Guarantor and its
successors and assigns and
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shall inure to the benefit of the Guaranteed Creditors and their successors and
assigns. Any Guaranteed Creditor may, to the extent permitted by the Credit
Agreement, sell, transfer or assign its rights in the Guaranteed Obligations
held by it, or any part thereof, or grant participations therein; and in that
event, each and every immediate and successive assignee or transferee of, or
holder or participant in, all or any part of the Guaranteed Obligations, shall
have the right to enforce this Guaranty, by suit or otherwise, for the benefit
of such assignee, transferee, holder or participant as fully as if such assignee
or transferee, holder or participant were herein by name specifically given such
rights, powers and benefits; but each Guaranteed Creditor shall have an
unimpaired right to enforce this Guaranty for its own benefit or for the benefit
of any such participant as to so much of the Guaranteed Obligations that it has
not sold, assigned or transferred.
9. The Guarantor acknowledges that executed (or conformed) copies of
the Credit Agreement and the other Credit Documents have been made available to
its principal executive officers and such officers are familiar with the
contents thereof.
10. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by the Borrower, or others (including the
Guarantor), with respect to any of the Guaranteed Obligations shall, if the
statute of limitations in favor of the Guarantor against the Guaranteed
Creditors shall have commenced to run, toll the running of such statute of
limitations, and if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
11. The records of the Agent and each Lender as to the unpaid balance
of the Guaranteed Obligations at any time and from time to time shall be prima
facie evidence thereof without further or other proof for all purposes,
including the enforcement of this Guaranty and any collateral therefor.
12. Except as otherwise required by law, each payment by the Guarantor
hereunder shall be made without withholding for or on account of any present or
future taxes (other than overall net income taxes on the recipient) imposed by
or within the jurisdiction in which the Guarantor is domiciled, any jurisdiction
from which the Guarantor makes any payment, or (in each case) any political
subdivision or taxing authority thereof or therein. If any such withholding is
so required, the Guarantor shall make the withholding, pay the amount withheld
to the appropriate governmental authority before penalties attach thereto or
interest accrues thereon and forthwith pay such additional amount as may be
necessary to ensure that the net amount actually received by each Guaranteed
Creditor free and clear of such taxes (including such taxes on such additional
amount) is equal to the amount which that Guaranteed Creditor would have
received had such withholding not been made. If any Guaranteed Creditor pays any
amount in respect of any such taxes, penalties or interest the Guarantor shall
reimburse the Guaranteed Creditor for that payment on demand in the currency in
which such payment was made. If the Guarantor pays any such taxes, penalties or
interest, it shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Guaranteed Creditor on whose account such
withholding was made (with a copy to the Agent if not the recipient of the
original) on or before the thirtieth day after payment. If any Guaranteed
Creditor determines it has received or been granted a credit against or relief
or remission for, or repayment of, any taxes paid or payable by it because of
any taxes, penalties or interest paid by the Guarantor and evidenced by such a
tax receipt, such Guaranteed Creditor shall, to the extent it can do so without
prejudice
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to the retention of the amount of such credit, relief, remission or repayment,
pay to the Guarantor as applicable, such amount as such Guaranteed Creditor
determines is attributable to such deduction or withholding and which will leave
such Guaranteed Creditor (after such payment) in no better or worse position
than it would have been in if the Guarantor had not been required to make such
deduction or withholding. Nothing herein shall interfere with the right of each
Guaranteed Creditor to arrange its tax affairs in whatever manner it thinks fit
nor oblige any Guaranteed Creditor to disclose any information relating to its
tax affairs or any computations in connection with such taxes.
13. Each reference in the Credit Agreement or any other Credit Document
to U.S. Dollars or to an alternative currency (the "relevant currency") is of
the essence. To the fullest extent permitted by law, the obligation of the
Guarantor in respect of any amount due in the relevant currency under the Credit
Agreement shall, notwithstanding any payment in any other currency (whether
pursuant to a judgment or otherwise), be discharged only to the extent of the
amount in the relevant currency that the Guaranteed Creditor entitled to receive
such payment may, in accordance with normal banking procedures, purchase with
the sum paid in such other currency (after any premium and costs of exchange) on
the business day immediately following the day on which such Guaranteed Creditor
receives such payment. If the amount of the relevant currency so purchased is
less than the sum originally due to such Guaranteed Creditor in the relevant
currency, the Guarantor agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Guaranteed Creditor against such loss, and if
the amount of the specified currency so purchased exceeds the sum of (a) the
amount originally due to the relevant Guaranteed Creditor in the specified
currency plus (b) any amounts shared with other Guaranteed Creditors as a result
of allocations of such excess as a disproportionate payment to such Guaranteed
Creditor under Section 3.4 of the Credit Agreement, such Guaranteed
Creditor agrees to remit such excess to the Guarantor.
14. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF ILLINOIS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS), in which
State it shall be performed by the Guarantor.
15. The obligation of the Guarantor hereunder shall be absolute and
unconditional under all circumstances and irrespective of the validity or the
enforceability of the Guaranteed Obligations and irrespective of any present or
future law of any government or of any agency thereof purporting to reduce,
amend or otherwise affect any of the Guaranteed Obligations. To the extent that
the Guarantor or any of its properties or revenues has or hereafter may acquire
any right of immunity from suit, judgment or execution, the Guarantor hereby
irrevocably waives such right of immunity in respect of its obligations
hereunder and in respect of any action or proceeding, wherever brought, to
enforce any judgment against the Guarantor for breach of any of such
obligations.
16. The Guarantor hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Northern District of Illinois and of
any Illinois State court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Guaranty, the Credit
Agreement, the other Credit Documents or the transactions contemplated hereby or
thereby, and consents to the service of process by registered or certified mail
out of any such court or by service of process on the Borrower (now at
_________________________________) which the
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Guarantor hereby irrevocably appoints as its agent to receive, for it and on its
behalf, service of process in any action or proceeding in Illinois. Such service
shall be deemed completed on delivery to such process agent (whether or not it
is forwarded to and received by the Guarantor) provided that notice of such
service of process is given by the Guaranteed Creditors to the Guarantor. If,
for any reason, such process agent ceases to be able to act as such, the
Guarantor irrevocably agrees to appoint a substitute process agent acceptable to
the Agent and to deliver to the Agent a copy of the new agent's acceptance of
that appointment within thirty days. Nothing contained herein shall affect the
right of the Guaranteed Creditors to serve legal process in any other manner or
to bring any proceeding hereunder in any jurisdiction where the Guarantor may be
amenable to suit. The Guarantor irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum. Final judgment (a certified or exemplified copy of which shall be
conclusive evidence of the fact and of the amount of any indebtedness of the
Guarantor to the Guaranteed Creditors therein described) against the Guarantor
in any such legal action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment. The Guarantor, the Agent, and
each Lender hereby irrevocably waives any and all right to trial by jury in any
legal proceeding arising out of or relating to the Guaranty, any Credit Document
or the transactions contemplated hereby or thereby.
17. The Guarantor shall at all times and from time to time do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged and
delivered all and singular every such further act, deed, transfer, assignment,
assurance, document and instrument as the Agent or any Lender may reasonably
require for the better accomplishing and effectuating of this Guaranty and the
provisions contained herein, and every officer of the Agent and the Lenders and
each of them are irrevocably appointed attorneys or attorney to execute in the
name and on behalf of the Guarantor any document or instrument for the said
purpose.
18. Except as otherwise defined herein, terms used herein and defined
in the Credit Agreement shall be used herein as so defined.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement to
be executed and delivered as of the date first above written.
----------------------------------
By
Its
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SCHEDULE 6.2
MATERIAL SUBSIDIARIES
JURISDICTION OF PERCENTAGE
NAME INCORPORATION OWNERSHIP
Anicom Multimedia Wiring Canada 100%
Systems, Incorporated
NON-MATERIAL SUBSIDIARIES
JURISDICTION OF PERCENTAGE
NAME INCORPORATION OWNERSHIP
Morgan Hill Supply Company, New York 100%
Inc.2/(
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Anicom-Carolina, Inc.* Delaware 100%
Anicom-Norfolk, Inc.* Delaware 100%
Anicom-Security, Inc.* Delaware 100%
Northern Wire & Cable, Inc.* Delaware 100%
Northern Connectivity Corp.* Michigan 100%
3022504 Nova Scotia Limited Canada 100%
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2
The Company is in the process of liquidating these Subsidiaries.
-69-
EXHIBIT 10.6
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") is made as of November 30, 1998 by and between Scott C.
Anixter ("Executive") and ANICOM, INC., a Delaware corporation (the
"Company").
PRELIMINARY RECITALS
WHEREAS, the Company is engaged in the business of selling and
distributing communication related wire, cable, fiber optics and computer
network and connectivity products (the "Business").
WHEREAS, Executive is currently employed by the Company as the
Chairman and Chief Executive Officer of the Company, pursuant to that
certain Executive Employment Agreement, dated January 15, 1995, by and
between the Company and Executive (the "Current Employment Agreement").
WHEREAS, Executive has extensive knowledge and a unique
understanding of the operation of the Business.
WHEREAS, the Company and Executive desire to continue Executive's
employment relationship with the Company in his present position, all under
the terms and conditions set forth herein.
WHEREAS, the parties hereto desire to amend and restate the
Current Employment Agreement in the form of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Company and Executive agree as
follows:
1. Employment of Executive. The Company hereby employs Executive
as the Company's Chairman and Chief Executive Officer, and Executive hereby
accepts such employment and agrees to act as Chairman and Chief Executive
Officer of the Company, all in accordance with the terms and conditions of
this Agreement.
2. Term of Employment. Subject to the termination provisions set
forth in Section 8 below, Executive's employment under this Agreement shall
commence on the date of this Agreement and shall continue for an initial
period of three (3) years (the "Initial Employment Period"). The Company
and Executive may agree by mutual consent to extend this Agreement for
subsequent periods (the Initial Employment Period and any subsequent term
thereof shall hereinafter be referred to as the "Employment Period"). If,
at least ninety (90) days before the expiration of any Employment Period,
the Company gives Executive a written offer to extend the
<PAGE>
Employment Period for a subsequent term of at least three (3) years
following the end of such Employment Period on economic terms not less
favorable to Executive as those set forth herein and Executive does not
accept such offer in writing within thirty (30) days after delivery of such
offer, then the expiration of such Employment Period shall constitute
termination without Good Reason by Executive for purposes of this
Agreement. If, at least ninety (90) days before the expiration of any
Employment Period, the Company does not give Executive a written offer to
extend the Employment Period for a subsequent term of at least three (3)
years following the end of such Employment Period on economic terms not
less favorable to Executive as those set forth herein, then the expiration
of such Employment Period shall constitute termination by the Company
without Cause for purposes of this Agreement.
3. Offices and Duties. Subject to Section 8, during the Employment
Period, Executive will perform the duties of Chairman and Chief Executive
Officer of the Company as described in the Company's Bylaws and such other
duties as the Board of Directors of the Company ("Board") may prescribe
from time to time, consistent with Executive's title. Executive agrees that
during the Employment Period, he will devote substantially all of his
business time and attention to fulfill his duties under this Agreement.
4. Board Representation. As of the date hereof, Executive is a
member of Class I of the Board, the term of which runs until the 1999
annual meeting of stockholders. During the Employment Period, the Company
shall use its reasonable efforts to recommend Executive for nomination by
the Board for election at the 1999 annual meeting of stockholders and each
subsequent annual meeting of stockholders during the Employment Period at
which his term on the Board would otherwise expire.
5. Compensation.
5.1 Base Salary. During the Employment Period, the
Company will pay Executive a base salary at a rate of $400,000 per
annum (the "Base Salary"), payable in accordance with the
Company's normal payroll practices for executive officers. The
Compensation Committee of the Board ("Compensation Committee")
shall perform an annual review of Executive's Base Salary based on
Executive's performance of his duties and the Company's normal
practice for executive salary review; provided that, in no event
shall Executive's Base Salary for any year be less than $400,000.
5.2 Bonus Payments. Executive shall be eligible to
receive an annual bonus ("Bonus Payments"), in an amount to be
determined by the Compensation Committee, in its sole discretion,
based upon Executive's and the Company's performance and the
achievement of goals and objectives approved by the Compensation
Committee. During the first quarter of 1999 and prior to each year
thereafter, the Compensation Committee shall establish a minimum
Bonus Payment for such year, and, if the Compensation Committee
determines, in its sole discretion, that a Bonus Payment is
warranted at the end of a particular year, Executive shall receive
at least the minimum Bonus Payment for such year.
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<PAGE>
5.3 Stock Options. Executive shall be eligible to receive
an annual grant of options to purchase the Company's common stock,
in an amount to be determined by the Compensation Committee, in
its sole discretion, based upon Executive's and the Company's
performance and the achievement of goals and objectives approved
by such members of the Compensation Committee. During the first
quarter of 1999 and prior to each year thereafter, the
Compensation Committee shall establish a minimum option grant for
such year, and, if the Compensation Committee determines, in its
sole discretion, that option grants are warranted at the end of a
particular year, Executive shall receive a grant of stock options
to purchase at least a number of shares of the Company's common
stock having a value equal to the minimum option grants for such
year.
5.4 Automobile Allowance. During the Employment Period,
the Company shall provide Executive with a monthly automobile
allowance of $1,250 (the "Automobile Allowance").
5.5 Transaction Bonus. Within fifteen (15) business days
following the effective date of a Change in Control, the Company
(or its successor or assigns) shall pay to Executive the
Transaction Bonus Amount.
5.6 Benefits. Executive will be entitled to participate
in group life and medical insurance plans, profit-sharing and
similar plans, and other "fringe benefits" (collectively,
"Benefits"), comparable to those made available by the Company to
its other senior executive employees, in accordance with the terms
of such plans.
5.7 Withholding. All compensation payable to Executive
under this Agreement is stated in gross amount and will be subject
to all applicable withholding taxes, other normal payroll
deductions, and any other amounts required by law to be withheld.
5.8 Expenses. The Company, in accordance with its
policies and past practices, will pay or reimburse Executive for
all expenses (including travel and entertainment expenses)
reasonably incurred by Executive during the Employment Period in
connection with the performance of Executive's duties under this
Agreement, provided that Executive, if so requested by the Board,
must provide to the Company documentation or evidence of expenses
for which Executive seeks reimbursement.
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<PAGE>
6. Covenant Not to Compete.
6.1 Executive's Acknowledgment. Executive agrees and
acknowledges that in order to assure the Company that it will retain its
value and that of the Business as a going concern, it is necessary that
Executive undertake not to utilize his special knowledge of the Business
and his relationships with customers and suppliers to compete with the
Company.
Executive further acknowledges that:
(a) the Company is currently engaged in the Business;
(b) Executive has occupied a position of trust and
confidence with the Company prior to the date of this Agreement
and will continue to acquire an intimate knowledge of all
proprietary and confidential information concerning the Business;
(c) the agreements and covenants contained in this
Section 6 are essential to protect the Company and the goodwill of
the Business;
(d) the Company would be irreparably damaged if Executive
were to provide services to any person or entity in violation of
the provisions of this Agreement;
(e) the scope and duration of the Restrictive Covenants
are reasonably designed to protect a protectible interest of the
Company and are not excessive in light of the circumstances; and
(f) Executive has a means to support himself and his
dependents other than by engaging in the Business, or a business
similar to the Business, and the provisions of this Section 6 will
not impair such ability.
6.2 Non-Compete. The "Restricted Period" for purposes of
this Agreement shall be the period of time commencing on the date hereof
and ending on the date three (3) years after termination of Executive's
employment for any reason; provided that, if Executive's employment with
the Company is terminated by Executive for Good Reason or by the Company
without Cause, then the payments to which Executive is entitled under
Sections 9.1, 9.2 and 9.4, shall be paid to Executive in consideration for
the survival of the Restricted Period beyond the effective date of
termination of Executive's employment. Executive hereby agrees that at all
times during the Restricted Period, Executive shall not, directly or
indirectly, as executive, agent, consultant, stockholder, director,
co-partner or in any other individual or representative capacity, own,
operate, manage, control, engage in, invest in or participate in any manner
in, act as a consultant or advisor to, render services for (alone or in
association with any person, firm, corporation or entity), or otherwise
assist any person or entity that engages in or owns, invests in, operates,
manages or controls any venture or enterprise that directly or indirectly
engages or proposes to engage in the Business anywhere within the United
States and Canada (the "Territory"); provided, however, that nothing
contained herein shall be construed to prevent Executive from investing in
the stock of any competing corporation listed on a national securities
exchange or traded in the over-the-counter market, but only if Executive is
not involved in the
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<PAGE>
business of said corporation and if Executive and his associates (as such
term is defined in Regulation 14(A) promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof), collectively, do
not own more than an aggregate of two percent (2%) of the stock of such
corporation.
6.3 Non-Solicitation. Without limiting the generality of
the provisions of Section 6.2 above, Executive hereby agrees that, during
the Restricted Period, Executive will not, directly or indirectly, solicit,
or participate as executive, agent, consultant, stockholder, director,
partner or in any other individual or representative capacity in any
business which solicits, business from any Person which is or was a
customer or vendor of the Business during the Restricted Period, or from
any successor in interest to any such Person for the purpose of marketing,
selling or providing any such Person any services or products offered by or
available from the Company, or encouraging any such Person to terminate or
otherwise alter his, her or its relationship with the Company.
6.4 Interference with Employee Relationships. During the
Restricted Period, Executive shall not, directly or indirectly, as
executive, agent, consultant, stockholder, director, co-partner or in any
other individual or representative capacity, without the prior written
consent of the Company, employ or engage, recruit or solicit for employment
or engagement, any individual who is employed or engaged by the Company at
that time, or has been employed or engaged by the Company during the six
(6) months prior thereto, or otherwise seek to influence or alter any such
individual's relationship with the Company.
6.5 Blue-Pencil. If any court of competent jurisdiction
shall at any time deem the term of this Agreement or any particular
Restrictive Covenant too lengthy or the Territory too extensive, the other
provisions of this Section 6 shall nevertheless stand, and the Restricted
Period shall be deemed to be the longest period permissible by law under
the circumstances and the Territory shall be deemed to comprise the largest
territory permissible by law under the circumstances. The court in each
case shall reduce the Restricted Period and/or the Territory to permissible
duration or size.
7. Confidential Information. During the term of this Agreement and
thereafter, Executive shall keep secret and retain in strictest confidence,
and shall not, without the prior written consent of the Company, furnish,
make available or disclose to any Person or use for the benefit of himself
or any Person party, any Confidential Information, except to the extent
reasonably necessary to carry out Executive's duties and responsibilities
to the Company. As used in this Section 7, "Confidential Information" shall
mean any information relating to the Business or affairs of the Company,
including but not limited to information relating to 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 used
by the Company in connection with the Business of the Company; 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 on the part of Executive. Executive acknowledges that the
Confidential Information is vital, sensitive, confidential and proprietary
to the Company.
-5-
<PAGE>
8. Termination.
8.1 The Company may terminate Executive's employment
hereunder at any time, without Cause (as defined in Section 10),
upon not less than ninety (90) days notice to Executive.
8.2 The Company may terminate Executive's employment
hereunder at any time for Cause by providing to Executive written
notice of termination stating the grounds for termination for
Cause and such termination shall take effect immediately upon
notice of termination.
8.3 Executive may terminate his employment hereunder at
any time, with or without Good Reason (as defined in Section 10),
upon not less than ninety (90) days notice (thirty (30) days
notice if Executive terminates following a Change in Control) to
the Company. Upon notice of such termination from Executive, the
Company may (i) require Executive to continue to perform his
duties hereunder on the Company's behalf during such notice
period, (ii) limit or impose reasonable restrictions on
Executive's activities during such notice period as it deems
necessary, or (iii) accept Executive's notice of termination as
Executive's resignation from the Company (including a resignation
from any position as director of the Company) at any time during
such notice period. If the Company at any time during the notice
period chooses to accept Executive's notice of termination as
Executive's resignation from the Company, then the effective date
of such termination shall be the date as of which such resignation
is accepted.
8.4 The Employment Period will terminate immediately upon
the death or Disability of Executive.
8.5 Following the effective date of termination by
Executive without Good Reason or by the Company for Cause,
Executive will not be entitled to receive any further compensation
(whether in the form of Base Salary, Bonus Payments, or Benefits
or otherwise) other than accrued but unpaid Base Salary through
the effective date of termination. Upon termination by the Company
without Cause, termination by Executive for Good Reason, death or
Disability, Executive (or his estate) will be entitled to receive
(i) all accrued but unpaid Base Salary through the effective date
of such termination, (ii) a pro rata portion of the minimum Bonus
Payment for the year in which such termination occurs, and (iii)
any amounts payable pursuant to Sections 9.1, 9.2 and 9.4 below,
but all other obligations of the Company to pay Executive any
further compensation, whether in the form of Base Salary, Bonus
Payments, or Benefits (other than death and Disability benefits,
if any) or otherwise, will terminate.
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<PAGE>
9. Additional Obligations Upon Termination.
9.1 Termination Without Cause. If Executive's employment
with the Company is terminated at any time prior to, upon or after
a Change in Control, (i) by the Company without Cause, or (ii) by
Executive for Good Reason, or (iii) due to the death or Disability
of Executive, then in addition to the amounts payable in
accordance with Section 8.5 above, and in consideration for the
Restrictive Covenants, the Company shall pay and provide to
Executive the following:
(a) Within thirty (30) days after the effective
date of termination of employment (for purposes of this
Section 9, the "Effective Date") the Company shall pay to
Executive or his estate, a lump sum cash payment, in an
amount equal to the Termination Payment;
(b) for a period of thirty-six (36) months after
the Effective Date, (i) Executive and his dependents
shall continue to be covered by all survivor rights,
insurance and benefit programs in type and amount at
least equivalent to those provided to him and his
dependents by the Company immediately prior to the
Effective Date, and (ii) Executive shall continue to
receive from the Company the Automobile Allowance set
forth in Section 5(d) above;
(c) any stock options then held by Executive or
his permitted assignees shall immediately vest as of the
Effective Date; and
(d) the Company, at its sole expense, shall
provide Executive with outplacement services consistent
with those services customarily provided by the Company
to its senior executive employees.
9.2 Termination After a Change in Control. If Executive's
employment with the Company is terminated after a Change in
Control, then in addition to the amounts payable in accordance
with Section 8.5 above, Executive shall be entitled to the
following:
(a) if, during the six (6) month period,
beginning on the one hundred eightieth (180th) day
following such Change in Control, Executive terminates
his employment with the Company without Good Reason, then
within five (5) business days after the Effective Date,
the Company shall pay and provide to Executive: (i) a
lump sum cash payment, in an amount equal to the sum of
(x) Executive's highest Base Salary, plus (y) the amount
of the highest Bonus Payment received by Executive, in
any of the three (3) years immediately preceding the year
in which the Effective Date occurs; and (ii) all benefits
specified under Sections 9.1(b), 9.1(c) and 9.1(d) above.
For purposes of providing Executive benefits under
Section 9.1(b), benefits shall be equivalent to those
provided to Executive and his dependents immediately
prior to the Change in Control; provided that, if
participation in any one or more of such arrangements is
not possible under the terms thereof, the Company
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<PAGE>
will provide substantially identical benefits outside of
the programs and cost of this coverage shall be paid by
the Company.
(b) if, at any time following a Change in Control, Executive's
employment is terminated (i) by the Company without Cause, or (ii) by
Executive with or without Good Reason, or (iii) due to the death or
Disability of Executive, the Company thereafter shall pay to Executive or
his spouse an annual amount equal to the Annual Payment, payable in equal
monthly installments, for a period equal to the greater of (i) the life of
Executive, or (ii) the life of Executive's spouse as of the Effective Date,
so long as she is married to Executive at the date of Executive's death. If
Executive shall die before Executive's spouse and Executive's spouse is
married to Executive at the date of Executive's death, whether before or
after the payments of the Annual Payment described above shall have
commenced, then the Annual Payment shall be paid to Executive's spouse. If
Executive shall not be married at the time of his death, then the Company
shall have no payment obligations following his death pursuant to this
Section 9.2(b).
9.3 Rabbi Trust. Prior to the consummation of a Change in
Control, the Company shall establish a "rabbi trust" for the
benefit of Executive into which there shall be contributed by the
Company cash in the amount sufficient to satisfy the Company's
obligations to pay Executive the amounts to which he is entitled
under Sections 5.5, 9.1(a) and 9.2(a). Any instruments
establishing such rabbi trust shall be substantially in the form
and substance of Exhibit 9.3 attached hereto.
9.4 Gross-Up Payments. If all or any portion of the
amounts payable to Executive under this Section 9, either alone or
together with other payments which Executive has the right to
receive from the Company, constitute "excess parachute payments"
(within the meaning of Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), that are subject to the excise
tax imposed by Section 4999 of the Code (or similar tax and/or
assessment), the Company (or its successor or assigns) shall
increase the amounts payable pursuant to this Agreement to the
extent necessary to place Executive in the same after-tax position
as he would have been in had no such excise tax been imposed on
the payments hereunder. The determination of the amount of any
such excise taxes shall initially be made by the independent
accounting firm employed by the Company immediately prior to the
Change in Control. If, at a later date, it is determined that the
amount of excise taxes payable by Executive is greater than the
amount initially so determined, then the Company (or its successor
or assigns) shall pay Executive an amount equal to the sum of (i)
such additional excise taxes, (ii) any interest, fines and
penalties resulting from such underpayment, plus (iii) an amount
necessary to reimburse Executive for any income, excise or other
taxes payable by Executive with respect to the amount specified in
(i) and (ii) above, and the reimbursement provided by this (iii).
9.5 No Mitigation. Executive shall not be required to
mitigate damages or the amount of any payment provided for or
referred to in this Section 9 by seeking other employment or
otherwise, nor shall the amount of any payment provided for or
referred to in this Section 9 be reduced by any compensation
earned by the Executive as the result of
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<PAGE>
employment by another employer after the termination of the Executive's
employment, or otherwise.
9.6 Release. As a condition to Executive's right to
receive any severance payments and benefits made hereto in this
Section 9, the Company shall require that (i) Executive execute
and deliver to the Company a general release, whereby Executive
shall release the Company, it successor, assigns, officers,
directors and agents from any and all claims, liabilities and
obligations relating to or arising out of this Agreement, and (ii)
Executive shall not be in breach of any Restrictive Covenant.
9.7 Termination in Anticipation of a Change in Control.
If the Company terminates Executive's employment without Cause
during the period commencing six (6) months prior to the earlier
of (i) public announcement by the Company of a Change in Control,
or (ii) the execution by the Company of a definitive agreement
with regard to a Change in Control, and ending on (and including)
the date of the Change in Control, such termination shall be
regarded as a termination after such Change in Control for
purposes of this Agreement, including without limitation, for
purposes of Sections 5.5 and 9.
9.8 Pooling. Notwithstanding anything contained in this
Agreement to the contrary, if any terms of this Agreement would
cause a Corporate Transaction to be ineligible for pooling of
interest accounting, and such Corporate Transaction would be
eligible for such accounting treatment but for such terms, the
Compensation Committee may modify or adjust the terms of this
Agreement so that pooling of interest accounting shall be
available.
10. Definitions. As used in this Agreement:
"Affiliate" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or
other entity (other than the Company) that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the Company including, without limitation, any member of an
affiliated group of which the Company is a common parent corporation as
provided in Section 1504 of the Code.
"Anixter Family" means Alan B. Anixter, William R. Anixter, Scott
C. Anixter, their spouses, heirs and any group (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of which any of the foregoing persons is a member for
purposes of acquiring, holding or disposing of securities of the Company,
any trust established by or for the benefit of any of the foregoing and any
other entity controlled by or for the benefit of any of the foregoing.
"Annual Payment" means an amount equal to the greater of (i) fifty
percent (50%) of the sum of (x) the average of Executive's Base Salary for
the year in which the Change in Control occurs and each of the two (2)
years immediately prior thereto, plus (y) the average of the amount of the
minimum Bonus Payment for the year in which the Change in Control occurs
and the Bonus Payment for each of the two (2) years immediately prior
thereto, or (ii) the Minimum Annual
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<PAGE>
Payment; provided if, as of the effective date of the Change in Control,
the Present Value of the Annual Payments payable to Scott Anixter, Carl
Putnam and Donald Welchko (collectively, the "Eligible Executives"), in the
aggregate, after taking into account any gross-up payments payable to any
of them with respect to such Annual Payments pursuant to Section 9.4 of
their respective employment agreements (the "Gross-up Payments"), exceed
two percent (2%) of the Transaction Value (the "Aggregate Cap"), the Annual
Payments payable to each of the Eligible Executives shall be reduced pro
rata based on their relative levels of Annual Payment so that the Present
Value of such Annual Payments, in the aggregate, after taking into account
any Gross-up Payments with respect thereto, equal the Aggregate Cap. If the
foregoing calculation of the Aggregate Cap would result in Executive's
Annual Payment being less than the Minimum Annual Payment, Executive's
Annual Payment shall not be reduced below the Minimum Annual Payment unless
and until each of the other Eligible Executive's Annual Payment has first
been reduced to his respective Minimum Annual Payment. The Annual Payment
shall be determined by the Compensation Committee prior to the Change in
Control, in consultation with a nationally recognized actuarial, accounting
or consulting firm selected by the Compensation Committee to determine the
Present Value of the Annual Payments; provided if the foregoing
determination cannot be made prior to the Change in Control, such
determination shall be made as soon as practicable following the Change in
Control by the persons who were members of the Compensation Committee
immediately prior to the Change in Control regardless of whether such
persons remain on the Board of Directors or Compensation Committee after
the Change in Control.
"Cause" means (a) an act of fraud or dishonesty by Executive that
results in material gain or personal enrichment of Executive at the
Company's expense, (b) Executive's conviction of a felony-class crime
(other than relating to the operation of a motor vehicle), (c) any material
breach by Executive of any provision of this Agreement that, if curable,
has not been cured by Executive within thirty days of written notice of
such breach from the Company, (d) Executive willfully engaging in gross
misconduct materially injurious to the Company that, if curable, has not
been cured by Executive within thirty days of written notice specifying the
alleged willful gross misconduct and material injury, or (e) any
intentional act or gross negligence on the part of Executive that has a
material, detrimental effect on the reputation or Business of the Company.
The decision to terminate Executive's employment for Cause, to take other
action or to take no action in response to such occurrence shall be in the
sole and exclusive discretion of the Board.
"Change in Control" means the happening of any of the following events:
(a) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change in Control: (A) any acquisition by the Company or by an
employee benefit plan (or related trust) sponsored or maintained
by the Company or an Affiliate, (B) any acquisition by a member or
members of the Anixter Family, (C) any acquisition by a lender to
the Company pursuant to a debt restructuring of the Company, (D)
any acquisition by, or consummation of a Corporate Transaction
with an
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Affiliate, (E) a Non-Control Transaction, or (F) an acquisition by
a Person of the beneficial ownership of twenty percent (20%) or
more, but less than fifty percent (50%) of the combined voting
power of the then Outstanding Company Voting Securities unless
Executive's employment is terminated by the Company without Cause
or by Executive for Good Reason, within twenty-four (24) months
following such acquisition;
(b) A change in the composition of the Board such that
the individuals who, as of the date hereof, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of this Section 10(b),
that any individual who becomes a member of the Board subsequent
to the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such
pursuant to this provision) shall be considered as though such
individual were a member of the Incumbent Board; but, provided,
further, that any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board shall not be so considered as a
member of the Incumbent Board;
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Company (a "Corporate Transaction"), in
each case, unless the Corporate Transaction is a Non-Control
Transaction; or
(d) Approval by stockholders of the Company of a complete
liquidation or dissolution of the Company.
"Closing Share Price" means the average closing price of the
Company's common stock as reported on the NASDAQ National Market and
published in The Wall Street Journal (Midwest Edition), for each of the ten
(10) consecutive trading days on the effective date of the Change in
Control.
"Disability" will be deemed to have occurred whenever Executive
has suffered physical or mental illness, injury, or infirmity that renders
Executive unable to perform the essential functions of his job with or
without reasonable accommodation.
"Good Reason" means the occurrence of any of the following events,
unless (i) such event occurs with Executive's express prior written
consent, (ii) the event is an isolated, insubstantial or inadvertent action
or failure to act which was not in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by Executive, or
(iii) the event occurs in connection with termination of Executive's
employment for Cause, Disability or death:
(a) the assignment to Executive by the Company of any
duties which are, in any material respect, inconsistent with, a
diminution of or an adverse change in Executive's
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position, duty, title, office, responsibility or status with the
Company, including without limitation, any material diminution of
Executive's position or responsibility in the decision or
management processes of the Company, reporting relationships, job
description, duties, responsibilities, or any removal of Executive
from, or any failure to reelect Executive to, such position;
(b) a reduction by the Company in Executive's rate of
Base Salary during the Employment Period;
(c) any failure to either continue in effect any material
Benefits or to substitute and continue other plans, policies,
programs or arrangements providing Executive with substantially
similar benefits, or the taking of any action which would
substantially and adversely affect Executive's participation in or
materially reduce Executive's Benefits or compensation;
(d) any failure by any successor or assignee of the
Company to continue this Agreement in full force and effect or any
breach of this Agreement by the Company (or any successor or
assignee of the Company), unless such breach is cured within
thirty (30) days of receiving written notice of the breach from
Executive; or
(e) following a Change in Control, the relocation of the
executive offices of the Company to a location that is more than
fifty (50) miles from the executive offices of the Company as of
the effective date of such Change in Control.
"Minimum Annual Payment" means $200,000.
"Non-Control Transaction" means a Corporate Transaction as a
result of which the Outstanding Company Voting Securities immediately prior
to such Corporate Transaction would entitle the holders thereof immediately
prior to such Corporate Transaction to exercise, directly or indirectly,
more than fifty percent (50%) of the combined voting power of all of the
shares of capital stock entitled to vote generally in election of directors
of the corporation resulting from such Corporate Transaction immediately
after such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries).
"Person" means any individual, corporation, trust, proprietorship,
association, governmental body, agency or subdivision or other entity.
"Present Value" means the present value of the Annual Payments as
of the effective date of the Change in Control as determined by a
nationally recognized actuarial, accounting or consulting firm selected by
the Compensation Committee, after taking into account reasonable
assumptions, including as to life expectancy and discount rates.
"Termination Payment" means an amount equal to the greater of (i)
the sum of Executive's Base Salary plus his minimum Bonus Payment for the
remaining term of the then current Employment Period, or (ii) two(2) (the
"Multiple") times the sum of (x) Executive's highest Base
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Salary plus (y) the amount of the highest Bonus Payment received by
Executive, in any of the three years immediately preceding the year in
which the Effective Date occurs; provided that, if the Effective Date
occurs during the thirty-six (36) months following a Change in Control, the
Multiple shall be equal to three (3) (rather than two (2)) for purposes of
clause (ii) above.
"Transaction Bonus Amount" means:
(i) if the Closing Share Price is less than or equal to
$13.00 per share, an amount equal to the Transaction Payment; or
(ii) if the Closing Share Price is greater than $13.00
per share but less than $17.00 per share, an amount equal to the
Transaction Payment times the sum of (x) one (1), plus (y) a fraction, the
numerator of which is the Closing Share Price minus $13.00, and the
denominator of which is equal to $17.00 minus $13.00; or
(iii) if the Closing Share Price is $17 per share or
greater, an amount equal to two (2) times the Transaction Payment.
The amounts per share set forth above in subparagraphs (i), (ii) and (iii)
shall be equitably adjusted by the Compensation Committee to reflect any
stock split, stock dividend, recapitalization or similar event.
"Transaction Payment" means the sum of (x) Executive's highest
Base Salary, plus (y) the amount of the highest Bonus Payment received by
Executive, in any of the three (3) years immediately prior to the year in
which the Change in Control occurs.
"Transaction Value" means (i) with respect to a Corporate
Transaction, the total amount of cash, securities, contractual arrangements
and other properties paid or payable, directly or indirectly in connection
with such Corporate Transaction including, without limitation; (a) amounts
paid to any party pursuant to covenants not to compete or other similar
arrangements; and (b) amounts paid to holders of any warrants, stock
purchase rights, convertible securities or similar rights of the Company
and to holders of any options or stock appreciation rights issued by the
Company (whether or not vested); and (c) amount of any short term debt and
long term liabilities of the Company (including the principal amount of any
indebtedness for borrowed money) (1) indirectly or directly assumed or
acquired by the Company or any other party, or otherwise repaid or retired,
in connection with or in anticipation of the Corporate Transaction, (2)
existing on the Company's balance sheet at the time of a Corporate
Transaction (if such Corporate Transaction takes the form of a merger,
consolidation or a purchase of stock) or (3) assumed in connection with a
Corporate Transaction (if such Corporate Transaction takes the form of a
purchase of assets); and (d) in the event the Corporate Transaction takes
the form of a recapitalization, restructuring, spin-off, split-off or
similar transaction, Transaction Value shall include the fair market value
of (A) the equity securities of the Company retained by the Company's
security holders following a Corporate Transaction and (B) any securities
received by the Company's security holders in exchange for or in respect of
securities of the target company following such Corporate Transaction (all
such securities received by such security holders being deemed to have been
paid to such security holders in such Corporate Transaction, and (ii) with
respect to a Change in Control that is not a Corporate
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Transaction, the enterprise value of the Company, as determined as soon as
practicable, following the Change in Control by the persons who were
members of the Compensation Committee immediately prior to the Change in
Control regardless of whether such persons remain on the Board of Directors
or the Compensation Committee following the Change in Control, in
consultation with such investment bankers or other advisors as such persons
may deem appropriate.
11. Remedies. Executive acknowledges and agrees that the covenants
set forth in Sections 6 and 7 of this Agreement (collectively, the
"Restrictive Covenants") are reasonable and necessary for the protection of
the Company's business interests, that irreparable injury will result to
the Company if Executive breaches any of the terms of the Restrictive
Covenants, and that in the event of Executive's actual or threatened breach
of any such Restrictive Covenants, the Company will have no adequate remedy
at law. Executive accordingly agrees that in the event of any actual or
threatened breach by him of any of the Restrictive Covenants, the Company
shall be entitled to immediate temporary injunctive and other equitable
relief, without bond and without the necessity of showing actual monetary
damages, subject to hearing as soon thereafter as possible. Nothing
contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of any damages which it is able to prove.
12. Miscellaneous.
(a) Notices. All notices and other communication between
the parties pursuant to this Agreement must be in writing and will
be deemed given when delivered in person, one (1) business day
after being dispatched by a nationally recognized overnight
courier service, three (3) business days after being deposited in
the U.S. Mail, registered or certified mail, return receipt
requested, or when sent by facsimile (with receipt acknowledged
and a copy sent for next day delivery by a nationally recognized
overnight courier service), to the Company at the address or
facsimile number of its principal office in the Chicago, Illinois
metropolitan area and to Executive (or his representatives) at his
address or facsimile as shown on the Company's records. Executive
(or his representatives) may change his address or facsimile
number for notice purposes by delivering notice to the Company in
accordance with this Section 12(a). All notices sent to the
Company shall also be delivered to Katten Muchin & Zavis, 525 West
Monroe Street, Suite 1600, Chicago, Illinois 60661-3693,
Attention: Jeffrey R. Patt, Esq., Facsimile No.: (312-902-1061).
(b) Governing Law. This Agreement will be subject to and
governed by the laws of the State of Illinois, without regard to
principles of conflicts of laws.
(c) Binding Effect. This Agreement will be binding upon
and inure to the benefit of the parties and their respective
heirs, legal representatives, executors, administrators,
successors, and assigns, subject to the limitations on assignment
in Section 12(h).
(d) Entire Agreement. This Agreement constitutes the
entire Agreement between the parties with respect to the subject
matter of this Agreement and supersedes any other agreements,
whether oral or written, between the parties with respect to the
subject matter of this Agreement.
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<PAGE>
(e) Modification. No change or modification of this
Agreement will be valid unless it is in writing and signed by both
of the parties. No waiver of any provision of this Agreement will
be valid unless in writing and signed by the person or party to be
charged.
(f) Severability. If any provision of this Agreement is,
for any reason, invalid or unenforceable, the remaining provisions
of this Agreement will nevertheless be valid and enforceable and
will remain in full force and effect. Any provision of this
Agreement that is held invalid or unenforceable by a court of
competent jurisdiction will be deemed modified to the extent
necessary to make it valid and enforceable and as so modified will
remain in full force and effect.
(g) Headings. The headings in this Agreement are inserted
for convenience only and are not to be considered in the
interpretation of construction of the provisions of this
Agreement.
(h) Assignability. This Agreement may not be assigned by
either party without the prior written consent of the other party,
except that the Company may assign its rights to, and cause its
obligations under this Agreement to be assumed by, any person or
entity to whom or to which the Company simultaneously transfers by
sale, merger, or otherwise all or substantially all of its assets.
(i) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by Executive
and the Company to express their mutual intent, and no rule of
strict construction will be applied against Executive or the
Company.
(j) Arbitration. Except for any claim or dispute which
gives rise or could give rise to equitable relief under this
Agreement, at the request of Executive, or the Company, any
disagreement, dispute, controversy or claim arising out of or
relating to this Agreement or the breach hereof shall be settled
exclusively and finally by arbitration. The arbitration shall be
conducted in accordance with such rules and before such arbitrator
as the parties shall agree and if they fail to so agree within
fifteen (15) days after demand for arbitration, such arbitration
shall be conducted in accordance with the Federal Arbitration Act
and the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association which are then in effect
(hereinafter referred to as "AAA Rules"). Such arbitration shall
be conducted in Chicago, Illinois, or in such other city as the
parties to the dispute may designate by mutual consent. The
arbitral tribunal shall consist of three arbitrators (or such
lesser number as may be agreed upon by the parties) selected
according to the procedure set forth in the AAA Rules in effect on
the date hereof and the arbitrators shall be empowered to order
any remedy which is appropriate to the proceedings and issues
presented to them. Any party to a decision rendered in such
arbitration proceedings may seek an order enforcing the same by
any court having jurisdiction.
(k) Legal Expenses. The Company shall pay the legal
expenses incurred by Executive for review of this Agreement by his
legal counsel, up to an amount not to exceed $10,000. If Executive
takes legal action to enforce the Company's obligations under this
Agreement and Executive prevails in such action, the Company shall
reimburse Executive
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for all reasonable expenses (including reasonable attorney's fees)
actually incurred by Executive in such action.
[signature page to follow]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Executive Employment Agreement as of the date first above written.
ANICOM, INC.
By: /s/ CARL E. PUTNAM
--------------------------
Carl E. Putnam, President
EXECUTIVE:
/s/ SCOTT C. ANIXTER
-------------------------------
Scott C. Anixter
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EXHIBIT 9.3
FORM OF RABBI TRUST
EXHIBIT 10.7
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") is made as of November 30, 1998 by and between Carl E. Putnam
("Executive") and ANICOM, INC., a Delaware corporation (the "Company").
PRELIMINARY RECITALS
WHEREAS, the Company is engaged in the business of selling and
distributing communication related wire, cable, fiber optics and computer
network and connectivity products (the "Business").
WHEREAS, Executive is currently employed by the Company as the
President of the Company, pursuant to that certain Executive Employment
Agreement, dated January 15, 1995, by and between the Company and Executive
(the "Current Employment Agreement").
WHEREAS, Executive has extensive knowledge and a unique
understanding of the operation of the Business.
WHEREAS, the Company and Executive desire to continue Executive's
employment relationship with the Company in his present position, all under
the terms and conditions set forth herein.
WHEREAS, the parties hereto desire to amend and restate the
Current Employment Agreement in the form of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Company and Executive agree as
follows:
1. Employment of Executive. The Company hereby employs Executive
as the Company's President, and Executive hereby accepts such employment
and agrees to act as President of the Company, all in accordance with the
terms and conditions of this Agreement.
2. Term of Employment. Subject to the termination provisions set
forth in Section 8 below, Executive's employment under this Agreement shall
commence on the date of this Agreement and shall continue for an initial
period of three (3) years (the "Initial Employment Period"). The Company
and Executive may agree by mutual consent to extend this Agreement for
subsequent periods (the Initial Employment Period and any subsequent term
thereof shall hereinafter be referred to as the "Employment Period"). If,
at least ninety (90) days before the expiration of any Employment Period,
the Company gives Executive a written offer to extend the Employment Period
for a subsequent term of at least three (3) years following the end of such
Employment Period on economic terms not less favorable to Executive as
those set forth herein
<PAGE>
and Executive does not accept such offer in writing within thirty (30) days
after delivery of such offer, then the expiration of such Employment Period
shall constitute termination without Good Reason by Executive for purposes
of this Agreement. If, at least ninety (90) days before the expiration of
any Employment Period, the Company does not give Executive a written offer
to extend the Employment Period for a subsequent term of at least three (3)
years following the end of such Employment Period on economic terms not
less favorable to Executive as those set forth herein, then the expiration
of such Employment Period shall constitute termination by the Company
without Cause for purposes of this Agreement.
3. Offices and Duties. Subject to Section 8, during the Employment
Period, Executive will perform the duties of President of the Company as
described in the Company's Bylaws and such other duties as the Board of
Directors of the Company ("Board") may prescribe from time to time,
consistent with Executive's title. Executive agrees that during the
Employment Period, he will devote substantially all of his business time
and attention to fulfill his duties under this Agreement.
4. Board Representation. As of the date hereof, Executive is a
member of Class I of the Board, the term of which runs until the 1999
annual meeting of stockholders. During the Employment Period, the Company
shall use its reasonable efforts to recommend Executive for nomination by
the Board for election at the 1999 annual meeting of stockholders and each
subsequent annual meeting of stockholders during the Employment Period at
which his term on the Board would otherwise expire.
5. Compensation.
5.1 Base Salary. During the Employment Period, the
Company will pay Executive a base salary at a rate of $345,000 per
annum (the "Base Salary"), payable in accordance with the
Company's normal payroll practices for executive officers. The
Compensation Committee of the Board ("Compensation Committee")
shall perform an annual review of Executive's Base Salary based on
Executive's performance of his duties and the Company's normal
practice for executive salary review; provided that, in no event
shall Executive's Base Salary for any year be less than $345,000.
5.2 Bonus Payments. Executive shall be eligible to
receive an annual bonus ("Bonus Payments"), in an amount to be
determined by the Compensation Committee, in its sole discretion,
based upon Executive's and the Company's performance and the
achievement of goals and objectives approved by the Compensation
Committee. During the first quarter of 1999 and prior to each year
thereafter, the Compensation Committee shall establish a minimum
Bonus Payment for such year, and, if the Compensation Committee
determines, in its sole discretion, that a Bonus Payment is
warranted at the end of a particular year, Executive shall receive
at least the minimum Bonus Payment for such year.
5.3 Stock Options. Executive shall be eligible to receive
an annual grant of options to purchase the Company's common stock,
in an amount to be determined by the
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Compensation Committee, in its sole discretion, based upon
Executive's and the Company's performance and the achievement of
goals and objectives approved by such members of the Compensation
Committee. During the first quarter of 1999 and prior to each year
thereafter, the Compensation Committee shall establish a minimum
option grant for such year, and, if the Compensation Committee
determines, in its sole discretion, that option grants are
warranted at the end of a particular year, Executive shall receive
a grant of stock options to purchase at least a number of shares
of the Company's common stock having a value equal to the minimum
option grants for such year.
5.4 Automobile Allowance. During the Employment Period,
the Company shall provide Executive with a monthly automobile
allowance of $1,706 (the "Automobile Allowance").
5.5 Transaction Bonus. Within fifteen (15) business days
following the effective date of a Change in Control, the Company
(or its successor or assigns) shall pay to Executive the
Transaction Bonus Amount.
5.6 Benefits. Executive will be entitled to participate
in group life and medical insurance plans, profit-sharing and
similar plans, and other "fringe benefits" (collectively,
"Benefits"), comparable to those made available by the Company to
its other senior executive employees, in accordance with the terms
of such plans.
5.7 Withholding. All compensation payable to Executive
under this Agreement is stated in gross amount and will be subject
to all applicable withholding taxes, other normal payroll
deductions, and any other amounts required by law to be withheld.
5.8 Expenses. The Company, in accordance with its
policies and past practices, will pay or reimburse Executive for
all expenses (including travel and entertainment expenses)
reasonably incurred by Executive during the Employment Period in
connection with the performance of Executive's duties under this
Agreement, provided that Executive, if so requested by the Board,
must provide to the Company documentation or evidence of expenses
for which Executive seeks reimbursement.
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6. Covenant Not to Compete.
6.1 Executive's Acknowledgment. Executive agrees and
acknowledges that in order to assure the Company that it will retain its
value and that of the Business as a going concern, it is necessary that
Executive undertake not to utilize his special knowledge of the Business
and his relationships with customers and suppliers to compete with the
Company.
Executive further acknowledges that:
(a) the Company is currently engaged in the Business;
(b) Executive has occupied a position of trust and
confidence with the Company prior to the date of this Agreement
and will continue to acquire an intimate knowledge of all
proprietary and confidential information concerning the Business;
(c) the agreements and covenants contained in this
Section 6 are essential to protect the Company and the goodwill of
the Business;
(d) the Company would be irreparably damaged if Executive
were to provide services to any person or entity in violation of
the provisions of this Agreement;
(e) the scope and duration of the Restrictive Covenants
are reasonably designed to protect a protectible interest of the
Company and are not excessive in light of the circumstances; and
(f) Executive has a means to support himself and his
dependents other than by engaging in the Business, or a business
similar to the Business, and the provisions of this Section 6 will
not impair such ability.
6.2 Non-Compete. The "Restricted Period" for purposes of
this Agreement shall be the period of time commencing on the date hereof
and ending on the date three (3) years after termination of Executive's
employment for any reason; provided that, if Executive's employment with
the Company is terminated by Executive for Good Reason or by the Company
without Cause, then the payments to which Executive is entitled under
Sections 9.1, 9.2 and 9.4, shall be paid to Executive in consideration for
the survival of the Restricted Period beyond the effective date of
termination of Executive's employment. Executive hereby agrees that at all
times during the Restricted Period, Executive shall not, directly or
indirectly, as executive, agent, consultant, stockholder, director,
co-partner or in any other individual or representative capacity, own,
operate, manage, control, engage in, invest in or participate in any manner
in, act as a consultant or advisor to, render services for (alone or in
association with any person, firm, corporation or entity), or otherwise
assist any person or entity that engages in or owns, invests in, operates,
manages or controls any venture or enterprise that directly or indirectly
engages or proposes to engage in the Business anywhere within the United
States and Canada (the "Territory"); provided, however, that nothing
contained herein shall be construed to prevent Executive from investing in
the stock of any competing corporation listed on a national securities
exchange or traded in the over-the-counter market, but only if Executive is
not involved in the
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business of said corporation and if Executive and his associates (as such
term is defined in Regulation 14(A) promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof), collectively, do
not own more than an aggregate of two percent (2%) of the stock of such
corporation.
6.3 Non-Solicitation. Without limiting the generality of
the provisions of Section 6.2 above, Executive hereby agrees that, during
the Restricted Period, Executive will not, directly or indirectly, solicit,
or participate as executive, agent, consultant, stockholder, director,
partner or in any other individual or representative capacity in any
business which solicits, business from any Person which is or was a
customer or vendor of the Business during the Restricted Period, or from
any successor in interest to any such Person for the purpose of marketing,
selling or providing any such Person any services or products offered by or
available from the Company, or encouraging any such Person to terminate or
otherwise alter his, her or its relationship with the Company.
6.4 Interference with Employee Relationships. During the
Restricted Period, Executive shall not, directly or indirectly, as
executive, agent, consultant, stockholder, director, co-partner or in any
other individual or representative capacity, without the prior written
consent of the Company, employ or engage, recruit or solicit for employment
or engagement, any individual who is employed or engaged by the Company at
that time, or has been employed or engaged by the Company during the six
(6) months prior thereto, or otherwise seek to influence or alter any such
individual's relationship with the Company.
6.5 Blue-Pencil. If any court of competent jurisdiction
shall at any time deem the term of this Agreement or any particular
Restrictive Covenant too lengthy or the Territory too extensive, the other
provisions of this Section 6 shall nevertheless stand, and the Restricted
Period shall be deemed to be the longest period permissible by law under
the circumstances and the Territory shall be deemed to comprise the largest
territory permissible by law under the circumstances. The court in each
case shall reduce the Restricted Period and/or the Territory to permissible
duration or size.
7. Confidential Information. During the term of this Agreement and
thereafter, Executive shall keep secret and retain in strictest confidence,
and shall not, without the prior written consent of the Company, furnish,
make available or disclose to any Person or use for the benefit of himself
or any Person party, any Confidential Information, except to the extent
reasonably necessary to carry out Executive's duties and responsibilities
to the Company. As used in this Section 7, "Confidential Information" shall
mean any information relating to the Business or affairs of the Company,
including but not limited to information relating to 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 used
by the Company in connection with the Business of the Company; 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 on the part of Executive. Executive acknowledges that the
Confidential Information is vital, sensitive, confidential and proprietary
to the Company.
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8. Termination.
8.1 The Company may terminate Executive's employment
hereunder at any time, without Cause (as defined in Section 10),
upon not less than ninety (90) days notice to Executive.
8.2 The Company may terminate Executive's employment
hereunder at any time for Cause by providing to Executive written
notice of termination stating the grounds for termination for
Cause and such termination shall take effect immediately upon
notice of termination.
8.3 Executive may terminate his employment hereunder at
any time, with or without Good Reason (as defined in Section 10),
upon not less than ninety (90) days notice (thirty (30) days
notice if Executive terminates following a Change in Control) to
the Company. Upon notice of such termination from Executive, the
Company may (i) require Executive to continue to perform his
duties hereunder on the Company's behalf during such notice
period, (ii) limit or impose reasonable restrictions on
Executive's activities during such notice period as it deems
necessary, or (iii) accept Executive's notice of termination as
Executive's resignation from the Company (including a resignation
from any position as director of the Company) at any time during
such notice period. If the Company at any time during the notice
period chooses to accept Executive's notice of termination as
Executive's resignation from the Company, then the effective date
of such termination shall be the date as of which such resignation
is accepted.
8.4 The Employment Period will terminate immediately upon
the death or Disability of Executive.
8.5 Following the effective date of termination by
Executive without Good Reason or by the Company for Cause,
Executive will not be entitled to receive any further compensation
(whether in the form of Base Salary, Bonus Payments, or Benefits
or otherwise) other than accrued but unpaid Base Salary through
the effective date of termination. Upon termination by the Company
without Cause, termination by Executive for Good Reason, death or
Disability, Executive (or his estate) will be entitled to receive
(i) all accrued but unpaid Base Salary through the effective date
of such termination, (ii) a pro rata portion of the minimum Bonus
Payment for the year in which such termination occurs, and (iii)
any amounts payable pursuant to Sections 9.1, 9.2 and 9.4 below,
but all other obligations of the Company to pay Executive any
further compensation, whether in the form of Base Salary, Bonus
Payments, or Benefits (other than death and Disability benefits,
if any) or otherwise, will terminate.
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9. Additional Obligations Upon Termination.
9.1 Termination Without Cause. If Executive's employment
with the Company is terminated at any time prior to, upon or after
a Change in Control, (i) by the Company without Cause, or (ii) by
Executive for Good Reason, or (iii) due to the death or Disability
of Executive, then in addition to the amounts payable in
accordance with Section 8.5 above, and in consideration for the
Restrictive Covenants, the Company shall pay and provide to
Executive the following:
(a) Within thirty (30) days after the effective
date of termination of employment (for purposes of this
Section 9, the "Effective Date") the Company shall pay to
Executive or his estate, a lump sum cash payment, in an
amount equal to the Termination Payment;
(b) for a period of thirty-six (36) months after
the Effective Date, (i) Executive and his dependents
shall continue to be covered by all survivor rights,
insurance and benefit programs in type and amount at
least equivalent to those provided to him and his
dependents by the Company immediately prior to the
Effective Date, and (ii) Executive shall continue to
receive from the Company the Automobile Allowance set
forth in Section 5(d) above;
(c) any stock options then held by Executive or
his permitted assignees shall immediately vest as of the
Effective Date; and
(d) the Company, at its sole expense, shall
provide Executive with outplacement services consistent
with those services customarily provided by the Company
to its senior executive employees.
9.2 Termination After a Change in Control. If Executive's
employment with the Company is terminated after a Change in
Control, then in addition to the amounts payable in accordance
with Section 8.5 above, Executive shall be entitled to the
following:
(a) if, during the six (6) month period,
beginning on the one hundred eightieth (180th) day
following such Change in Control, Executive terminates
his employment with the Company without Good Reason, then
within five (5) business days after the Effective Date,
the Company shall pay and provide to Executive: (i) a
lump sum cash payment, in an amount equal to the sum of
(x) Executive's highest Base Salary, plus (y) the amount
of the highest Bonus Payment received by Executive, in
any of the three (3) years immediately preceding the year
in which the Effective Date occurs; and (ii) all benefits
specified under Sections 9.1(b), 9.1(c) and 9.1(d) above.
For purposes of providing Executive benefits under
Section 9.1(b), benefits shall be equivalent to those
provided to Executive and his dependents immediately
prior to the Change in Control; provided that, if
participation in any one or more of such arrangements is
not possible under the terms thereof, the Company
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<PAGE>
will provide substantially identical benefits outside of
the programs and cost of this coverage shall be paid by
the Company.
(b) if, at any time following a Change in Control, Executive's
employment is terminated (i) by the Company without Cause, or (ii) by
Executive with or without Good Reason, or (iii) due to the death or
Disability of Executive, the Company thereafter shall pay to Executive or
his spouse an annual amount equal to the Annual Payment, payable in equal
monthly installments, for a period equal to the greater of (i) the life of
Executive, or (ii) the life of Executive's spouse as of the Effective Date,
so long as she is married to Executive at the date of Executive's death. If
Executive shall die before Executive's spouse and Executive's spouse is
married to Executive at the date of Executive's death, whether before or
after the payments of the Annual Payment described above shall have
commenced, then the Annual Payment shall be paid to Executive's spouse. If
Executive shall not be married at the time of his death, then the Company
shall have no payment obligations following his death pursuant to this
Section 9.2(b).
9.3 Rabbi Trust. Prior to the consummation of a Change in
Control, the Company shall establish a "rabbi trust" for the
benefit of Executive into which there shall be contributed by the
Company cash in the amount sufficient to satisfy the Company's
obligations to pay Executive the amounts to which he is entitled
under Sections 5.5, 9.1(a) and 9.2(a). Any instruments
establishing such rabbi trust shall be substantially in the form
and substance of Exhibit 9.3 attached hereto.
9.4 Gross-Up Payments. If all or any portion of the
amounts payable to Executive under this Section 9, either alone or
together with other payments which Executive has the right to
receive from the Company, constitute "excess parachute payments"
(within the meaning of Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), that are subject to the excise
tax imposed by Section 4999 of the Code (or similar tax and/or
assessment), the Company (or its successor or assigns) shall
increase the amounts payable pursuant to this Agreement to the
extent necessary to place Executive in the same after-tax position
as he would have been in had no such excise tax been imposed on
the payments hereunder. The determination of the amount of any
such excise taxes shall initially be made by the independent
accounting firm employed by the Company immediately prior to the
Change in Control. If, at a later date, it is determined that the
amount of excise taxes payable by Executive is greater than the
amount initially so determined, then the Company (or its successor
or assigns) shall pay Executive an amount equal to the sum of (i)
such additional excise taxes, (ii) any interest, fines and
penalties resulting from such underpayment, plus (iii) an amount
necessary to reimburse Executive for any income, excise or other
taxes payable by Executive with respect to the amount specified in
(i) and (ii) above, and the reimbursement provided by this (iii).
9.5 No Mitigation. Executive shall not be required to
mitigate damages or the amount of any payment provided for or
referred to in this Section 9 by seeking other employment or
otherwise, nor shall the amount of any payment provided for or
referred to in this Section 9 be reduced by any compensation
earned by the Executive as the result of
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<PAGE>
employment by another employer after the termination of the
Executive's employment, or otherwise.
9.6 Release. As a condition to Executive's right to
receive any severance payments and benefits made hereto in this
Section 9, the Company shall require that (i) Executive execute
and deliver to the Company a general release, whereby Executive
shall release the Company, it successor, assigns, officers,
directors and agents from any and all claims, liabilities and
obligations relating to or arising out of this Agreement, and (ii)
Executive shall not be in breach of any Restrictive Covenant.
9.7 Termination in Anticipation of a Change in Control.
If the Company terminates Executive's employment without Cause
during the period commencing six (6) months prior to the earlier
of (i) public announcement by the Company of a Change in Control,
or (ii) the execution by the Company of a definitive agreement
with regard to a Change in Control, and ending on (and including)
the date of the Change in Control, such termination shall be
regarded as a termination after such Change in Control for
purposes of this Agreement, including without limitation, for
purposes of Sections 5.5 and 9.
9.8 Pooling. Notwithstanding anything contained in this
Agreement to the contrary, if any terms of this Agreement would
cause a Corporate Transaction to be ineligible for pooling of
interest accounting, and such Corporate Transaction would be
eligible for such accounting treatment but for such terms, the
Compensation Committee may modify or adjust the terms of this
Agreement so that pooling of interest accounting shall be
available.
10. Definitions. As used in this Agreement:
"Affiliate" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or
other entity (other than the Company) that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the Company including, without limitation, any member of an
affiliated group of which the Company is a common parent corporation as
provided in Section 1504 of the Code.
"Anixter Family" means Alan B. Anixter, William R. Anixter, Scott
C. Anixter, their spouses, heirs and any group (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of which any of the foregoing persons is a member for
purposes of acquiring, holding or disposing of securities of the Company,
any trust established by or for the benefit of any of the foregoing and any
other entity controlled by or for the benefit of any of the foregoing.
"Annual Payment" means an amount equal to the greater of (i) fifty
percent (50%) of the sum of (x) the average of Executive's Base Salary for
the year in which the Change in Control occurs and each of the two (2)
years immediately prior thereto, plus (y) the average of the amount of the
minimum Bonus Payment for the year in which the Change in Control occurs
and the Bonus Payment for each of the two (2) years immediately prior
thereto, or (ii) the Minimum Annual
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Payment; provided if, as of the effective date of the Change in Control,
the Present Value of the Annual Payments payable to Scott Anixter, Carl
Putnam and Donald Welchko (collectively, the "Eligible Executives"), in the
aggregate, after taking into account any gross-up payments payable to any
of them with respect to such Annual Payments pursuant to Section 9.4 of
their respective employment agreements (the "Gross-up Payments"), exceed
two percent (2%) of the Transaction Value (the "Aggregate Cap"), the Annual
Payments payable to each of the Eligible Executives shall be reduced pro
rata based on their relative levels of Annual Payment so that the Present
Value of such Annual Payments, in the aggregate, after taking into account
any Gross-up Payments with respect thereto, equal the Aggregate Cap. If the
foregoing calculation of the Aggregate Cap would result in Executive's
Annual Payment being less than the Minimum Annual Payment, Executive's
Annual Payment shall not be reduced below the Minimum Annual Payment unless
and until each of the other Eligible Executive's Annual Payment has first
been reduced to his respective Minimum Annual Payment. The Annual Payment
shall be determined by the Compensation Committee prior to the Change in
Control, in consultation with a nationally recognized actuarial, accounting
or consulting firm selected by the Compensation Committee to determine the
Present Value of the Annual Payments; provided if the foregoing
determination cannot be made prior to the Change in Control, such
determination shall be made as soon as practicable following the Change in
Control by the persons who were members of the Compensation Committee
immediately prior to the Change in Control regardless of whether such
persons remain on the Board of Directors or Compensation Committee after
the Change in Control.
"Cause" means (a) an act of fraud or dishonesty by Executive that
results in material gain or personal enrichment of Executive at the
Company's expense, (b) Executive's conviction of a felony-class crime
(other than relating to the operation of a motor vehicle), (c) any material
breach by Executive of any provision of this Agreement that, if curable,
has not been cured by Executive within thirty days of written notice of
such breach from the Company, (d) Executive willfully engaging in gross
misconduct materially injurious to the Company that, if curable, has not
been cured by Executive within thirty days of written notice specifying the
alleged willful gross misconduct and material injury, or (e) any
intentional act or gross negligence on the part of Executive that has a
material, detrimental effect on the reputation or Business of the Company.
The decision to terminate Executive's employment for Cause, to take other
action or to take no action in response to such occurrence shall be in the
sole and exclusive discretion of the Board.
"Change in Control" means the happening of any of the following events:
(a) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change in Control: (A) any acquisition by the Company or by an
employee benefit plan (or related trust) sponsored or maintained
by the Company or an Affiliate, (B) any acquisition by a member or
members of the Anixter Family, (C) any acquisition by a lender to
the Company pursuant to a debt restructuring of the Company, (D)
any acquisition by, or consummation of a Corporate Transaction
with an
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<PAGE>
Affiliate, (E) a Non-Control Transaction, or (F) an acquisition by
a Person of the beneficial ownership of twenty percent (20%) or
more, but less than fifty percent (50%) of the combined voting
power of the then Outstanding Company Voting Securities unless
Executive's employment is terminated by the Company without Cause
or by Executive for Good Reason, within twenty-four (24) months
following such acquisition;
(b) A change in the composition of the Board such that
the individuals who, as of the date hereof, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of this Section 10(b),
that any individual who becomes a member of the Board subsequent
to the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such
pursuant to this provision) shall be considered as though such
individual were a member of the Incumbent Board; but, provided,
further, that any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board shall not be so considered as a
member of the Incumbent Board;
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Company (a "Corporate Transaction"), in
each case, unless the Corporate Transaction is a Non-Control
Transaction; or
(d) Approval by stockholders of the Company of a complete
liquidation or dissolution of the Company.
"Closing Share Price" means the average closing price of the
Company's common stock as reported on the NASDAQ National Market and
published in The Wall Street Journal (Midwest Edition), for each of the ten
(10) consecutive trading days on the effective date of the Change in
Control.
"Disability" will be deemed to have occurred whenever Executive
has suffered physical or mental illness, injury, or infirmity that renders
Executive unable to perform the essential functions of his job with or
without reasonable accommodation.
"Good Reason" means the occurrence of any of the following events,
unless (i) such event occurs with Executive's express prior written
consent, (ii) the event is an isolated, insubstantial or inadvertent action
or failure to act which was not in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by Executive, or
(iii) the event occurs in connection with termination of Executive's
employment for Cause, Disability or death:
(a) the assignment to Executive by the Company of any
duties which are, in any material respect, inconsistent with, a
diminution of or an adverse change in Executive's
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position, duty, title, office, responsibility or status with the
Company, including without limitation, any material diminution of
Executive's position or responsibility in the decision or
management processes of the Company, reporting relationships, job
description, duties, responsibilities, or any removal of Executive
from, or any failure to reelect Executive to, such position;
(b) a reduction by the Company in Executive's rate of
Base Salary during the Employment Period;
(c) any failure to either continue in effect any material
Benefits or to substitute and continue other plans, policies,
programs or arrangements providing Executive with substantially
similar benefits, or the taking of any action which would
substantially and adversely affect Executive's participation in or
materially reduce Executive's Benefits or compensation;
(d) any failure by any successor or assignee of the
Company to continue this Agreement in full force and effect or any
breach of this Agreement by the Company (or any successor or
assignee of the Company), unless such breach is cured within
thirty (30) days of receiving written notice of the breach from
Executive; or
(e) following a Change in Control, the relocation of the
executive offices of the Company to a location that is more than
fifty (50) miles from the executive offices of the Company as of
the effective date of such Change in Control.
"Minimum Annual Payment" means $100,000.
"Non-Control Transaction" means a Corporate Transaction as a
result of which the Outstanding Company Voting Securities immediately prior
to such Corporate Transaction would entitle the holders thereof immediately
prior to such Corporate Transaction to exercise, directly or indirectly,
more than fifty percent (50%) of the combined voting power of all of the
shares of capital stock entitled to vote generally in election of directors
of the corporation resulting from such Corporate Transaction immediately
after such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries).
"Person" means any individual, corporation, trust, proprietorship,
association, governmental body, agency or subdivision or other entity.
"Present Value" means the present value of the Annual Payments as
of the effective date of the Change in Control as determined by a
nationally recognized actuarial, accounting or consulting firm selected by
the Compensation Committee, after taking into account reasonable
assumptions, including as to life expectancy and discount rates.
"Termination Payment" means an amount equal to the greater of (i)
the sum of Executive's Base Salary plus his minimum Bonus Payment for the
remaining term of the then current Employment Period, or (ii) two(2) (the
"Multiple") times the sum of (x) Executive's highest Base
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Salary plus (y) the amount of the highest Bonus Payment received by
Executive, in any of the three years immediately preceding the year in
which the Effective Date occurs; provided that, if the Effective Date
occurs during the thirty-six (36) months following a Change in Control, the
Multiple shall be equal to three (3) (rather than two (2)) for purposes of
clause (ii) above.
"Transaction Bonus Amount" means:
(i) if the Closing Share Price is less than or equal to
$13.00 per share, an amount equal to the Transaction Payment; or
(ii) if the Closing Share Price is greater than $13.00
per share but less than $17.00 per share, an amount equal to the
Transaction Payment times the sum of (x) one (1), plus (y) a fraction, the
numerator of which is the Closing Share Price minus $13.00, and the
denominator of which is equal to $17.00 minus $13.00; or
(iii) if the Closing Share Price is $17 per share or
greater, an amount equal to two (2) times the Transaction Payment.
The amounts per share set forth above in subparagraphs (i), (ii) and (iii)
shall be equitably adjusted by the Compensation Committee to reflect any
stock split, stock dividend, recapitalization or similar event.
"Transaction Payment" means the sum of (x) Executive's highest
Base Salary, plus (y) the amount of the highest Bonus Payment received by
Executive, in any of the three (3) years immediately prior to the year in
which the Change in Control occurs.
"Transaction Value" means (i) with respect to a Corporate
Transaction, the total amount of cash, securities, contractual arrangements
and other properties paid or payable, directly or indirectly in connection
with such Corporate Transaction including, without limitation; (a) amounts
paid to any party pursuant to covenants not to compete or other similar
arrangements; and (b) amounts paid to holders of any warrants, stock
purchase rights, convertible securities or similar rights of the Company
and to holders of any options or stock appreciation rights issued by the
Company (whether or not vested); and (c) amount of any short term debt and
long term liabilities of the Company (including the principal amount of any
indebtedness for borrowed money) (1) indirectly or directly assumed or
acquired by the Company or any other party, or otherwise repaid or retired,
in connection with or in anticipation of the Corporate Transaction, (2)
existing on the Company's balance sheet at the time of a Corporate
Transaction (if such Corporate Transaction takes the form of a merger,
consolidation or a purchase of stock) or (3) assumed in connection with a
Corporate Transaction (if such Corporate Transaction takes the form of a
purchase of assets); and (d) in the event the Corporate Transaction takes
the form of a recapitalization, restructuring, spin-off, split-off or
similar transaction, Transaction Value shall include the fair market value
of (A) the equity securities of the Company retained by the Company's
security holders following a Corporate Transaction and (B) any securities
received by the Company's security holders in exchange for or in respect of
securities of the target company following such Corporate Transaction (all
such securities received by such security holders being deemed to have been
paid to such security holders in such Corporate Transaction, and (ii) with
respect to a Change in Control that is not a Corporate
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<PAGE>
Transaction, the enterprise value of the Company, as determined as soon as
practicable, following the Change in Control by the persons who were
members of the Compensation Committee immediately prior to the Change in
Control regardless of whether such persons remain on the Board of Directors
or the Compensation Committee following the Change in Control, in
consultation with such investment bankers or other advisors as such persons
may deem appropriate.
11. Remedies. Executive acknowledges and agrees that the covenants
set forth in Sections 6 and 7 of this Agreement (collectively, the
"Restrictive Covenants") are reasonable and necessary for the protection of
the Company's business interests, that irreparable injury will result to
the Company if Executive breaches any of the terms of the Restrictive
Covenants, and that in the event of Executive's actual or threatened breach
of any such Restrictive Covenants, the Company will have no adequate remedy
at law. Executive accordingly agrees that in the event of any actual or
threatened breach by him of any of the Restrictive Covenants, the Company
shall be entitled to immediate temporary injunctive and other equitable
relief, without bond and without the necessity of showing actual monetary
damages, subject to hearing as soon thereafter as possible. Nothing
contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of any damages which it is able to prove.
12. Miscellaneous.
(a) Notices. All notices and other communication between
the parties pursuant to this Agreement must be in writing and will
be deemed given when delivered in person, one (1) business day
after being dispatched by a nationally recognized overnight
courier service, three (3) business days after being deposited in
the U.S. Mail, registered or certified mail, return receipt
requested, or when sent by facsimile (with receipt acknowledged
and a copy sent for next day delivery by a nationally recognized
overnight courier service), to the Company at the address or
facsimile number of its principal office in the Chicago, Illinois
metropolitan area and to Executive (or his representatives) at his
address or facsimile as shown on the Company's records. Executive
(or his representatives) may change his address or facsimile
number for notice purposes by delivering notice to the Company in
accordance with this Section 12(a). All notices sent to the
Company shall also be delivered to Katten Muchin & Zavis, 525 West
Monroe Street, Suite 1600, Chicago, Illinois 60661-3693,
Attention: Jeffrey R. Patt, Esq., Facsimile No.: (312-902-1061).
(b) Governing Law. This Agreement will be subject to and
governed by the laws of the State of Illinois, without regard to
principles of conflicts of laws.
(c) Binding Effect. This Agreement will be binding upon
and inure to the benefit of the parties and their respective
heirs, legal representatives, executors, administrators,
successors, and assigns, subject to the limitations on assignment
in Section 12(h).
(d) Entire Agreement. This Agreement constitutes the
entire Agreement between the parties with respect to the subject
matter of this Agreement and supersedes any other agreements,
whether oral or written, between the parties with respect to the
subject matter of this Agreement.
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<PAGE>
(e) Modification. No change or modification of this
Agreement will be valid unless it is in writing and signed by both
of the parties. No waiver of any provision of this Agreement will
be valid unless in writing and signed by the person or party to be
charged.
(f) Severability. If any provision of this Agreement is,
for any reason, invalid or unenforceable, the remaining provisions
of this Agreement will nevertheless be valid and enforceable and
will remain in full force and effect. Any provision of this
Agreement that is held invalid or unenforceable by a court of
competent jurisdiction will be deemed modified to the extent
necessary to make it valid and enforceable and as so modified will
remain in full force and effect.
(g) Headings. The headings in this Agreement are inserted
for convenience only and are not to be considered in the
interpretation of construction of the provisions of this
Agreement.
(h) Assignability. This Agreement may not be assigned by
either party without the prior written consent of the other party,
except that the Company may assign its rights to, and cause its
obligations under this Agreement to be assumed by, any person or
entity to whom or to which the Company simultaneously transfers by
sale, merger, or otherwise all or substantially all of its assets.
(i) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by Executive
and the Company to express their mutual intent, and no rule of
strict construction will be applied against Executive or the
Company.
(j) Arbitration. Except for any claim or dispute which
gives rise or could give rise to equitable relief under this
Agreement, at the request of Executive, or the Company, any
disagreement, dispute, controversy or claim arising out of or
relating to this Agreement or the breach hereof shall be settled
exclusively and finally by arbitration. The arbitration shall be
conducted in accordance with such rules and before such arbitrator
as the parties shall agree and if they fail to so agree within
fifteen (15) days after demand for arbitration, such arbitration
shall be conducted in accordance with the Federal Arbitration Act
and the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association which are then in effect
(hereinafter referred to as "AAA Rules"). Such arbitration shall
be conducted in Chicago, Illinois, or in such other city as the
parties to the dispute may designate by mutual consent. The
arbitral tribunal shall consist of three arbitrators (or such
lesser number as may be agreed upon by the parties) selected
according to the procedure set forth in the AAA Rules in effect on
the date hereof and the arbitrators shall be empowered to order
any remedy which is appropriate to the proceedings and issues
presented to them. Any party to a decision rendered in such
arbitration proceedings may seek an order enforcing the same by
any court having jurisdiction.
(k) Legal Expenses. The Company shall pay the legal
expenses incurred by Executive for review of this Agreement by his
legal counsel, up to an amount not to exceed $10,000. If Executive
takes legal action to enforce the Company's obligations under this
Agreement and Executive prevails in such action, the Company shall
reimburse Executive
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for all reasonable expenses (including reasonable attorney's fees)
actually incurred by Executive in such action.
[signature page to follow]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Executive Employment Agreement as of the date first above written.
ANICOM, INC.
By: /s/ SCOTT C. ANIXTER
------------------------------------
Scott C. Anixter, Chairman and Chief
Executive Officer
EXECUTIVE:
/s/ CARL E. PUTNAM
------------------------------
Carl E. Putnam
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<PAGE>
EXHIBIT 9.3
FORM OF RABBI TRUST
EXHIBIT 10.13
ANICOM, INC.
1996 STOCK INCENTIVE PLAN, AS AMENDED
<PAGE>
ANICOM, INC.
1996 STOCK INCENTIVE PLAN, AS AMENDED
TABLE OF CONTENTS
Page
ARTICLE I
ESTABLISHMENT, AMENDMENT AND RESTATEMENT................................... 1
1.1 Purpose............................................. 1
ARTICLE II
DEFINITIONS................................................................ 1
2.1 "Affiliate"......................................... 1
2.2 "Agreement" or "Award Agreement".................... 1
2.3 "Anixter Family".................................... 1
2.4 "Award"............................................. 1
2.5 "Board of Directors" or "Board"..................... 2
2.6 "Cause"............................................. 2
2.7 "Change in Control" ................................ 2
2.8 "Code" or "Internal Revenue Code"................... 2
2.9 "Commission"........................................ 2
2.10 "Committee"......................................... 2
2.11 "Common Stock"...................................... 2
2.12 "Company"........................................... 2
2.13 "Deferred Stock".................................... 2
2.14 "Disability"........................................ 2
2.15 "Disinterested Person".............................. 3
2.16 "Effective Date".................................... 3
2.17 "Exchange Act"...................................... 3
2.18 "Fair Market Value"................................. 3
2.19 "Grant Date"........................................ 3
2.20 "Incentive Stock Option"............................ 3
2.21 "Nonqualified Stock Option"......................... 3
2.22 "Option Period"..................................... 4
2.23 "Option Price"...................................... 4
2.24 "Participant"....................................... 4
2.25 "Plan".............................................. 4
2.26 "Public Offering"................................... 4
2.27 "Representative".................................... 4
2.28 "Restricted Stock".................................. 4
2.29 "Retirement"........................................ 4
2.30 "Rule 16b-3"........................................ 4
(i)
<PAGE>
Page
2.31 "Securities Act".................................... 4
2.32 "Stock Appreciation Right".......................... 4
2.33 "Stock Option" or "Option".......................... 5
2.34 "Termination of Employment"......................... 5
ARTICLE III
ADMINISTRATION............................................................. 5
3.1 Committee Structure and Authority................... 5
ARTICLE IV
STOCK SUBJECT TO PLAN...................................................... 7
4.1 Number of Shares.................................... 7
4.2 Release of Shares................................... 8
4.3 Restrictions on Shares.............................. 8
4.4 Stockholder Rights.................................. 8
4.5 Reasonable Efforts To Register...................... 9
4.6 Anti-Dilution....................................... 9
ARTICLE V
ELIGIBILITY................................................................ 9
5.1 Eligibility......................................... 9
ARTICLE VI
STOCK OPTIONS.............................................................. 10
6.1 General............................................. 10
6.2 Grant and Exercise.................................. 10
6.3 Terms and Conditions................................ 10
6.4 Termination by Reason of Death...................... 13
6.5 Termination by Reason of Disability................. 13
6.6 Other Termination................................... 13
6.7 Cashing Out of Option............................... 13
ARTICLE VII
STOCK APPRECIATION RIGHTS.................................................. 14
7.1 General............................................. 14
7.2 Grant............................................... 14
7.3 Terms and Conditions................................ 14
ARTICLE VIII
RESTRICTED STOCK........................................................... 16
8.1 General............................................. 16
8.2 Awards and Certificates............................. 16
(ii)
<PAGE>
Page
8.3 Terms and Conditions................................ 16
ARTICLE IX
DEFERRED STOCK............................................................. 18
9.1 General............................................. 18
9.2 Terms and Conditions................................ 18
ARTICLE X
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN..................... 19
10.1 Transfer of Shares.................................. 19
10.2 Limited Transfer During Offering.................... 19
10.3 Committee Discretion................................ 20
10.4 No Company Obligation............................... 20
ARTICLE XI
CHANGE IN CONTROL PROVISIONS............................................... 20
11.1 Impact of Event..................................... 20
11.2 Definition of Change in Control..................... 20
ARTICLE XII
MISCELLANEOUS.............................................................. 21
12.1 Amendments and Termination.......................... 22
12.2 Unfunded Status of Plan............................. 22
12.3 General Provisions.................................. 23
12.4 Mitigation of Excise Tax............................ 24
12.5 Status of Awards Under Code Section 162(m).......... 24
12.6 Rights with Respect to Continuance of Employment.... 24
12.7 Awards in Substitution for Awards Granted
by Other Corporations............................. 24
12.8 Procedure for Adoption.............................. 24
12.9 Procedure for Withdrawal............................ 25
12.10 Delay............................................... 25
12.11 Headings............................................ 25
12.12 Severability........................................ 25
12.13 Successors and Assigns.............................. 25
12.14 No Obligation to Give Notice........................ 25
12.15 No Third Party Beneficiaries........................ 25
12.16 Entire Agreement.................................... 25
(iii)
<PAGE>
ANICOM, INC.
1996 STOCK INCENTIVE PLAN, AS AMENDED
ARTICLE II
ESTABLISHMENT, AMENDMENT AND RESTATEMENT
I Purpose.
The Anicom, Inc. 1996 Stock Incentive Plan (the "Plan"), is hereby
established by Anicom, Inc. (the "Company") effective April 15, 1996. The
purpose of the Plan is to promote the overall financial objectives of the
Company and its stockholders by motivating those persons selected to participate
in the Plan to achieve long-term growth in stockholder equity in the Company and
by retaining the association of those individuals who are instrumental in
achieving this growth. This Plan and the grant of awards hereunder is expressly
conditioned upon the Plan's approval by the security holders of the Company. If
such approval is not obtained, then the Plan and all Awards hereunder shall be
null and void ab initio.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company) that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company including, without limitation, any member of an affiliated group of
which the Company is a common parent corporation as provided in Section 1504 of
the Code.
2.2 "Agreement" or "Award Agreement" means, individually or
collectively, any agreement entered into pursuant to the Plan pursuant to which
an Award is granted to a Participant.
2.3 "Anixter Family" means Alan B. Anixter, William R. Anixter, Scott
C. Anixter, their spouses, heirs and any group (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of which any of the foregoing persons is a member for purposes of
acquiring, holding or disposing of securities of the Company, any trust
established by or for the benefit of any of the foregoing and any other entity
controlled by or for the benefit of any of the foregoing.
2.4 "Award" means a Stock Option, Stock Appreciation Right, Restricted
Stock or Deferred Stock.
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2.5 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.6 "Cause" shall mean, for purposes of whether and when a Participant
has incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for Cause as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause,"
then Cause shall mean (a) an act of fraud or dishonesty by Participant that
results in gain or personal enrichment of Participant at the Company's expense,
(b) Participant's conviction of a felony-class crime or any act involving moral
turpitude, (c) any material breach by Participant of any provision of this
Agreement that has not been cured by Participant within thirty days of written
notice of such breach from the Company, (d) the Participant's willful engaging
in gross misconduct materially injurious to the Company that has not been cured
by Participant within thirty days of written notice specifying the alleged
willful gross misconduct and material injury, or (e) any intentional act or
gross negligence by Participant that has a material, detrimental effect on the
reputation or business of the Company.
2.7 "Change in Control" has the meaning set forth in Section 11.2.
2.8 "Code" or "Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, final Treasury Regulations thereunder and any subsequent
Internal Revenue Code.
2.9 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.10 "Committee" means the person or persons appointed by the Board of
Directors to administer the Plan, as further described in the Plan.
2.11 "Common Stock" means the shares of Common Stock, $.001 par value,
whether presently or hereafter issued, and any other stock or security resulting
from adjustment thereof as described hereinafter or the common stock of any
successor to the Company which is designated for the purpose of the Plan.
2.12 "Company" means Anicom, Inc., a Delaware corporation, and includes
any successor or assignee corporation or corporations into which the Company may
be merged, changed or consolidated; any corporation for whose securities all or
substantially all of the securities of the Company shall be exchanged; and any
assignee of or successor to substantially all of the assets of the Company.
2.13 "Deferred Stock" means an Award made pursuant to Article IX.
2.14 "Disability" means a mental or physical illness, injury, or
infirmity that prevents Participant from fulfilling his or her duties for the
Company or an Affiliate for a period of
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sixty (60) consecutive days in the manner ordinarily required of him or her.
Notwithstanding the foregoing, a Disability shall not qualify under the Plan if
it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness; or (ii) an injury or disease contracted, suffered, or
incurred, while participating in a criminal offense. The determination of
Disability shall be made by the Committee. The determination of Disability for
purposes of the Plan shall not be construed to be an admission of disability for
any other purpose.
2.15 "Disinterested Person" shall have the meaning set forth in Rule
16b-3 and shall mean a person is also an "outside director" under Section 162(m)
of the Code.
2.16 "Effective Date" means April 15, 1996.
2.17 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2.18 "Fair Market Value" means the value of the Common Stock determined
on the basis of the good faith determination of the Committee, without regard to
whether the Common Stock is restricted or represents a minority interest,
pursuant to the applicable method described below:
(a) if the Common Stock is listed on a national securities
exchange or quoted on The Nasdaq Stock Market (either the Nasdaq
National Market or the Nasdaq Small Cap Market (in either case,
"NASDAQ")), unless otherwise provided in an Agreement or determined by
the Committee, the closing price of the Common Stock on the relevant
date (or, if such date is not a business day or a day on which
quotations are reported, then on the immediately preceding date on
which quotations were reported), as reported by the principal national
exchange on which such shares are traded (in the case of an exchange)
or by the NASDAQ, as the case may be;
(b) if the Common Stock is not listed on a national securities
exchange or quoted on the NASDAQ, but is actively traded in the
over-the-counter market, unless otherwise provided in an Agreement or
determined by the Committee, the average of the closing bid and asked
prices for the Common Stock on the relevant date (or, if such date is
not a business day or a day on which quotations are reported, then on
the immediately preceding date on which quotations were reported), or
the most recent preceding date for which such quotations are reported;
and
(c) if, on the relevant date, the Common Stock is not publicly
traded or reported as described in (a) or (b), the value determined in
good faith by the Committee.
2.19 "Grant Date" means the date that as of which an Award is granted
pursuant to the Plan.
2.20 "Incentive Stock Option" means any Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
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2.21 "Nonqualified Stock Option" means an Option granted under the Plan
other than an incentive stock option within the meaning of Section 422 of the
Code.
2.22 "Option Period" means the period during which an Option shall be
exercisable in accordance with the Agreement and Article VI.
2.23 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3.
2.24 "Participant" means a person who satisfies the eligibility
conditions of Article V and to whom an Award has been granted by the Committee
under the Plan, and in the event a person becomes a Representative, then the
term "Participant" shall mean such Representative. For purposes of this
Agreement, the term "Termination of Employment" shall be deemed to be binding on
a Representative of the Participant.
2.25 "Plan" means the Anicom, Inc. 1995 Stock Incentive Plan, as herein
set forth and as may be amended from time to time.
2.26 "Public Offering" means an initial public offering of shares of
Common Stock under the Securities Act.
2.27 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been permissibly transferred including, without
limitation, a trust for the benefit of the Participant, the Participant's
parents, spouse or descendants, or a custodian under a uniform gifts to minors
act or similar statute for the benefit of the Participant's descendants, to the
extent permitted by the Committee and not inconsistent with Rule 16b-3 or the
status of the Option as an Incentive Stock Option; provided that only one of the
foregoing shall be the Representative at any point in time as determined under
applicable law and recognized by the Committee.
2.28 "Restricted Stock" means an Award under Article VIII.
2.29 "Retirement" means the Participant's voluntary Termination of
Employment with the intent of not re-entering the work force after attaining
either the normal retirement age or the early retirement age as defined in the
principal (as determined by the Committee) tax-qualified plan of the Company or
an Affiliate. If the Participant is not covered by such a plan, then age 65
shall be deemed the age of Retirement.
2.30 "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as promulgated under the Exchange Act, as amended from time to
time, or any successor thereto.
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2.31 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
2.32 "Stock Appreciation Right" means a right granted under Article
VII.
2.33 "Stock Option" or "Option" means an option granted under Article
VI.
2.34 "Termination of Employment" means the occurrence of any act or
event whether pursuant to an employment agreement or otherwise that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, director or employee of the Company or of
any Affiliate, or to be an officer, independent contractor, director or employee
of any entity that provides services to the Company or an Affiliate, including,
without limitation, death, Disability, dismissal, severance at the election of
the Participant, Retirement, or severance as a result of the discontinuance,
liquidation, sale or transfer by the Company or its Affiliates of all businesses
owned or operated by the Company or its Affiliates. With respect to any person
who is not an employee with respect to the Company or an Affiliate, the
Agreement shall establish what act or event shall constitute a Termination of
Employment for purposes of the Plan. A Termination of Employment shall occur to
an employee who is employed by an Affiliate if the Affiliate shall cease to be
an Affiliate and the Participant shall not immediately thereafter become an
employee of the Company or an Affiliate.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be administered
by the Committee which may be comprised of one or more persons. The Committee
shall be the Option Committee of the Board of Directors, unless such committee
does not exist or the Board establishes a committee whose sole purpose is the
administration of the Plan; provided that only those members of the Option
Committee of the Board who participate in the decision relative to Awards under
the Plan shall be deemed to be part of the "Committee" for purposes of the Plan.
In the absence of an appointment, the Board or the portion thereof that are
Disinterested Persons shall be the Committee. A majority of the Committee shall
constitute a quorum at any meeting thereof (including telephone conference) and
the acts of a majority of the members present, or acts approved in writing by a
majority of the entire Committee without a meeting, shall be the acts of the
Committee for purposes of the Plan. The Committee may authorize any one or more
of its members or an officer of the Company to execute and deliver documents on
behalf of the Committee. The Committee shall include no less than the number of
Disinterested Persons required for application of Rule 16b-3 and the deduction
of compensation under Section 162(m) of the Code. No member of the Committee
shall exercise any discretion respecting himself or herself under the Plan. The
Board shall have the authority to remove, replace or fill any vacancy
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of any member of the Committee upon notice to the Committee and the affected
member. Any member of the Committee may resign upon notice to the Board. The
Committee may allocate among one or more of its members, or may delegate to one
or more of its agents, such duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) to select those persons to whom Awards may be granted from
time to time;
(b) to determine whether and to what extent Stock Options,
Stock Appreciation Rights, Restricted Stock and Deferred Stock or any
combination thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be
covered by each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise
acceleration or forfeiture waiver regarding any Award and the shares of
Common Stock relating thereto);
(e) to adjust the terms and conditions, at any time or from
time to time, of any Award, subject to the limitations of Section 12.1;
(f) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to an Award shall
be deferred;
(g) to determine under what circumstances an Award may be
settled in cash or Common Stock.
(h) to provide for the forms of Agreement to be utilized in
connection with the Plan;
(i) to determine whether a Participant has a Disability or is
in Retirement;
(j) to determine what securities law requirements are
applicable to the Plan, Awards, and the issuance of shares of Common
Stock and to require of a Participant that appropriate action be taken
with respect to such requirements;
(k) to cancel, with the consent of the Participant or as
otherwise provided in the Plan or an Agreement, outstanding Awards;
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(l) to interpret and make a final determination with respect
to the remaining number of shares of Common Stock available under the
Plan;
(m) to require as a condition of the exercise of an Award or
the issuance or transfer of a certificate of Common Stock, the
withholding from a Participant of the amount of any federal, state or
local taxes as may be necessary in order for the Company or any other
employer to obtain a deduction or as may be otherwise required by law;
(n) to determine whether and with what effect an individual
has incurred a Termination of Employment;
(o) to determine whether the Company or any other person has a
right or obligation to purchase Common Stock from a Participant and, if
so, the terms and conditions on which such Common Stock is to be
purchased;
(p) to determine the restrictions or limitations on the
transfer of Common Stock;
(q) to determine whether an Award is to be adjusted, modified
or purchased, or is to become fully exercisable, under the Plan or the
terms of an Agreement;
(r) to determine the permissible methods of Award exercise and
payment, including cashless exercise arrangements;
(s) to adopt, amend and rescind such rules and regulations as,
in its opinion, may be advisable in the administration of the Plan; and
(t) to appoint and compensate agents, counsel, auditors or
other specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Awards granted at different times or to
different Participants.
Any determination made by the Committee pursuant to the provisions of
the Plan shall be made in its sole discretion, and in the case of any
determination relating to an Award, may be made at the time of the grant of the
Award or, unless in contravention of any express term of the Plan or an
Agreement, at any time thereafter. All decisions made by the Committee pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Company and Participants. Any determination shall not be subject
to de novo review if challenged in court.
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ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares. Subject to adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Options under the Plan shall be 1,800,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares.
4.2 Release of Shares. The Committee shall have full authority to
determine the number of shares of Common Stock available for Award, and in its
discretion may include (without limitation) as available for distribution any
shares of Common Stock that have ceased to be subject to an Award, any shares of
Common Stock subject to any Award that are forfeited, any Award that otherwise
terminates without issuance of shares of Common Stock being made to the
Participant, or any shares (whether or not restricted) of Common Stock that are
received by the Company in connection with the exercise of an Award including
the satisfaction of any tax liability or the satisfaction of a tax withholding
obligation. If any shares could not again be available for Options to a
particular Participant under any applicable law, such shares shall be available
exclusively for Options to Participants who are not subject to such limitations.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Award shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its discretion
may determine or provide in the Award Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock, cash
or other property prior to (i) the listing of such shares on any stock exchange
(or other public market) on which the Common Stock may then be listed (or
regularly traded), (ii) the completion of any registration or qualification of
such shares under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to the exercise of an
Award. The Company may cause any certificate for any share of Common Stock which
is to be delivered to be properly marked with a legend or other notation
reflecting the limitations on transfer of such Common Stock as provided in the
Plan or as the Committee may otherwise require. The Committee may require any
person exercising an Award to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of the shares of Common Stock in compliance with applicable law or
otherwise. Fractional shares shall not be delivered, but shall be rounded to the
next lower whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a
stockholder as to shares of Common Stock subject to an Award until, after proper
exercise of the Award or other action required, such shares shall have been
recorded on the Company's official stockholder records as having been issued or
transferred. Upon exercise of the Award or any portion thereof, the Company will
have thirty (30) days in which to issue the shares, and the Participant will not
be treated as a stockholder for any purpose whatsoever prior to such issuance.
No adjustment shall
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be made for cash dividends or other rights for which the record date is prior to
the date such shares are recorded as issued or transferred in the Company's
official stockholder records, except as provided herein or in an Agreement.
4.5 Reasonable Efforts To Register. If there has been a Public
Offering, the Company intends to register under the Securities Act the Common
Stock delivered or deliverable pursuant to Awards on Form S-8 if available to
the Company for this purpose (or any successor or alternate form that is
substantially similar to that form to the extent available to effect such
registration), in accordance with the rules and regulations governing such
forms. If the Committee deems registration to be in the Company's best
interests, the Company will use its reasonable efforts to cause a registration
statement to become effective and will file such supplements and amendments to
the registration statement as may be necessary to keep the registration
statement in effect until the earliest of (a) one year following the expiration
of the Option Period of the last Option outstanding, (b) the date the Company is
no longer a reporting company under the Exchange Act and (c) the date all
Participants have disposed of all shares delivered pursuant to any Award. The
Company may delay the foregoing obligation if the Committee reasonably
determines that any such registration is not in the Company's best interests or
if there is no material benefit to Participants in the Plan.
4.6 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction, Company share
offering or event involving the Company and having an effect similar to any of
the foregoing, then the Committee shall adjust or substitute, as the case may
be, the number of shares of Common Stock available for Awards under the Plan,
the number of shares of Common Stock covered by outstanding Awards, the maximum
number of Awards available for grant to any Participant for a stated period of
time (including the maximum number of Stock Appreciation Rights), the exercise
price per share of outstanding Awards, and any other characteristics or terms of
the Awards as the Committee shall deem necessary or appropriate to reflect
equitably the effects of such changes to the Participants; provided, however,
that the Committee may limit any such adjustment so as to maintain the
deductibility of the Awards under Section 162(m) of the Code, and that any
fractional shares resulting from such adjustment shall be eliminated by rounding
to the next lower whole number of shares with appropriate payment for such
fractional share as shall reasonably be determined by the Committee.
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ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan and be granted Awards shall be those persons
who are officers, employees and consultants of the Company, who shall be in a
position, in the opinion of the Committee, to make contributions to the growth,
management, protection and success of the Company. Of those persons described in
the preceding sentence, the Committee may, from time to time, select persons to
be granted Awards and shall determine the terms and conditions with respect
thereto. In making any such selection and in determining the form of the Award,
the Committee may give consideration to the functions and responsibilities of
the person's contributions to the Company, the value of the individual's service
to the Company and such other factors deemed relevant by the Committee. The
Committee may designate any person who is not eligible to participate in this
Plan if such person would otherwise be eligible to participate in this Plan (and
members of the Committee are expressly excluded to the extent such persons are
intended to be Disinterested Persons).
ARTICLE VI
STOCK OPTIONS
6.1 General. The Committee shall have authority to grant Options under
the Plan at any time or from time to time. Stock Options may be granted alone or
in addition to other Awards and may be either Incentive Stock Options or
Non-Qualified Stock Options. An Option shall entitle the Participant to receive
shares of Common Stock upon exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement (the terms and
provisions of which may differ from other Agreements) including without
limitation, payment of the Option Price. During any three-calendar-year-period,
Options for no more than 300,000 shares of Common Stock (subject to adjustment
under Section 4.6) shall be granted to any Participant.
6.2 Grant and Exercise. The grant of a Stock Option shall occur as of
the date the Committee determines. Each Option granted under the Plan shall be
evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and conditions of such Option and which shall be subject to the
express terms and conditions set forth in the Plan. Such Agreement shall become
effective upon execution by the Participant. Only a person who is a common-law
employee of the Company (as such terms are defined in Section 424 of the Code)
on the date of grant shall be eligible to be granted an Option which is intended
to be and is an Incentive Stock Option. To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option. Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered,
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nor shall any discretion or authority granted under the Plan be exercised, so as
to disqualify the Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify any Incentive Stock Option under such
Section 422.
6.3 Terms and Conditions. Stock Options shall be subject to such terms
and conditions as shall be determined by the Committee, including the following:
(a) Option Period. The Option Period of each Stock Option
shall be fixed by the Committee; provided that no Non-Qualified Stock
Option shall be exercisable more than ten (10) years after the date the
Stock Option is granted. In the case of an Incentive Stock Option, the
Option Period shall not exceed ten (10) years from the date of grant or
five (5) years in the case of an individual who owns more than ten
percent (10%) of the voting power of all classes of stock of the
Company, a corporation which is a parent corporation of the Company or
any subsidiary of the Company (as defined in Section 424 of the Code).
No Option which is intended to be an Incentive Stock Option shall be
granted more than ten (10) years from the date the Plan is adopted by
the Company or the date the Plan is approved by the stockholders of the
Company, whichever is earlier.
(b) Option Price. The Option Price per share of the Common
Stock purchasable under an Option shall be determined by the Committee.
If such Option is intended to qualify as an Incentive Stock Option, the
Option Price per share shall be not less than the Fair Market Value per
share on the date the Option is granted, or where granted to an
individual who owns or who is deemed to own stock possessing more than
ten percent (10%) of the combined voting power of all classes of stock
of the Company, a corporation which is a parent corporation of the
Company or any subsidiary of the Company (each as defined in Section
424 of the Code), not less than one hundred ten percent (110%) of such
Fair Market Value per share.
(c) Exercisability. Subject to Section 11.1, Stock Options
shall be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee. If the
Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such installment
exercise provisions, in whole or in part. In addition, the Committee
may at any time accelerate the exercisability of any Stock Option. If
the Committee intends that an Option be an Incentive Stock Option, the
Committee shall, in its discretion, provide that the aggregate Fair
Market Value (determined at the Grant Date) of Incentive Stock Option
which is exercisable for the first time during the calendar year shall
not exceed $100,000.
(d) Method of Exercise. Subject to the provisions of this
Article VI, a Participant may exercise Stock Options, in whole or in
part, at any time during the Option Period by the Participant's giving
written notice of exercise on a form provided by the Committee to the
Company specifying the number of shares of Common Stock subject to the
Stock Option to be purchased. Except where waived by the Committee,
such notice shall be accompanied by payment in full of the purchase
price by cash or check or such
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other form of payment as the Company may accept. If approved by the
Committee (including approval at the time of exercise), payment in full
or in part may also be made (i) by delivering Common Stock already
owned by the Participant having a total Fair Market Value on the date
of such delivery equal to the Option Price; (ii) by the execution and
delivery of a note or other evidence of indebtedness (and any security
agreement thereunder) satisfactory to the Committee and permitted in
accordance with Section 6.3(e); (iii) by authorizing the Company to
retain shares of Common Stock which would otherwise be issuable upon
exercise of the Option having a total Fair Market Value on the date of
delivery equal to the Option Price; (iv) by the delivery of cash or the
extension of credit by a broker-dealer to whom the Participant has
submitted a notice of exercise or otherwise indicated an intent to
exercise an Option (in accordance with Part 220, Chapter II, Title 12
of the Code of Federal Regulations, a so-called "cashless" exercise);
(v) by certifying ownership of shares of Common Stock by the
Participant to the satisfaction of the Committee for later delivery to
the Company as specified by the Committee; or (vi) by any combination
of the foregoing. If payment of the Option Price of a Non-Qualified
Stock Option is made in whole or in part in the form of Restricted
Stock or Deferred Stock, the number of shares of Common Stock to be
received upon such exercise equal to the number of shares of Restricted
Stock or Deferred Stock used for payment of the Option Price shall be
subject to the same forfeiture restrictions or deferral limitations to
which such Restricted Stock or Deferred Stock was subject, unless
otherwise determined by the Committee. In the case of an Incentive
Stock Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject to
the Stock Option may be authorized only at the time the Stock Option is
granted. No shares of Common Stock shall be issued until full payment
therefor has been made. Subject to any forfeiture restrictions or
deferral limitations that may apply if a Stock Option is exercised
using Restricted Stock or Deferred Stock, a Participant shall have all
of the rights of a stockholder of the Company holding the Common Stock
that is subject to such Stock Option (including, if applicable, the
right to vote the shares and the right to receive dividends), when the
Participant has given written notice of exercise, has paid in full for
such shares and such shares have been recorded on the Company's
official stockholder records as having been issued or transferred.
(e) Non-transferability of Options. Unless otherwise provided
in an Agreement or determined by the Committee, no Stock Option or
interest therein shall be transferable by the Participant other than by
will or by the laws of descent and distribution or by a designation of
beneficiary effective upon the death of the Participant, and all Stock
Options shall be exercisable during the Participant's lifetime only by
the Participant. If and to the extent transferability is permitted by
Rule 16b-3 and except as otherwise provided herein or by an Agreement,
every Option granted hereunder shall be freely transferable, but only
if such transfer does not result in liability under Section 16 of the
Exchange Act to the Participant or other Participants and is consistent
with registration of the Option and sale of Common Stock on Form S-8
(or a successor form) or the Committee's waiver of such condition.
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6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any vested, unexpired and unexercised Stock Options
held by such Participant shall thereafter be fully exercisable for a period of
one (1) year (or such other period or no period as the Committee may specify)
immediately following the date of such death or until the expiration of the
Option Period, whichever period is the shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in
an Agreement or determined by the Committee, if a Participant incurs a
Termination of Employment due to a Disability, any vested, unexpired and
unexercised Stock Options held by such Participant shall thereafter be fully
exercisable by the Participant for the period of one (1) year (or such other
period or no period as the Committee may specify) immediately following the date
of such Termination of Employment or until the expiration of the Option Period,
whichever period is shorter, and the Participant's death at any time following
such Termination of Employment due to Disability shall not affect the foregoing.
In the event of Termination of Employment by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, any vested, unexpired and unexercised Stock Option held by
such Participant shall thereafter be fully exercisable by the Participant for
the period of one (1) year (or such other period or no period as the Committee
may specify) immediately following the date of such Termination of Employment or
until the expiration of the Option Period, whichever period is shorter. Unless
otherwise provided in an Agreement or determined by the Committee, if a
Participant voluntarily incurs a Termination of Employment (other than due to
Retirement) or incurs a Termination of Employment by the Company for Cause, any
vested, unexpired and unexercised Stock Option held by such Participant shall
terminate immediately upon notice of termination by the Participant or the
Company, as the case may be. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment by the Company without Cause (other than due to death or Disability),
any vested, unexpired and unexercised Stock Options held by such Participant
shall thereafter be fully exercisable for a period of three (3) months (or such
other period or no period as the Committee may specify) immediately following
the date of such Termination of Employment or until the expiration of the Option
Period, whichever period is shorter. Unless otherwise provided in an Agreement
or determined by the Committee, the death or Disability of a Participant after a
Termination of Employment otherwise provided herein shall not extend the
exercisability of the time permitted to exercise an Option.
6.7 Cashing Out of Option. On receipt of written notice of exercise,
the Committee may elect to cash out all or part of the portion of any Stock
Option for which at least six months has elapsed since the Grant Date (provided
that such limitation shall not apply to an Option granted to a Participant who
has subsequently died) to be exercised by paying the Participant an amount, in
cash or Common Stock, equal to the excess of the Fair Market Value of the Common
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Stock that is subject to the Option over the Option Price times the number of
shares of Common Stock subject to the Option on the effective date of such cash
out. Cash outs relating to Options held by Participants who are actually or
potentially subject to Section 16(b) of the Exchange Act shall comply with the
"window period" provisions of Rule 16b-3, to the extent applicable, and, in the
case of cash outs of Non-Qualified Stock Options held by such Participants, the
Committee may determine Fair Market Value under the pricing rule set forth in
Section 2.18.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 General. The Committee shall have authority to grant Stock
Appreciation Rights under the Plan at any time or from time to time. Subject to
the Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement, a Stock
Appreciation Right shall entitle the Participant to surrender to the Company the
Stock Appreciation Right and to be paid therefor in shares of the Common Stock,
cash or a combination thereof as herein provided, the amount described in
Section 7.3(b).
7.2 Grant. Stock Appreciation Rights may be granted in conjunction
with all or part of any Stock Option granted under the Plan and the exercise of
such a Stock Appreciation Right shall require the cancellation of a
corresponding portion of the Stock Option (and the exercise of a Stock Option
shall result in a corresponding cancellation of the Stock Appreciation Right).
In the case of a Non-Qualified Stock Option, such rights may be granted either
at or after the time of grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right may also be granted on a stand alone basis.
The grant of a Stock Appreciation Right shall occur as of the date the Committee
determines. Each Stock Appreciation Right granted under the Plan shall be
evidenced by an Agreement, which shall embody the terms and conditions of such
Stock Appreciation Right and which shall be subject to the terms and conditions
set forth in the Plan. During any three-calendar-year-period, Stock Appreciation
Rights in respect of no more than 300,000 shares of Common Stock (subject to
adjustment under Section 4.6) shall be granted to any Participant.
7.3 Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions as shall be determined by the Committee, including
the following:
(a) Period and Exercise. The term of a Stock Appreciation
Right shall be established by the Committee. If granted in conjunction
with a Stock Option, the Stock Appreciation Right shall have a term
which is the same as the Option Period and shall be exercisable only at
such time or times and to the extent the related Stock Options would be
exercisable in accordance with the provisions of Article VI. A Stock
Appreciation Right which is granted on a stand alone basis shall be for
such period and shall be exercisable at such times and to the extent
provided in an Agreement. Stock Appreciation Rights shall be exercised
by the Participant's giving written notice of exercise on a form
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provided by the Committee (if available) to the Company specifying the
portion of the Stock Appreciation Right to be exercised.
(b) Amount. Upon the exercise of a Stock Appreciation Right, a
Participant shall be entitled to receive an amount in cash, shares of
Common Stock or both as determined by the Committee or as otherwise
permitted in an Agreement equal in value to the excess of the Fair
Market Value per share of Common Stock over the Option Price per share
of Common Stock specified in the related Agreement multiplied by the
number of shares in respect of which the Stock Appreciation Right is
exercised. In the case of a Stock Appreciation Right granted on a stand
alone basis, the Agreement shall specify the value to be used in lieu
of the Option Price per share of Common Stock. The aggregate Fair
Market Value per share of the Common Stock shall be determined as of
the date of exercise of such Stock Appreciation Right.
(c) Special Rules. In the case of Stock Appreciation Rights
relating to Stock Options held by Participants who are actually or
potentially subject to Section 16(b) of the Exchange Act:
(i) The Committee may require that such Stock
Appreciation Rights be exercised only in accordance with the
applicable "window period" provisions of Rule 16b-3;
(ii) The Committee may provide that the amount to be
paid upon exercise of such Stock Appreciation Rights (other
than those relating to Incentive Stock Options) during a Rule
16b-3 "window period" shall be based on the highest mean sales
price of the Common Stock on the principal exchange on which
the Common Stock is traded, NASDAQ or other relevant market
for determining value on any day during such "window period";
and
(iii) no Stock Appreciation Right shall be
exercisable during the first six months of its term, except
that this limitation shall not apply in the event of death or
Disability of the Participant prior to the expiration of the
six-month period.
(d) Non-transferability of Stock Appreciation Rights. Stock
Appreciation Rights shall be transferable only when and to the extent
that a Stock Option would be transferable under the Plan unless
otherwise provided in an Agreement.
(e) Termination. A Stock Appreciation Right shall terminate at
such time as a Stock Option would terminate under the Plan, unless
otherwise provided in an Agreement.
(f) Effect on Shares Under the Plan. To the extent required by
Rule 16b-3, upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is
related shall be deemed to have been exercised for the
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purpose of the limitation set forth in Section 4.2 on the number of
shares of Common Stock to be issued under the Plan, but only to the
extent of the number of shares of Common Stock covered by the Stock
Appreciation Right at the time of exercise based on the value of the
Stock Appreciation Right at such time.
(g) Incentive Stock Option. A Stock Appreciation Right granted
in tandem with an Incentive Stock Option shall not be exercisable
unless the Fair Market Value of the Common Stock on the date of
exercise exceeds the Option Price. In no event shall any amount paid
pursuant to the Stock Appreciation Right exceed the difference between
the Fair Market Value on the date of exercise and the Option Price.
ARTICLE VIII
RESTRICTED STOCK
8.1 General. The Committee shall have authority to grant Restricted
Stock under the Plan at any time or from time to time. Shares of Restricted
Stock may be awarded either alone or in addition to other Awards granted under
the Plan. The Committee shall determine the persons to whom and the time or
times at which grants of Restricted Stock will be awarded, the number of shares
of Restricted Shares to be awarded to any Participant, the time or times within
which such Awards may be subject to forfeiture and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Restricted
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate (including a division or department of the
Company or an Affiliate) for or within which the Participant is primarily
employed or upon such other factors or criteria as the Committee shall
determine. The provisions of Restricted Stock Awards need not be the same with
respect to any Participant.
8.2 Awards and Certificates. Notwithstanding the limitations on
issuance of shares of Common Stock otherwise provided in the Plan, each
Participant receiving an Award of Restricted Stock shall be issued a certificate
in respect of such shares of Restricted Stock. Such certificate shall be
registered in the name of such Participant and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such Award as
determined by the Committee. The Committee may require that the certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed and that, as a condition of any Award of Restricted
Stock, the Participant shall have delivered a stock power, endorsed in blank,
relating to the Common Stock covered by such Award.
8.3 Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions
of the Plan and the Agreement, during a period set by the Committee,
commencing with the date of such
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Award (the "Restriction Period"), the Participant shall not be
permitted to sell, assign, transfer, pledge or otherwise encumber any
interest in shares of Restricted Stock.
(b) Rights. Except as provided in Section 8.3(a), the
Participant shall have, with respect to the shares of Restricted Stock,
all of the rights of a stockholder of the Company holding the class of
Common Stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any
cash dividends. Unless otherwise determined by the Committee and
subject to the Plan, cash dividends on Common Stock that are the
subject of the Restricted Stock shall be automatically deferred and
reinvested in additional Restricted Stock, and dividends on Common
Stock that are the subject of the Restricted Stock shall be paid in the
form of Restricted Stock of Common Stock on which such dividend was
paid.
(c) Criteria. Based on service, performance by the Participant
or by the Company or the Affiliate, including any division or
department for which the Participant is employed or such other factors
or criteria as the Committee may determine, the Committee may provide
for the lapse of restrictions in installments and may accelerate the
vesting of all or any part of any Award and waive the restrictions for
all or any part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Restriction Period due to death or Disability,
the restrictions shall lapse and the Participant shall be fully vested
in the Restricted Stock. Except to the extent otherwise provided in the
applicable Agreement and the Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than
death or Disability, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Participant, except the Committee
shall have the discretion to waive in whole or in part any or all
remaining restrictions with respect to any or all of such Participant's
shares of Restricted Stock.
(e) Delivery. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, unlegended certificates for such shares shall be
delivered to the Participant.
(f) Election. A Participant may elect to further defer receipt
of the Restricted Stock for a specified period or until a specified
event, subject in each case to the Committee's approval and to such
terms as are determined by the Committee. Subject to any exceptions
adopted by the Committee, such election must be made one (1) year prior
to completion of the Restriction Period.
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ARTICLE IX
DEFERRED STOCK
9.1 General. The Committee shall have authority to grant Deferred
Stock under the Plan at any time or from time to time. Shares of Deferred Stock
may be awarded either alone or in addition to other Awards granted under the
Plan. The Committee shall determine the persons to whom and the time or times at
which Deferred Stock will be awarded, the number of shares of Deferred Stock to
be awarded to any Participant, the duration of the period (the "Deferral
Period") prior to which the Common Stock will be delivered, and the conditions
under which receipt of the Common Stock will be deferred and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Deferred
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate, including a division or department of the
Company or an Affiliate for or within which the Participant is primarily
employed or upon such other factors or criteria as the Committee shall
determine. The provisions of Deferred Stock Awards need not be the same with
respect to any Participant.
9.2 Terms and Conditions. Deferred Stock Awards shall be subject to
the following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions
of the Plan and except as provided in an Agreement, Deferred Stock
Awards, or any interest therein, may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or Elective Deferral
Period as defined in Section 9.2(e), where applicable), the Committee
may elect to deliver Common Stock, cash equal to the Fair Market Value
of such Common Stock or a combination of cash and Common Stock, to the
Participant for the shares covered by the Deferred Stock Award.
(b) Rights. Unless otherwise determined by the Committee and
subject to the Plan, cash dividends on the Common Stock that is the
subject of the Deferred Stock Award shall be automatically deferred and
reinvested in additional Deferred Stock, and dividends on the Common
Stock that is the subject of the Deferred Stock Award payable in Common
Stock shall be paid in the form of Deferred Stock of Common Stock on
which such dividend was paid.
(c) Criteria. Based on service, performance by the Participant
or by the Company or the Affiliate, including any division or
department for which the Participant is employed or such other factors
or criteria as the Committee may determine, the Committee may provide
for the lapse of deferral limitations in installments and may
accelerate the vesting of all or any part of any Award and waive the
deferral limitations for all or any part of such Award.
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(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Deferral Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in
the Deferred Stock. Unless otherwise provided in an Agreement or
determined by the Committee, upon a Participant's Termination of
Employment for any reason during the Deferral Period other than death
or Disability, the rights to the shares still covered by the Award
shall be forfeited by the Participant, except the Committee shall have
the discretion to waive in whole or in part any or all remaining
deferral limitations with respect to any or all of such Participant's
Deferred Stock.
(e) Election. A Participant may elect to further defer receipt
of the Deferred Stock payable under an Award (or an installment of an
Award) for a specified period or until a specified event, subject in
each case to the Committee's approval and to such terms as are
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made at one (1) year prior to
completion of the Deferral Period for the Award.
ARTICLE XXI
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
10.1 Transfer of Shares. A Participant may at any time make a transfer
of shares of Common Stock received pursuant to the exercise of an Award to his
parents, spouse or descendants or to any trust for the benefit of the foregoing
or to a custodian under a uniform gifts to minors act or similar statute for the
benefit of any of the Participant's descendants. Any transfer of shares received
pursuant to the exercise of an Award shall not be permitted or valid unless and
until the transferee agrees to be bound by the provisions of the Plan, and any
provision respecting Common Stock under the Agreement, provided that
"Termination of Employment" shall continue to refer to the Termination of
Employment of the Participant.
10.2 Limited Transfer During Offering. In the event there is an
effective registration statement under the Securities Act pursuant to which
shares of Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of shares
received directly or indirectly pursuant to an exercise of an Award.
10.3 Committee Discretion. The Committee may in its sole discretion
include in any Agreement an obligation that the Company purchase a Participant's
shares of Common Stock received upon the exercise of an Award (including the
purchase of any unexercised Awards which have not expired), or may obligate a
Participant to sell shares of Common Stock to the Company upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article X shall be construed by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee may from time to time determine. Notwithstanding any provision herein
to the contrary, the Company may upon determination by the Committee assign its
right to purchase shares of Common Stock this Article
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X, whereupon the assignee of such right shall have all the rights, duties and
obligations of the Company with respect to purchase of the shares of Common
Stock.
10.4 No Company Obligation. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to affirmatively disclose to a
record or beneficial holder of Common Stock or an Award, and such holder shall
have no right to be advised of any material information regarding the Company or
any Affiliate at any time prior to, upon or in connection with receipt or the
exercise of an Award or the Company's purchase of Common Stock or an Award from
such holder in accordance with the terms hereof.
ARTICLE XI
CHANGE IN CONTROL PROVISIONS
11.1 Impact of Event. Notwithstanding any other provision of the Plan
to the contrary, in the event of a Change in Control (as defined in Section
11.2):
(a) Any Stock Appreciation Rights and Stock Options
outstanding as of the date such Change in Control and not then
exercisable shall become fully exercisable to the full extent of the
original grant;
(b) The restrictions and deferral limitations applicable to
any Restricted Stock and Deferred Stock shall lapse, and such
Restricted Stock and Deferred Stock shall become free of all
restrictions and become fully vested and transferable to the full
extent of the original grant.
11.2 Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following events:
(a) An acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of fifty percent (50%) or more of
the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the approval by the
stockholders of the Company of a reorganization, merger, consolidation,
complete liquidation or dissolution of the Company, the sale or
disposition of all or substantially all of the assets of the Company or
similar corporate transaction (in each case referred to in this Section
11.2(a) as a "Corporate Transaction") or, if consummation of such
Corporate Transaction is subject, at the time of such approval by
stockholders, to the consent of any government or governmental agency,
the obtaining of such consent (either explicitly or implicitly)
provided such acquisition or beneficial ownership would result in any
other Person's beneficially owning fifty percent (50%) or more of the
Outstanding Company Common Stock; excluding, however, the following:
(A) any acquisition by the Company or by an employee benefit plan (or
related trust) sponsored or maintained by the Company or an
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Affiliate, (B) any acquisition by a member of the Anixter Family, or
(C) any acquisition by or consummation of a Corporate Transaction with
an Affiliate.
(b) A change in the composition of the Board such that the
individuals who, as of the date of the Initial Public Offering (the
"Public Offering"), constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, for
purposes of this Section 11.2(b), that any individual who becomes a
member of the Board subsequent to the date of the Company's Public
Offering whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of those
individuals who are members of the Board and who were also members of
the Incumbent Board (or deemed to be such pursuant to this provision)
shall be considered as though such individual were a member of the
Incumbent Board; but, provided, further, that any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board shall not be so considered as a member of
the Incumbent Board.
ARTICLE XII
MISCELLANEOUS
12.1 Amendments and Termination. The Board may amend, alter, or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would impair the rights of a Participant
under a Stock Option, Stock Appreciation Right, Restricted Stock Award or
Deferred Stock Award theretofore granted without the Participant's consent,
except such an amendment (a) made to avoid an expense charge to the Company or
an Affiliate, (b) made to cause the Plan to qualify for the exemption provided
by Rule 16b-3, (c) made to prevent the Plan from being disqualified from the
exemption provided by Rule 16b-3 or (d) made to permit the Company or an
Affiliate a deduction under the Code. In addition, no such amendment shall be
made without the approval of the Company's stockholders to the extent such
approval is required by law or agreement.
The Committee may amend the terms of the Plan or any Award theretofore
granted, prospectively or retroactively, subject to the same limitations (and
exceptions to limitations) as applied to the Board and further subject to any
approval or limitations the Board may impose.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and accounting rules,
as well as other developments and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval. Notwithstanding the
foregoing, if any right under the Plan would cause a transaction to be
ineligible for pooling of interest accounting that would but for the right
hereunder be eligible for such accounting treatment, the Committee may modify or
adjust the right so that pooling of interest accounting shall be available.
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25.2 Unfunded Status of Plan. It is intended that the Plan be an
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
12.3 General Provisions.
(a) Representation. The Committee may require each person
purchasing or receiving shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the
shares without a view to the distribution thereof. The certificates for
such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
(b) No Additional Obligation. Nothing contained in the Plan
shall prevent the Company or an Affiliate from adopting other or
additional compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for
Federal income tax purposes with respect to any Award, the Participant
shall pay to the Company (or other entity identified by the Committee),
or make arrangements satisfactory to the Company or other entity
identified by the Committee regarding the payment of, any Federal,
state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount required in order for the Company
or an Affiliate to obtain a current deduction. Unless otherwise
determined by the Committee, withholding obligations may be settled
with Common Stock, including Common Stock that is part of the Award
that gives rise to the withholding requirement provided that any
applicable requirements under Section 16 of the Exchange Act are
satisfied. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company and its
Affiliates shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the
Participant. If the Participant disposes of shares of Common Stock
acquired pursuant to an Incentive Stock Option in any transaction
considered to be a disqualifying transaction under the Code, the
Participant must give written notice of such transfer and the Company
shall have the right to deduct any taxes required by law to be withheld
from any amounts otherwise payable to the Participant.
(d) Reinvestment. The reinvestment of dividends in additional
Deferred or Restricted Stock at the time of any dividend payment shall
only be permissible if sufficient shares of Common Stock are available
for such reinvestment (taking into account then outstanding Options and
other Awards).
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(e) Representation. The Committee shall establish such
procedures as it deems appropriate for a Participant to designate a
Representative to whom any amounts payable in the event of the
Participant's death are to be paid.
(f) Controlling Law. The Plan and all Awards made and actions
taken thereunder shall be governed by and construed in accordance with
the laws of the State of Delaware (other than its law respecting choice
of law). The Plan shall be construed to comply with all applicable law,
and to avoid liability to the Company, an Affiliate or a Participant,
including, without limitation, liability under Section 16(b) of the
Exchange Act.
(g) Offset. Unless otherwise provided in an Agreement, any
amounts owed to the Company or an Affiliate by the Participant of
whatever nature may be offset by the Company from the value of any
shares of Common Stock, cash or other thing of value under the Plan or
an Agreement to be transferred to the Participant, and no shares of
Common Stock, cash or other thing of value under the Plan or an
Agreement shall be transferred unless and until all disputes between
the Company and the Participant have been fully and finally resolved
and the Participant has waived all claims to such against the Company
or an Affiliate.
(h) Right to Capitalize. The grant of an Award shall in no way
affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of
its business or assets.
12.4 Mitigation of Excise Tax. If any payment or right accruing to a
Participant under the Plan (without the application of this Section 12.4),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments") would constitute
a "parachute payment" (as defined in Section 280G of the Code and regulations
thereunder) that is subject to the excise tax imposed by Section 4999 of the
Code (or similar tax and/or assessment), the Company (or its successor or
assigns) shall increase the amounts payable hereunder to the extent necessary to
place Participant in the same after-tax position as he or she would have been in
had no such excise tax been imposed on the payments hereunder. The determination
of the amount of any such excise taxes shall initially be made by an independent
accounting firm employed by the Company. The Participant shall cooperate in good
faith with the Committee in making such determination and providing the
necessary information for this purpose. If, at a later date, it is determined
that the amount of excise taxes payable by Participant is greater than the
amount initially so determined, then the Company (or its successor or assigns)
shall pay Participant an amount equal to the sum of (i) such additional excise
taxes, (ii) any interest, fines and penalties resulting from such underpayment,
plus (iii) an amount necessary to reimburse Participant for any income, excise
or other taxes payable by Participant with respect to the amount specified in
(i) and (ii) above, and the reimbursement provided by this (iii).
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12.5 Status of Awards Under Code Section 162(m). It is the intent of
the Company that Awards granted to persons who are Covered Employees within the
meaning of Code Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Code Section 162(m). Accordingly,
the provisions of the Plan shall be interpreted in a manner consistent with Code
Section 162(m). If any provision of the Plan or any agreement relating to such
an Award does not comply or is inconsistent with the requirements of Code
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
12.6 Rights with Respect to Continuance of Employment. Nothing
contained herein shall be deemed to alter the relationship between the Company
or an Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or an
Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of the Plan. There shall be no inference as to the length of
employment or service hereby, and the Company or an Affiliate reserves the same
rights to terminate the Participant's employment or service as existed prior to
the individual becoming a Participant in the Plan.
12.7 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under the Plan from time to time in substitution for
awards held by employees, directors or service providers of other corporations
who are about to become officers, directors or employees of the Company or an
Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or an Affiliate, or the acquisition by the Company
or an Affiliate of the assets of the employing corporation, or the acquisition
by the Company or Affiliate of the stock of the employing corporation, as the
result of which it becomes a designated employer under the Plan. The terms and
conditions of the Awards so granted may vary from the terms and conditions set
forth in the Plan at the time of such grant as the majority of the members of
the Committee may deem appropriate to conform, in whole or in part, to the
provisions of the awards in substitution for which they are granted.
12.8 Procedure for Adoption. Any Affiliate of the Company may by
resolution of such Affiliate's board of directors, with the consent of the Board
of Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution.
12.9 Procedure for Withdrawal. Any Affiliate which has adopted the Plan
may, by resolution of the board of directors of such direct or indirect
subsidiary, with the consent of the Board of Directors and subject to such
conditions as may be imposed by the Board of Directors, terminate its adoption
of the Plan.
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12.10 Delay. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to the
extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, or the period for exercise of a Stock Appreciation Right as provided in
the Agreement, whichever is shorter. The Company shall have the right to suspend
or delay any time period described in the Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Company, an Affiliate or a stockholder of the
Company until such time as the action required or permitted shall not constitute
a violation of law or result in liability to the Company, an Affiliate or a
stockholder of the Company. The Committee shall have the discretion to suspend
the application of the provisions of the Plan required solely to comply with
Rule 16b-3 if the Committee shall determine that Rule 16b-3 does not apply to
the Plan.
12.11 Headings. The headings contained in the Plan are for reference
purposes only and shall not affect the meaning or interpretation of the Plan.
12.12 Severability. If any provision of the Plan shall for any reason
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not effect any other provision hereby, and the Plan shall be construed as
if such invalid or unenforceable provision were omitted.
12.13 Successors and Assigns. The Plan shall inure to the benefit of
and be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
12.14 No Obligation to Give Notice. No provision of the Plan shall be
deemed to create an obligation on the Company to give notice to any person or
entity of any event, except as expressly set forth in this Agreement.
12.15 No Third Party Beneficiaries. Nothing in this Agreement expressed
or implied is intended to confer any right or remedy under or by reason of this
Agreement on any person other than the parties hereto and their respective
heirs, representatives, successors and assigns, nor is anything set forth herein
intended to affect or discharge the obligation or liability of any third persons
to any party to this Agreement nor shall any provision give any third party any
right of subrogation or action over against any part to this Agreement.
12.16 Entire Agreement. The Plan and the Agreement constitute the
entire agreement with respect to the subject matter hereof and thereof, provided
that in the event of any inconsistency between the Plan and the Agreement, the
terms and conditions of the Agreement shall control.
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EXECUTED effective as of April 15, 1996.
ANICOM, INC.
/s/ SCOTT C. ANIXTER
------------------------
Scott C. Anixter
Chief Executive Officer
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AMENDMENT TO THE
1996 STOCK INCENTIVE PLAN
RESOLVED, that the 1996 Stock Incentive Plan (the "Plan") be and hereby
is amended, subject to and effective upon stockholders' approval at the Annual
Meeting of Stockholders on May 21, 1997, as follows:
Section 4.1 of the Plan is amended to read as follows:
"4.1 Number of Shares. Subject to adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Options under the Plan shall be 1,800,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares."
Except as herein amended, the Plan shall remain in full force and
effect.
ANICOM, INC.
By: /s/ SCOTT C. ANIXTER
-------------------------
Scott C. Anixter
Chief Executive Officer
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AMENDMENT TO THE
1996 STOCK INCENTIVE PLAN
RESOLVED, that the 1996 Stock Incentive Plan (the "Plan") be and hereby
is amended, subject to and effective upon stockholders' approval at the Annual
Meeting of Stockholders on May 20, 1998, as follows:
Section 4.1 of the Plan is amended to read as follows:
"4.1 Number of Shares. Subject to adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Options under the Plan shall be 2,600,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares."
Except as herein amended, the Plan shall remain in full force and
effect.
ANICOM, INC.
By:/s/ SCOTT C. ANIXTER
----------------------------------------
Scott C. Anixter
Chairman and Chief Executive Officer
EXHIBIT 10.14
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") is made as of November 30, 1998 by and between Donald C.
Welchko ("Executive") and ANICOM, INC., a Delaware corporation (the
"Company").
PRELIMINARY RECITALS
WHEREAS, the Company is engaged in the business of selling and
distributing communication related wire, cable, fiber optics and computer
network and connectivity products (the "Business").
WHEREAS, Executive is currently employed by the Company as the
Vice President and Chief Financial Officer of the Company, pursuant to that
certain Executive Employment Agreement, dated October 1, 1996, by and
between the Company and Executive (the "Current Employment Agreement").
WHEREAS, Executive has extensive knowledge and a unique
understanding of the operation of the Business.
WHEREAS, the Company and Executive desire to continue Executive's
employment relationship with the Company in his present position, all under
the terms and conditions set forth herein.
WHEREAS, the parties hereto desire to amend and restate the
Current Employment Agreement in the form of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Company and Executive agree as
follows:
1. Employment of Executive. The Company hereby employs Executive
as the Company's Vice President and Chief Financial Officer, and Executive
hereby accepts such employment and agrees to act as Vice President and
Chief Financial Officer of the Company, all in accordance with the terms
and conditions of this Agreement.
2. Term of Employment. Subject to the termination provisions set
forth in Section 8 below, Executive's employment under this Agreement shall
commence on the date of this Agreement and shall continue for an initial
period of three (3) years (the "Initial Employment Period"). The Company
and Executive may agree by mutual consent to extend this Agreement for
subsequent periods (the Initial Employment Period and any subsequent term
thereof shall hereinafter be referred to as the "Employment Period"). If,
at least ninety (90) days before the expiration of any Employment Period,
the Company gives Executive a written offer to extend the
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Employment Period for a subsequent term of at least three (3) years
following the end of such Employment Period on economic terms not less
favorable to Executive as those set forth herein and Executive does not
accept such offer in writing within thirty (30) days after delivery of such
offer, then the expiration of such Employment Period shall constitute
termination without Good Reason by Executive for purposes of this
Agreement. If, at least ninety (90) days before the expiration of any
Employment Period, the Company does not give Executive a written offer to
extend the Employment Period for a subsequent term of at least three (3)
years following the end of such Employment Period on economic terms not
less favorable to Executive as those set forth herein, then the expiration
of such Employment Period shall constitute termination by the Company
without Cause for purposes of this Agreement.
3. Offices and Duties. Subject to Section 8, during the Employment
Period, Executive will perform the duties of Vice President and Chief
Financial Officer of the Company as described in the Company's Bylaws and
such other duties as the Board of Directors of the Company ("Board") may
prescribe from time to time, consistent with Executive's title. Executive
agrees that during the Employment Period, he will devote substantially all
of his business time and attention to fulfill his duties under this
Agreement.
4. Board Representation. As of the date hereof, Executive is a
member of Class II of the Board, the term of which runs until the 2000
annual meeting of stockholders. During the Employment Period, the Company
shall use its reasonable efforts to recommend Executive for nomination by
the Board for election at the 2000 annual meeting of stockholders and each
subsequent annual meeting of stockholders during the Employment Period at
which his term on the Board would otherwise expire.
5. Compensation.
5.1 Base Salary. During the Employment Period, the
Company will pay Executive a base salary at a rate of $230,000 per
annum (the "Base Salary"), payable in accordance with the
Company's normal payroll practices for executive officers. The
Compensation Committee of the Board ("Compensation Committee")
shall perform an annual review of Executive's Base Salary based on
Executive's performance of his duties and the Company's normal
practice for executive salary review; provided that, in no event
shall Executive's Base Salary for any year be less than $230,000.
5.2 Bonus Payments. Executive shall be eligible to
receive an annual bonus ("Bonus Payments"), in an amount to be
determined by the Compensation Committee, in its sole discretion,
based upon Executive's and the Company's performance and the
achievement of goals and objectives approved by the Compensation
Committee. During the first quarter of 1999 and prior to each year
thereafter, the Compensation Committee shall establish a minimum
Bonus Payment for such year, and, if the Compensation Committee
determines, in its sole discretion, that a Bonus Payment is
warranted at the end of a particular year, Executive shall receive
at least the minimum Bonus Payment for such year.
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5.3 Stock Options. Executive shall be eligible to receive
an annual grant of options to purchase the Company's common stock,
in an amount to be determined by the Compensation Committee, in
its sole discretion, based upon Executive's and the Company's
performance and the achievement of goals and objectives approved
by such members of the Compensation Committee. During the first
quarter of 1999 and prior to each year thereafter, the
Compensation Committee shall establish a minimum option grant for
such year, and, if the Compensation Committee determines, in its
sole discretion, that option grants are warranted at the end of a
particular year, Executive shall receive a grant of stock options
to purchase at least a number of shares of the Company's common
stock having a value equal to the minimum option grants for such
year.
5.4 Automobile Allowance. During the Employment Period,
the Company shall provide Executive with a monthly automobile
allowance of $1,180 (the "Automobile Allowance").
5.5 Transaction Bonus. Within fifteen (15) business days
following the effective date of a Change in Control, the Company
(or its successor or assigns) shall pay to Executive the
Transaction Bonus Amount.
5.6 Benefits. Executive will be entitled to participate
in group life and medical insurance plans, profit-sharing and
similar plans, and other "fringe benefits" (collectively,
"Benefits"), comparable to those made available by the Company to
its other senior executive employees, in accordance with the terms
of such plans.
5.7 Withholding. All compensation payable to Executive
under this Agreement is stated in gross amount and will be subject
to all applicable withholding taxes, other normal payroll
deductions, and any other amounts required by law to be withheld.
5.8 Expenses. The Company, in accordance with its
policies and past practices, will pay or reimburse Executive for
all expenses (including travel and entertainment expenses)
reasonably incurred by Executive during the Employment Period in
connection with the performance of Executive's duties under this
Agreement, provided that Executive, if so requested by the Board,
must provide to the Company documentation or evidence of expenses
for which Executive seeks reimbursement.
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6. Covenant Not to Compete.
6.1 Executive's Acknowledgment. Executive agrees and
acknowledges that in order to assure the Company that it will retain its
value and that of the Business as a going concern, it is necessary that
Executive undertake not to utilize his special knowledge of the Business
and his relationships with customers and suppliers to compete with the
Company.
Executive further acknowledges that:
(a) the Company is currently engaged in the Business;
(b) Executive has occupied a position of trust and
confidence with the Company prior to the date of this Agreement
and will continue to acquire an intimate knowledge of all
proprietary and confidential information concerning the Business;
(c) the agreements and covenants contained in this
Section 6 are essential to protect the Company and the goodwill of
the Business;
(d) the Company would be irreparably damaged if Executive
were to provide services to any person or entity in violation of
the provisions of this Agreement;
(e) the scope and duration of the Restrictive Covenants
are reasonably designed to protect a protectible interest of the
Company and are not excessive in light of the circumstances; and
(f) Executive has a means to support himself and his
dependents other than by engaging in the Business, or a business
similar to the Business, and the provisions of this Section 6 will
not impair such ability.
6.2 Non-Compete. The "Restricted Period" for purposes of
this Agreement shall be the period of time commencing on the date hereof
and ending on the date three (3) years after termination of Executive's
employment for any reason; provided that, if Executive's employment with
the Company is terminated by Executive for Good Reason or by the Company
without Cause, then the payments to which Executive is entitled under
Sections 9.1, 9.2 and 9.4, shall be paid to Executive in consideration for
the survival of the Restricted Period beyond the effective date of
termination of Executive's employment. Executive hereby agrees that at all
times during the Restricted Period, Executive shall not, directly or
indirectly, as executive, agent, consultant, stockholder, director,
co-partner or in any other individual or representative capacity, own,
operate, manage, control, engage in, invest in or participate in any manner
in, act as a consultant or advisor to, render services for (alone or in
association with any person, firm, corporation or entity), or otherwise
assist any person or entity that engages in or owns, invests in, operates,
manages or controls any venture or enterprise that directly or indirectly
engages or proposes to engage in the Business anywhere within the United
States and Canada (the "Territory"); provided, however, that nothing
contained herein shall be construed to prevent Executive from investing in
the stock of any competing corporation listed on a national securities
exchange or traded in the over-the-counter market, but only if Executive is
not involved in the
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<PAGE>
business of said corporation and if Executive and his associates (as such
term is defined in Regulation 14(A) promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof), collectively, do
not own more than an aggregate of two percent (2%) of the stock of such
corporation.
6.3 Non-Solicitation. Without limiting the generality of
the provisions of Section 6.2 above, Executive hereby agrees that, during
the Restricted Period, Executive will not, directly or indirectly, solicit,
or participate as executive, agent, consultant, stockholder, director,
partner or in any other individual or representative capacity in any
business which solicits, business from any Person which is or was a
customer or vendor of the Business during the Restricted Period, or from
any successor in interest to any such Person for the purpose of marketing,
selling or providing any such Person any services or products offered by or
available from the Company, or encouraging any such Person to terminate or
otherwise alter his, her or its relationship with the Company.
6.4 Interference with Employee Relationships. During the
Restricted Period, Executive shall not, directly or indirectly, as
executive, agent, consultant, stockholder, director, co-partner or in any
other individual or representative capacity, without the prior written
consent of the Company, employ or engage, recruit or solicit for employment
or engagement, any individual who is employed or engaged by the Company at
that time, or has been employed or engaged by the Company during the six
(6) months prior thereto, or otherwise seek to influence or alter any such
individual's relationship with the Company.
6.5 Blue-Pencil. If any court of competent jurisdiction
shall at any time deem the term of this Agreement or any particular
Restrictive Covenant too lengthy or the Territory too extensive, the other
provisions of this Section 6 shall nevertheless stand, and the Restricted
Period shall be deemed to be the longest period permissible by law under
the circumstances and the Territory shall be deemed to comprise the largest
territory permissible by law under the circumstances. The court in each
case shall reduce the Restricted Period and/or the Territory to permissible
duration or size.
7. Confidential Information. During the term of this Agreement and
thereafter, Executive shall keep secret and retain in strictest confidence,
and shall not, without the prior written consent of the Company, furnish,
make available or disclose to any Person or use for the benefit of himself
or any Person party, any Confidential Information, except to the extent
reasonably necessary to carry out Executive's duties and responsibilities
to the Company. As used in this Section 7, "Confidential Information" shall
mean any information relating to the Business or affairs of the Company,
including but not limited to information relating to 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 used
by the Company in connection with the Business of the Company; 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 on the part of Executive. Executive acknowledges that the
Confidential Information is vital, sensitive, confidential and proprietary
to the Company.
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8. Termination.
8.1 The Company may terminate Executive's employment
hereunder at any time, without Cause (as defined in Section 10),
upon not less than ninety (90) days notice to Executive.
8.2 The Company may terminate Executive's employment
hereunder at any time for Cause by providing to Executive written
notice of termination stating the grounds for termination for
Cause and such termination shall take effect immediately upon
notice of termination.
8.3 Executive may terminate his employment hereunder at
any time, with or without Good Reason (as defined in Section 10),
upon not less than ninety (90) days notice (thirty (30) days
notice if Executive terminates following a Change in Control) to
the Company. Upon notice of such termination from Executive, the
Company may (i) require Executive to continue to perform his
duties hereunder on the Company's behalf during such notice
period, (ii) limit or impose reasonable restrictions on
Executive's activities during such notice period as it deems
necessary, or (iii) accept Executive's notice of termination as
Executive's resignation from the Company (including a resignation
from any position as director of the Company) at any time during
such notice period. If the Company at any time during the notice
period chooses to accept Executive's notice of termination as
Executive's resignation from the Company, then the effective date
of such termination shall be the date as of which such resignation
is accepted.
8.4 The Employment Period will terminate immediately upon
the death or Disability of Executive.
8.5 Following the effective date of termination by
Executive without Good Reason or by the Company for Cause,
Executive will not be entitled to receive any further compensation
(whether in the form of Base Salary, Bonus Payments, or Benefits
or otherwise) other than accrued but unpaid Base Salary through
the effective date of termination. Upon termination by the Company
without Cause, termination by Executive for Good Reason, death or
Disability, Executive (or his estate) will be entitled to receive
(i) all accrued but unpaid Base Salary through the effective date
of such termination, (ii) a pro rata portion of the minimum Bonus
Payment for the year in which such termination occurs, and (iii)
any amounts payable pursuant to Sections 9.1, 9.2 and 9.4 below,
but all other obligations of the Company to pay Executive any
further compensation, whether in the form of Base Salary, Bonus
Payments, or Benefits (other than death and Disability benefits,
if any) or otherwise, will terminate.
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9. Additional Obligations Upon Termination.
9.1 Termination Without Cause. If Executive's employment
with the Company is terminated at any time prior to, upon or after
a Change in Control, (i) by the Company without Cause, or (ii) by
Executive for Good Reason, or (iii) due to the death or Disability
of Executive, then in addition to the amounts payable in
accordance with Section 8.5 above, and in consideration for the
Restrictive Covenants, the Company shall pay and provide to
Executive the following:
(a) Within thirty (30) days after the effective
date of termination of employment (for purposes of this
Section 9, the "Effective Date") the Company shall pay to
Executive or his estate, a lump sum cash payment, in an
amount equal to the Termination Payment;
(b) for a period of thirty-six (36) months after
the Effective Date, (i) Executive and his dependents
shall continue to be covered by all survivor rights,
insurance and benefit programs in type and amount at
least equivalent to those provided to him and his
dependents by the Company immediately prior to the
Effective Date, and (ii) Executive shall continue to
receive from the Company the Automobile Allowance set
forth in Section 5(d) above;
(c) any stock options then held by Executive or
his permitted assignees shall immediately vest as of the
Effective Date; and
(d) the Company, at its sole expense, shall
provide Executive with outplacement services consistent
with those services customarily provided by the Company
to its senior executive employees.
9.2 Termination After a Change in Control. If Executive's
employment with the Company is terminated after a Change in
Control, then in addition to the amounts payable in accordance
with Section 8.5 above, Executive shall be entitled to the
following:
(a) if, during the six (6) month period,
beginning on the one hundred eightieth (180th) day
following such Change in Control, Executive terminates
his employment with the Company without Good Reason, then
within five (5) business days after the Effective Date,
the Company shall pay and provide to Executive: (i) a
lump sum cash payment, in an amount equal to the sum of
(x) Executive's highest Base Salary, plus (y) the amount
of the highest Bonus Payment received by Executive, in
any of the three (3) years immediately preceding the year
in which the Effective Date occurs; and (ii) all benefits
specified under Sections 9.1(b), 9.1(c) and 9.1(d) above.
For purposes of providing Executive benefits under
Section 9.1(b), benefits shall be equivalent to those
provided to Executive and his dependents immediately
prior to the Change in Control; provided that, if
participation in any one or more of such arrangements is
not possible under the terms thereof, the Company
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will provide substantially identical benefits outside of
the programs and cost of this coverage shall be paid by
the Company.
(b) if, at any time following a Change in Control, Executive's
employment is terminated (i) by the Company without Cause, or (ii) by
Executive with or without Good Reason, or (iii) due to the death or
Disability of Executive, the Company thereafter shall pay to Executive or
his spouse an annual amount equal to the Annual Payment, payable in equal
monthly installments, for a period equal to the greater of (i) the life of
Executive, or (ii) the life of Executive's spouse as of the Effective Date,
so long as she is married to Executive at the date of Executive's death. If
Executive shall die before Executive's spouse and Executive's spouse is
married to Executive at the date of Executive's death, whether before or
after the payments of the Annual Payment described above shall have
commenced, then the Annual Payment shall be paid to Executive's spouse. If
Executive shall not be married at the time of his death, then the Company
shall have no payment obligations following his death pursuant to this
Section 9.2(b).
9.3 Rabbi Trust. Prior to the consummation of a Change in
Control, the Company shall establish a "rabbi trust" for the
benefit of Executive into which there shall be contributed by the
Company cash in the amount sufficient to satisfy the Company's
obligations to pay Executive the amounts to which he is entitled
under Sections 5.5, 9.1(a) and 9.2(a). Any instruments
establishing such rabbi trust shall be substantially in the form
and substance of Exhibit 9.3 attached hereto.
9.4 Gross-Up Payments. If all or any portion of the
amounts payable to Executive under this Section 9, either alone or
together with other payments which Executive has the right to
receive from the Company, constitute "excess parachute payments"
(within the meaning of Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), that are subject to the excise
tax imposed by Section 4999 of the Code (or similar tax and/or
assessment), the Company (or its successor or assigns) shall
increase the amounts payable pursuant to this Agreement to the
extent necessary to place Executive in the same after-tax position
as he would have been in had no such excise tax been imposed on
the payments hereunder. The determination of the amount of any
such excise taxes shall initially be made by the independent
accounting firm employed by the Company immediately prior to the
Change in Control. If, at a later date, it is determined that the
amount of excise taxes payable by Executive is greater than the
amount initially so determined, then the Company (or its successor
or assigns) shall pay Executive an amount equal to the sum of (i)
such additional excise taxes, (ii) any interest, fines and
penalties resulting from such underpayment, plus (iii) an amount
necessary to reimburse Executive for any income, excise or other
taxes payable by Executive with respect to the amount specified in
(i) and (ii) above, and the reimbursement provided by this (iii).
9.5 No Mitigation. Executive shall not be required to
mitigate damages or the amount of any payment provided for or
referred to in this Section 9 by seeking other employment or
otherwise, nor shall the amount of any payment provided for or
referred to in this Section 9 be reduced by any compensation
earned by the Executive as the result of
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employment by another employer after the termination of the
Executive's employment, or otherwise.
9.6 Release. As a condition to Executive's right to
receive any severance payments and benefits made hereto in this
Section 9, the Company shall require that (i) Executive execute
and deliver to the Company a general release, whereby Executive
shall release the Company, it successor, assigns, officers,
directors and agents from any and all claims, liabilities and
obligations relating to or arising out of this Agreement, and (ii)
Executive shall not be in breach of any Restrictive Covenant.
9.7 Termination in Anticipation of a Change in Control.
If the Company terminates Executive's employment without Cause
during the period commencing six (6) months prior to the earlier
of (i) public announcement by the Company of a Change in Control,
or (ii) the execution by the Company of a definitive agreement
with regard to a Change in Control, and ending on (and including)
the date of the Change in Control, such termination shall be
regarded as a termination after such Change in Control for
purposes of this Agreement, including without limitation, for
purposes of Sections 5.5 and 9.
9.8 Pooling. Notwithstanding anything contained in this
Agreement to the contrary, if any terms of this Agreement would
cause a Corporate Transaction to be ineligible for pooling of
interest accounting, and such Corporate Transaction would be
eligible for such accounting treatment but for such terms, the
Compensation Committee may modify or adjust the terms of this
Agreement so that pooling of interest accounting shall be
available.
10. Definitions. As used in this Agreement:
"Affiliate" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or
other entity (other than the Company) that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the Company including, without limitation, any member of an
affiliated group of which the Company is a common parent corporation as
provided in Section 1504 of the Code.
"Anixter Family" means Alan B. Anixter, William R. Anixter, Scott
C. Anixter, their spouses, heirs and any group (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of which any of the foregoing persons is a member for
purposes of acquiring, holding or disposing of securities of the Company,
any trust established by or for the benefit of any of the foregoing and any
other entity controlled by or for the benefit of any of the foregoing.
"Annual Payment" means an amount equal to the greater of (i) fifty
percent (50%) of the sum of (x) the average of Executive's Base Salary for
the year in which the Change in Control occurs and each of the two (2)
years immediately prior thereto, plus (y) the average of the amount of the
minimum Bonus Payment for the year in which the Change in Control occurs
and the Bonus Payment for each of the two (2) years immediately prior
thereto, or (ii) the Minimum Annual
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<PAGE>
Payment; provided if, as of the effective date of the Change in Control,
the Present Value of the Annual Payments payable to Scott Anixter, Carl
Putnam and Donald Welchko (collectively, the "Eligible Executives"), in the
aggregate, after taking into account any gross-up payments payable to any
of them with respect to such Annual Payments pursuant to Section 9.4 of
their respective employment agreements (the "Gross-up Payments"), exceed
two percent (2%) of the Transaction Value (the "Aggregate Cap"), the Annual
Payments payable to each of the Eligible Executives shall be reduced pro
rata based on their relative levels of Annual Payment so that the Present
Value of such Annual Payments, in the aggregate, after taking into account
any Gross-up Payments with respect thereto, equal the Aggregate Cap. If the
foregoing calculation of the Aggregate Cap would result in Executive's
Annual Payment being less than the Minimum Annual Payment, Executive's
Annual Payment shall not be reduced below the Minimum Annual Payment unless
and until each of the other Eligible Executive's Annual Payment has first
been reduced to his respective Minimum Annual Payment. The Annual Payment
shall be determined by the Compensation Committee prior to the Change in
Control, in consultation with a nationally recognized actuarial, accounting
or consulting firm selected by the Compensation Committee to determine the
Present Value of the Annual Payments; provided if the foregoing
determination cannot be made prior to the Change in Control, such
determination shall be made as soon as practicable following the Change in
Control by the persons who were members of the Compensation Committee
immediately prior to the Change in Control regardless of whether such
persons remain on the Board of Directors or Compensation Committee after
the Change in Control.
"Cause" means (a) an act of fraud or dishonesty by Executive that
results in material gain or personal enrichment of Executive at the
Company's expense, (b) Executive's conviction of a felony-class crime
(other than relating to the operation of a motor vehicle), (c) any material
breach by Executive of any provision of this Agreement that, if curable,
has not been cured by Executive within thirty days of written notice of
such breach from the Company, (d) Executive willfully engaging in gross
misconduct materially injurious to the Company that, if curable, has not
been cured by Executive within thirty days of written notice specifying the
alleged willful gross misconduct and material injury, or (e) any
intentional act or gross negligence on the part of Executive that has a
material, detrimental effect on the reputation or Business of the Company.
The decision to terminate Executive's employment for Cause, to take other
action or to take no action in response to such occurrence shall be in the
sole and exclusive discretion of the Board.
"Change in Control" means the happening of any of the following events:
(a) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty percent (20%) or more of the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a
Change in Control: (A) any acquisition by the Company or by an
employee benefit plan (or related trust) sponsored or maintained
by the Company or an Affiliate, (B) any acquisition by a member or
members of the Anixter Family, (C) any acquisition by a lender to
the Company pursuant to a debt restructuring of the Company, (D)
any acquisition by, or consummation of a Corporate Transaction
with an
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<PAGE>
Affiliate, (E) a Non-Control Transaction, or (F) an acquisition by
a Person of the beneficial ownership of twenty percent (20%) or
more, but less than fifty percent (50%) of the combined voting
power of the then Outstanding Company Voting Securities unless
Executive's employment is terminated by the Company without Cause
or by Executive for Good Reason, within twenty-four (24) months
following such acquisition;
(b) A change in the composition of the Board such that
the individuals who, as of the date hereof, constitute the Board
(such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of this Section 10(b),
that any individual who becomes a member of the Board subsequent
to the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such
pursuant to this provision) shall be considered as though such
individual were a member of the Incumbent Board; but, provided,
further, that any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board shall not be so considered as a
member of the Incumbent Board;
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Company (a "Corporate Transaction"), in
each case, unless the Corporate Transaction is a Non-Control
Transaction; or
(d) Approval by stockholders of the Company of a complete
liquidation or dissolution of the Company.
"Closing Share Price" means the average closing price of the
Company's common stock as reported on the NASDAQ National Market and
published in The Wall Street Journal (Midwest Edition), for each of the ten
(10) consecutive trading days on the effective date of the Change in
Control.
"Disability" will be deemed to have occurred whenever Executive
has suffered physical or mental illness, injury, or infirmity that renders
Executive unable to perform the essential functions of his job with or
without reasonable accommodation.
"Good Reason" means the occurrence of any of the following events,
unless (i) such event occurs with Executive's express prior written
consent, (ii) the event is an isolated, insubstantial or inadvertent action
or failure to act which was not in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by Executive, or
(iii) the event occurs in connection with termination of Executive's
employment for Cause, Disability or death:
(a) the assignment to Executive by the Company of any
duties which are, in any material respect, inconsistent with, a
diminution of or an adverse change in Executive's
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<PAGE>
position, duty, title, office, responsibility or status with the
Company, including without limitation, any material diminution of
Executive's position or responsibility in the decision or
management processes of the Company, reporting relationships, job
description, duties, responsibilities, or any removal of Executive
from, or any failure to reelect Executive to, such position;
(b) a reduction by the Company in Executive's rate of
Base Salary during the Employment Period;
(c) any failure to either continue in effect any material
Benefits or to substitute and continue other plans, policies,
programs or arrangements providing Executive with substantially
similar benefits, or the taking of any action which would
substantially and adversely affect Executive's participation in or
materially reduce Executive's Benefits or compensation;
(d) any failure by any successor or assignee of the
Company to continue this Agreement in full force and effect or any
breach of this Agreement by the Company (or any successor or
assignee of the Company), unless such breach is cured within
thirty (30) days of receiving written notice of the breach from
Executive; or
(e) following a Change in Control, the relocation of the
executive offices of the Company to a location that is more than
fifty (50) miles from the executive offices of the Company as of
the effective date of such Change in Control.
"Minimum Annual Payment" means $50,000.
"Non-Control Transaction" means a Corporate Transaction as a
result of which the Outstanding Company Voting Securities immediately prior
to such Corporate Transaction would entitle the holders thereof immediately
prior to such Corporate Transaction to exercise, directly or indirectly,
more than fifty percent (50%) of the combined voting power of all of the
shares of capital stock entitled to vote generally in election of directors
of the corporation resulting from such Corporate Transaction immediately
after such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries).
"Person" means any individual, corporation, trust, proprietorship,
association, governmental body, agency or subdivision or other entity.
"Present Value" means the present value of the Annual Payments as
of the effective date of the Change in Control as determined by a
nationally recognized actuarial, accounting or consulting firm selected by
the Compensation Committee, after taking into account reasonable
assumptions, including as to life expectancy and discount rates.
"Termination Payment" means an amount equal to the greater of (i)
the sum of Executive's Base Salary plus his minimum Bonus Payment for the
remaining term of the then current Employment Period, or (ii) two(2) (the
"Multiple") times the sum of (x) Executive's highest Base
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<PAGE>
Salary plus (y) the amount of the highest Bonus Payment received by
Executive, in any of the three years immediately preceding the year in
which the Effective Date occurs; provided that, if the Effective Date
occurs during the thirty-six (36) months following a Change in Control, the
Multiple shall be equal to three (3) (rather than two (2)) for purposes of
clause (ii) above.
"Transaction Bonus Amount" means:
(i) if the Closing Share Price is less than or equal to
$13.00 per share, an amount equal to the Transaction Payment; or
(ii) if the Closing Share Price is greater than $13.00
per share but less than $17.00 per share, an amount equal to the
Transaction Payment times the sum of (x) one (1), plus (y) a fraction, the
numerator of which is the Closing Share Price minus $13.00, and the
denominator of which is equal to $17.00 minus $13.00; or
(iii) if the Closing Share Price is $17 per share or
greater, an amount equal to two (2) times the Transaction Payment.
The amounts per share set forth above in subparagraphs (i), (ii) and (iii)
shall be equitably adjusted by the Compensation Committee to reflect any
stock split, stock dividend, recapitalization or similar event.
"Transaction Payment" means the sum of (x) Executive's highest
Base Salary, plus (y) the amount of the highest Bonus Payment received by
Executive, in any of the three (3) years immediately prior to the year in
which the Change in Control occurs.
"Transaction Value" means (i) with respect to a Corporate
Transaction, the total amount of cash, securities, contractual arrangements
and other properties paid or payable, directly or indirectly in connection
with such Corporate Transaction including, without limitation; (a) amounts
paid to any party pursuant to covenants not to compete or other similar
arrangements; and (b) amounts paid to holders of any warrants, stock
purchase rights, convertible securities or similar rights of the Company
and to holders of any options or stock appreciation rights issued by the
Company (whether or not vested); and (c) amount of any short term debt and
long term liabilities of the Company (including the principal amount of any
indebtedness for borrowed money) (1) indirectly or directly assumed or
acquired by the Company or any other party, or otherwise repaid or retired,
in connection with or in anticipation of the Corporate Transaction, (2)
existing on the Company's balance sheet at the time of a Corporate
Transaction (if such Corporate Transaction takes the form of a merger,
consolidation or a purchase of stock) or (3) assumed in connection with a
Corporate Transaction (if such Corporate Transaction takes the form of a
purchase of assets); and (d) in the event the Corporate Transaction takes
the form of a recapitalization, restructuring, spin-off, split-off or
similar transaction, Transaction Value shall include the fair market value
of (A) the equity securities of the Company retained by the Company's
security holders following a Corporate Transaction and (B) any securities
received by the Company's security holders in exchange for or in respect of
securities of the target company following such Corporate Transaction (all
such securities received by such security holders being deemed to have been
paid to such security holders in such Corporate Transaction, and (ii) with
respect to a Change in Control that is not a Corporate
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<PAGE>
Transaction, the enterprise value of the Company, as determined as soon as
practicable, following the Change in Control by the persons who were
members of the Compensation Committee immediately prior to the Change in
Control regardless of whether such persons remain on the Board of Directors
or the Compensation Committee following the Change in Control, in
consultation with such investment bankers or other advisors as such persons
may deem appropriate.
11. Remedies. Executive acknowledges and agrees that the covenants
set forth in Sections 6 and 7 of this Agreement (collectively, the
"Restrictive Covenants") are reasonable and necessary for the protection of
the Company's business interests, that irreparable injury will result to
the Company if Executive breaches any of the terms of the Restrictive
Covenants, and that in the event of Executive's actual or threatened breach
of any such Restrictive Covenants, the Company will have no adequate remedy
at law. Executive accordingly agrees that in the event of any actual or
threatened breach by him of any of the Restrictive Covenants, the Company
shall be entitled to immediate temporary injunctive and other equitable
relief, without bond and without the necessity of showing actual monetary
damages, subject to hearing as soon thereafter as possible. Nothing
contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of any damages which it is able to prove.
12. Miscellaneous.
(a) Notices. All notices and other communication between
the parties pursuant to this Agreement must be in writing and will
be deemed given when delivered in person, one (1) business day
after being dispatched by a nationally recognized overnight
courier service, three (3) business days after being deposited in
the U.S. Mail, registered or certified mail, return receipt
requested, or when sent by facsimile (with receipt acknowledged
and a copy sent for next day delivery by a nationally recognized
overnight courier service), to the Company at the address or
facsimile number of its principal office in the Chicago, Illinois
metropolitan area and to Executive (or his representatives) at his
address or facsimile as shown on the Company's records. Executive
(or his representatives) may change his address or facsimile
number for notice purposes by delivering notice to the Company in
accordance with this Section 12(a). All notices sent to the
Company shall also be delivered to Katten Muchin & Zavis, 525 West
Monroe Street, Suite 1600, Chicago, Illinois 60661-3693,
Attention: Jeffrey R. Patt, Esq., Facsimile No.: (312-902-1061).
(b) Governing Law. This Agreement will be subject to and
governed by the laws of the State of Illinois, without regard to
principles of conflicts of laws.
(c) Binding Effect. This Agreement will be binding upon
and inure to the benefit of the parties and their respective
heirs, legal representatives, executors, administrators,
successors, and assigns, subject to the limitations on assignment
in Section 12(h).
(d) Entire Agreement. This Agreement constitutes the
entire Agreement between the parties with respect to the subject
matter of this Agreement and supersedes any other agreements,
whether oral or written, between the parties with respect to the
subject matter of this Agreement.
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<PAGE>
(e) Modification. No change or modification of this
Agreement will be valid unless it is in writing and signed by both
of the parties. No waiver of any provision of this Agreement will
be valid unless in writing and signed by the person or party to be
charged.
(f) Severability. If any provision of this Agreement is,
for any reason, invalid or unenforceable, the remaining provisions
of this Agreement will nevertheless be valid and enforceable and
will remain in full force and effect. Any provision of this
Agreement that is held invalid or unenforceable by a court of
competent jurisdiction will be deemed modified to the extent
necessary to make it valid and enforceable and as so modified will
remain in full force and effect.
(g) Headings. The headings in this Agreement are inserted
for convenience only and are not to be considered in the
interpretation of construction of the provisions of this
Agreement.
(h) Assignability. This Agreement may not be assigned by
either party without the prior written consent of the other party,
except that the Company may assign its rights to, and cause its
obligations under this Agreement to be assumed by, any person or
entity to whom or to which the Company simultaneously transfers by
sale, merger, or otherwise all or substantially all of its assets.
(i) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by Executive
and the Company to express their mutual intent, and no rule of
strict construction will be applied against Executive or the
Company.
(j) Arbitration. Except for any claim or dispute which
gives rise or could give rise to equitable relief under this
Agreement, at the request of Executive, or the Company, any
disagreement, dispute, controversy or claim arising out of or
relating to this Agreement or the breach hereof shall be settled
exclusively and finally by arbitration. The arbitration shall be
conducted in accordance with such rules and before such arbitrator
as the parties shall agree and if they fail to so agree within
fifteen (15) days after demand for arbitration, such arbitration
shall be conducted in accordance with the Federal Arbitration Act
and the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association which are then in effect
(hereinafter referred to as "AAA Rules"). Such arbitration shall
be conducted in Chicago, Illinois, or in such other city as the
parties to the dispute may designate by mutual consent. The
arbitral tribunal shall consist of three arbitrators (or such
lesser number as may be agreed upon by the parties) selected
according to the procedure set forth in the AAA Rules in effect on
the date hereof and the arbitrators shall be empowered to order
any remedy which is appropriate to the proceedings and issues
presented to them. Any party to a decision rendered in such
arbitration proceedings may seek an order enforcing the same by
any court having jurisdiction.
(k) Legal Expenses. The Company shall pay the legal
expenses incurred by Executive for review of this Agreement by his
legal counsel, up to an amount not to exceed $10,000. If Executive
takes legal action to enforce the Company's obligations under this
Agreement and Executive prevails in such action, the Company shall
reimburse Executive
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<PAGE>
for all reasonable expenses (including reasonable attorney's fees)
actually incurred by Executive in such action.
[signature page to follow]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Executive Employment Agreement as of the date first above written.
ANICOM, INC.
By: /s/ SCOTT C. ANIXTER
-------------------------------------
Scott C. Anixter, Chairman and Chief
Executive Officer
EXECUTIVE:
/s/ DONALD C. WELCHKO
-------------------------------------
Donald C. Welchko
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<PAGE>
EXHIBIT 9.3
FORM OF RABBI TRUST
EXHIBIT 10.15
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement") is effective
April 6, 1998 and as executed on the date appearing below opposite relevant
signatures by and among Robert Brzustewicz, Sr. ("Brzustewicz") and Anicom,
Inc., a Delaware corporation ("Anicom").
WHEREAS, Brzustewicz and Anicom entered into an employment agreement as
of March 12, 1996, wherein Brzustewicz was to be employed by Anicom through
March 12, 2001 ("Brzustewicz Employment Agreement"), and
WHEREAS, the parties mutually wish to accelerate the expiration of the
Brzustewicz Employment Agreement and to settle and compromise all matters with
respect to the Brzustewicz Employment Agreement.
THEREFORE, in consideration of the above, the parties hereto agree as
follows:
1. The foregoing recitals are incorporated by reference herein and made a
part hereof as though fully set forth.
2. Terms not defined herein shall have the meaning given them in the
Brzustewicz Employment Agreement.
3. In consideration of the releases contained herein, Anicom shall pay to
Brzustewicz Six Hundred Thousand Dollars ($600,000) ("Settlement
Proceeds"); provided however, that Anicom's obligation to pay the
Settlement Proceeds shall only arise and shall be expressly conditioned
upon Brzustewicz having not elected to revoke this Agreement prior to
the expiration of the "Revocation Period" as described in Paragraph 14.
Within twenty four (24) hours after the expiration of the Revocation
Period, Anicom shall wire transfer the Settlement Proceeds less income,
FICA and Medicare taxes appropriately withheld in
<PAGE>
connection with such disbursement (the "Net Settlement Proceeds") to
the Lipson, Neilson, Jacobs & Cole, P.C. Client Trust Account (the
"Transferee Account"). The wire transfer information is as follows:
Bank: Huntington Banks of Michigan (Troy, Michigan)
Routing Code: # 072410343
Account No. # 4250 011 4430
Upon receipt of the Net Settlement Proceeds, Brzustewicz or his legal
counsel shall provide written confirmation to Anicom of receipt of the Net
Settlement Proceeds. Anicom shall promptly furnish Brzustewicz or his legal
counsel with a schedule identifying the taxes withheld in connection with the
wire transfer of the Net Settlement Proceeds. In the event any taxes, interest
and/or penalties are assessed against Anicom or Brzustewicz as a result of this
Agreement or with respect to payments made pursuant hereto which involve taxes
which are customarily the responsibility of an employee, Brzustewicz agrees to
indemnify Anicom for said taxes, interest and/or penalties and to be responsible
for any taxes, interest and/or penalties assessed against him. Anicom shall be
responsible for payment of any FICA, FUTA or Medicare employment taxes
associated with payments made pursuant hereto which are customarily the
responsibility of an employer.
In the event that Anicom shall fail to timely wire transfer the Net
Settlement Proceeds to the Transferee Account, then in such event, Anicom shall
be in default hereunder and interest shall commence to accrue (as of the
expiration of the Revocation Period) on the Settlement Proceeds at the rate of
Eighteen Percent (18%) per annum, compounded monthly, or at the maximum legal
rate of interest allowed by law if lesser in amount.
2
<PAGE>
Upon default by Anicom hereunder, Brzustewicz shall furnish Anicom with
notice of such default in the manner and to the person as set forth in paragraph
20 (the "Notice of Default"). If Anicom shall not cure such default hereunder by
payment to Brzustewicz of the Settlement Proceeds (and accrued interest thereon)
within thirty (30) days of the date upon which Brzustewicz furnished Anicom the
Notice of Default, then the restrictive covenants set forth in Section 6 of the
Brzustewicz Employment Agreement shall terminate and no longer be of any legal
or equitable force or effect. The termination of such restrictive covenants
shall not constitute the sole, absolute or exclusive right or remedy of
Brzustewicz at law or in equity and it is expressly acknowledged that
Brzustewicz shall be entitled to exercise all other rights or remedies at law or
in equity to receive the Settlement Proceeds and such additional payments or
benefits provided to him under this Agreement.
4. Effective upon the Effective Date, the options granted by Anicom to
Brzustewicz to purchase up to 300,000 (originally 150,000) shares of
the common stock of Anicom for the aggregate option price of $1,856,250
(on a per-share bases, for an option price of $6.1875 per share)
pursuant to a March 12, 1996 Nonqualified Stock Option Agreement shall
be fully vested and exercisable as to any or all of the entire 300,000
shares granted therein, notwithstanding the expiration of the
Brzustewicz Employment Agreement. The expiration of the Brzustewicz's
employment by Anicom will not impact Brzustewicz's ability to exercise
any option to purchase shares granted by the March 12, 1996
Nonqualified Stock Option Agreement. Brzustewicz, his heirs,
beneficiaries, and/or his assigns, may exercise such options through
March 12, 2006. Other than the clarification
3
<PAGE>
set forth in this section, all other terms of the aforementioned March
12, 1996 Nonqualified Stock Option Agreement shall remain in effect.
(a) Effective upon the Effective Date,
Brzustewicz shall be fully vested in
all account balances established or
maintained with respect to any
Anicom Qualified Plan (as such term
is defined in such Section 5.3 of
the Brzustewicz Employment
Agreement). It is acknowledged that
the aggregate account balance of
Brzustewicz's in the Anicom 401K
Plan currently approximates
$47,000.00. This Agreement serves as
an acknowledgment that: (i)
Brzustewicz is fully vested in such
Qualified Account Plan Balance; (ii)
that Anicom will, within sixty (60)
days of the expiration of the
Revocation Period, provide
Brzustewicz with the customary
distribution package provided to
Qualified Plan participants upon
occurrence of a "break in service"
(the "Distribution Package"); and
(iii) that Anicom will fully and
completely implement the elections
and directions furnished by
Brzustewicz to Anicom in connection
with the submission of the
Distribution Package by Brzustewicz
to Anicom on or before September 15,
1998 or within thirty (30) days of
the submission of the
4
<PAGE>
Distribution Package by Brzustewicz,
whichever shall later occur.
5. In further consideration of the agreements set forth herein, Anicom
agrees to (i) continue to provide Brzustewicz with health insurance
equivalent to that provided to Brzustewicz prior to the expiration of
the Brzustewicz Employment Agreement, at no cost to Brzustewicz, until
March 1, 2001, and (ii) after March 1, 2001, to provide applicable
COBRA benefits thereafter through the applicable COBRA coverage period.
6. Effective upon the Effective Date, Anicom hereby releases and
discharges Brzustewicz from any and all liability and obligation
related to the Brzustewicz Employment Agreement, other than any
liability or obligation arising from the restrictive covenants set
forth in Sections 6 and 7 of the Brzustewicz Employment Agreement
together with such remedies for breach of such restrictive covenants as
set forth in Section 10 of the Brzustewicz Employment Agreement. The
language of such restrictive covenants and remedies for breach thereof
as set forth in the Brzustewicz Employment Agreement is as follows:
6. Restrictive Covenants
6.1 Employee's Acknowledgment. Employee agrees and
acknowledges that in order to assure Anicom that Anicom will retain its
value as a going concern, it is necessary that Employee undertake not
to utilize his special knowledge of the Business and his relationships
with customers and suppliers to compete with Anicom. Employee further
acknowledges that:
(a) Anicom is currently engaged in the
Business;
(b) Employee has occupied a position of
trust and confidence with Northern prior to the date of this Agreement
and will acquire an intimate knowledge of proprietary and confidential
information concerning Anicom and the Business as a
5
<PAGE>
Senior Executive Vice President of Anicom in Troy, Michigan after the
date of this Agreement;
(c) the agreements and covenants contained
in this Section 6 are essential to protect Anicom and the goodwill of
the Business;
(d) Anicom would be irreparably damaged if
Employee were to provide services to any person or entity or otherwise
act in violation of the provisions of this Agreement;
(e) the scope and duration of the
Restrictive Covenants are reasonably designed to protect a protectable
interest of Anicom and are not excessive in light of the circumstances;
and
(f) Employee acknowledges that the
Restrictive Covenants are being entered into as a condition to, and in
connection with, a sale of substantially all of the assets of Northern
to a wholly-owned subsidiary of Anicom.
6.2 Non-Compete. The "Restricted Period" for purposes
of this Agreement shall be the period of time commencing on the date
hereof and ending on the second anniversary of the effective date of
the termination of Employee's employment by either Anicom or Employee,
for any reason, provided that Anicom may not terminate Employee's
employment hereunder during the Initial Employment Period without
"Cause" (as defined in Section 8(d)). Employee hereby agrees that at
all times during the Restricted Period, Employee shall not, directly or
indirectly, as employee, agent, consultant, stockholder, director,
co-partner or in any other individual or representative capacity, own,
operate, manage, control, engage in, invest in or participate in any
manner in, act as a consultant or advisor to, render services for
(alone or in association with any person, firm, corporation or entity),
or otherwise assist any person or entity that engages in or owns,
invests in, operates, manages or controls any venture or enterprise
that directly or indirectly engages or proposes to engage in the
Business anywhere within thirty (30) miles of any office of Anicom or
Purchaser existing as of the earlier of the date of determination and
the effective date of the termination of Employee's employment
(collectively, the "Territory"); provided, however, that nothing
contained herein shall be construed to prevent Employee from (i)
engaging in a business in which the sale of wire and cable is ancillary
to the conduct of the business and such business does not compete with
Anicom, or (ii) investing in the stock of any competing corporation
listed on a national securities exchange or traded in the
over-the-counter market, but only if Employee is not involved in the
business of said corporation and if Employee and his "associates" (as
such term is defined in Regulation 14A promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof, collectively, do
not own more than an aggregate of two percent of the stock of such
corporation.
6
<PAGE>
6.3 Non-Solicitation. Without limiting the generality
of the provisions of Section 6.2 above, Employee hereby agrees that,
during the Restricted Period, Employee will not, directly or
indirectly, as employee, agent, consultant, stockholder, director,
partner or in any other individual or representative capacity solicit
business from, or otherwise seek to alter or influence Anicom's
relationship with, (a) any Person who is or was a customer of Anicom
during the Restricted Period, or from any successor in interest to any
such Person, for the purpose of marketing, selling or providing any
such Person any services or products offered by or available from
Anicom, or encouraging any such Person to terminate or otherwise alter
his, her or its relationship with Anicom, or (b) any Person who is or
was a "Prospective Customer" of Anicom, for the purpose of marketing,
selling or providing any such Person any services offered by or
available from Anicom or encouraging any such Person to terminate or
otherwise alter his, her or its relationship with Anicom. For purposes
of this Agreement, "Prospective Customer" shall mean any Person who
either Northern or Anicom has contacted (orally or in writing), during
the one year period prior to the earlier of (i) the date of
determination or (ii) the effective date of the termination of
Employee's employment with Anicom, with the goal of such Person
becoming a customer of Northern or Anicom.
6.4 Interference with Employee Relationships. During
the Restricted Period, Employee shall not, directly or indirectly, as
employee, agent consultant stockholder, director, co-partner or in any
other individual or representative capacity, other than as expressly
authorized by Anicom to act on behalf of Anicom, employ or engage,
recruit or solicit for employment or engagement, any person who is or
becomes employed or engaged by Anicom during the Restricted Period, or
otherwise seek to influence or alter any such Person's relationship
with Anicom.
6.5 Interference with Supplier Relationships. During
the Restricted Period, Employee shall not, directly or indirectly, as
employee, agent consultant stockholder, director, co-partner or in any
other individual or representative capacity, other than as expressly
authorized by Anicom to act on behalf of Anicom, seek to influence or
alter Anicom's relationship with (a) any Person who is or was a
supplier or vendor of Anicom during the Restricted Period, or any
successor in interest to any such Person, or (b) any Person who is or
was a "Prospective Supplier" of Anicom. For purposes of this Agreement,
"Prospective Supplier" shall mean any Person who Northern or Anicom has
contacted (orally or in writing) during the one year period prior to
the earlier of (i) the date of determination or (ii) the effective date
of the termination of Employee's employment with Anicom, with the goal
of such Person becoming a supplier or vendor of Northern or Anicom.
6.6 Blue-Pencil. If any court of competent
jurisdiction shall at any time deem the term of this Agreement or any
particular Restrictive Covenant too lengthy or the Territory too
extensive, the other provisions of this Section 6 shall nevertheless
stand, and the Restricted Period shall be deemed to be the longest
period permissible by law under
7
<PAGE>
the circumstances and the Territory shall be deemed to comprise the
largest territory permissible by law under the circumstances. The court
in each case shall reduce the Restricted Period and/or the Territory to
a permissible duration or size.
7. Confidential Information. During the term of this Agreement
and thereafter, Employee shall keep secret and retain in strictest
confidence, and shall not, without the prior written consent of Anicom,
furnish, make available or disclose to any third party or use for the
benefit of himself or any third party, any Confidential Information,
except to the extent reasonable necessary to carry out Employee's
duties and responsibilities to Anicom. As used in this Section 7,
"Confidential Information" shall mean any information relating to the
Business or affairs of Anicom, including but not limited to information
relating to 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 used by Anicom in connection
with the conduct of the Business, 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 on the
part of Employee. Employee acknowledges that the Confidential
Information is vital, sensitive, confidential and proprietary to
Anicom.
10. Employee acknowledges and agrees that the covenants set
forth in Section 6 and 7 of this Agreement (collectively, the
"Restrictive Covenants") are reasonable and necessary for the
protection of Anicom's business interests, that irreparable injury will
result to Anicom if Employee breaches any of the terms of the
Restrictive Covenants, and that in the event of Employee's actual or
threatened breach of any such Restrictive Covenants, Anicom will have
no adequate remedy at law. Employee accordingly agrees that in the
event of any actual or threatened breach by him of any of the
Restrictive Covenants, Anicom shall be entitled to immediate temporary
injunctive and other equitable relief, without bond and without the
necessity of showing actual monetary damages, subject to hearing as
soon thereafter as possible. Nothing contained herein shall be
construed as prohibiting Anicom from pursuing any other remedies
available to it for such breach or threatened breach, including the
recovery of any damages which it is able to prove.
Brzustewicz hereby reaffirms the above covenants and provisions
appearing in the Brzustewicz Employment Agreement. It is agreed that the
restrictive covenant set forth in Section 6 of the Brzustewicz Employment
Agreement duplicated above terminates March 12, 2003 and will not extend beyond
March 12, 2003.
8
<PAGE>
7. Brzustewicz acknowledges and understands that the payments and
commitments provided for him under this Agreement are in consideration
of Brzustewicz waiving and otherwise releasing Anicom and its past and
present parent and subsidiary companies, affiliates, owners, directors,
officers, agents, employees, successors, heirs and assigns (the "Anicom
Group"), from certain claims, demands, rights, liabilities, and causes
of action. Accordingly, by the execution of this Agreement, and in
return for the consideration given to Brzustewicz as detailed in
paragraphs 3, 4 and 5 of this Agreement, Brzustewicz does hereby
release, waive, forever discharge and covenants not to sue or to file
administrative charges against the Anicom Group with respect to any and
all claims, demands, rights, liabilities, and causes of action of any
kind or nature arising out of or in connection with Brzustewicz's
employment relationship with Anicom or his separation from employment
with Anicom, and any and all other claims, known and unknown, which
Brzustewicz has or may have against Anicom, other than the "Surviving
Claims" as defined in Section 8. In conjunction with the foregoing,
Brzustewicz agrees to sign the attached Release of Claims, which is
incorporated herein by this reference.
8. It is acknowledged and agreed that the terms and provisions of
paragraph 7 which provide for a general release by Brzustewicz of the
Anicom Group shall not apply to one or more of the following claims
(collectively the "Surviving Claims"):
(i) The obligations of
Anicom to Brzustewicz
as set forth in
Agreement and
specifically paragraphs
3, 4 and 5 of this
Agreement;
9
<PAGE>
(ii) The obligation to
indemnify Brzustewicz
with respect to any
liability or obligation
which is covered by any
insurance policy
obtained by Anicom in
which Anicom and/or
Brzustewicz are or were
insured or covered
parties, including but
not limited to
directors'and officers'
liability insurance;
(iii) Any liability or
obligation of Anicom to
Brzustewicz under that
certain Indemnification
Agreement dated March
12, 1996 between
Brzustewicz and Anicom
or otherwise pursuant
to Article XII of the
Restated Certificate of
Incorporation of
Anicom, Inc. with
respect to
Brzustewicz's service
as a director or
officer of Anicom; or
(iv) Any and all claims,
demands, rights,
liabilities, and causes
of action of any kind
or nature whatsoever
which arise or accrue
with respect to events
occurring subsequent to
the execution date of
this Agreement.
(a) It is also agreed that the neither
the execution of this Agreement nor
the Release of Claims described
herein shall
10
<PAGE>
affect, modify, enlarge, diminish,
impact, amend, terminate, create,
revoke or otherwise change or alter
the following:
(i) The obligation of
Anicom to make the last
$1,133,768 payment to
Northern Wire & Cable,
Inc. (now known as
Northern Liquidation
Company) on March 12,
1999, pursuant to the
March 12, 1996
NonNegotiable Note
executed by Anicom as
maker originally given
to Northern Wire &
Cable, Inc.; or
(ii) Any right, privilege,
immunity or power
inherent to, attendant
with or otherwise
associated with the
capital stock in Anicom
(or any successor in
interest of Anicom)
which is owned by
Brzustewicz, his heirs,
personal
representatives,
transferees, successors
or assigns, regardless
of whether such capital
stock is now owned or
hereafter acquired.
9. As part of this Agreement, Brzustewicz also agrees (a) to waive
reinstatement and not to seek future employment in any position with
Anicom, or any of its parents,
11
<PAGE>
subsidiaries or affiliates, and (b) to refrain from making any
unfavorable comments, in writing or verbally, about Anicom, its staff
or its policies or procedures.
10. This Agreement does not constitute an admission by Anicom of a
violation of any contract, law, order, regulation, enactment or public
policy, and Anicom specifically denies any such violation or
wrongdoing. This Agreement, its execution, and implementation shall not
in any respect be construed, and shall not be admissible in any
proceeding, as evidence of (1) an admission of an unlawful employment
practice under any federal, state or local statute, regulation, order,
or public policy, or (2) an admission by Anicom of a violation of the
common law or public policy of the State of Michigan or that of any
other State, relating to the discharge of employees or the termination
of the employment relationship between employer and employee, or (3)
any tort or breach of contract by Anicom; provided however, that none
of the foregoing restrictions shall prohibit Brzustewicz from
introducing this Agreement into evidence in connection with a legal
proceeding enforcing the terms of this Agreement or seeking damages
resulting from a breach thereof by Anicom.
11. The parties agree to return any property in their possession which
belongs to the other party on or before the expiration of the
Revocation Period.
12. The parties agree that any press release or internal communication to
be issued relating to the expiration of the Brzustewicz Employment
Agreement shall state that Brzustewicz's motivation in leaving the
employment of Anicom was his desire to pursue charitable activity and
business pursuits unrelated to the business activity of Anicom and that
Anicom was willing to honor Brzustewicz's desires. Anicom, for itself
and on behalf
12
<PAGE>
of its parents, subsidiaries, affiliates, owners, directors, officers,
agents, employees, successors, heirs and assigns agrees to refrain from
making any unfavorable comments, in writing or verbally, about
Brzustewicz.
13. Notwithstanding Brzustewicz' s entitlement to election to Anicom's
Board of Directors pursuant to Section 3 of the Brzustewicz Employment
Agreement (or any other agreement related to the March 12, 1996 Asset
Purchase Agreement between Anicom and Northern Wire & Cable, Inc.,
inter alia), it is agreed that upon payment of the Settlement Proceeds,
Brzustewicz will execute and deliver to Anicom the corporate resolution
in the form delivered concurrently herewith which nominates Alan B.
Anixter to be a Director of Anicom in the place of Brzustewicz.
Brzustewicz further relinquishes any right or entitlement to be
nominated or elected to Anicom's Board of Directors in the future.
14. Brzustewicz, Anicom and their respective legal counsel expressly
recognize that this Agreement shall be revocable for the seven (7)
calendar day period following execution of this Agreement by
Brzustewicz. Accordingly, this Agreement shall not become effective or
enforceable until 5:00 p.m. EDT of the eighth day immediately following
the date of this Agreement (the "Effective Date"). The period of time
between the execution of this Agreement and the Effective Date shall
constitute the "Revocation Period". Brzustewicz, Anicom and their
respective legal counsel further expressly recognize that upon
expiration of the Revocation Period, this Agreement will become
irrevocable. In any action to enforce this Agreement, the terms of the
Agreement shall be binding, and the reneging party expressly and
irrevocably waives any right to contest or
13
<PAGE>
collaterally attack its terms on any basis, including but not limited
to ignorance or mistake. This acknowledgment is not a mere recital by
the parties.
15. In compliance with The Older Workers Benefit Protection Act (P.L.
101-433), Anicom and Brzustewicz do hereby acknowledge as follows:
(a) Brzustewicz acknowledges that he
fully understands this
Agreement:
(b) Brzustewicz acknowledges that
this Agreement and his release
and waiver of claims as
expressly provided under this
Agreement and the attached
Release of Claims specifically
applies to any rights or claims
he may have against Anicom or
any party released herein under
the Federal Age Discrimination
in Employment Act of 1967, as
amended;
(c) This Agreement does not purport
to waive rights or claims that
may arise from acts or events
occurring after the date that
this Agreement is executed by
the parties;
(d) Brzustewicz acknowledges that
the consideration provided for
in this Agreement and the
provisions of this paragraph is
in addition to any amounts to
which he is already entitled;
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<PAGE>
(e) Brzustewicz further acknowledges
that he has been advised of his
right to consult with an
attorney prior to signing this
Agreement and that he has been
given a period of twenty one
(21) days within which to
consider whether to sign this
Agreement; and
(f) This Agreement shall be
revocable by Brzustewicz until
expiration of the Revocation
Period.
16. It is further agreed that Brzustewicz will not encourage any employee
or former employee of Anicom in litigating claims or filing
administrative charges against Anicom, and/or its parents,
subsidiaries, affiliates, owners, agents, officers, directors,
shareholders, or employees, unless required to provide testimony or
documents pursuant to a lawful subpoena or as otherwise required by
law. Further, Anicom shall not encourage the prosecution of any third
party claims against Brzustewicz.
17. Both Brzustewicz and Anicom agree to keep the nature, terms, and
conditions of this Agreement confidential. Anicom and Brzustewicz may
disseminate the Agreement as necessary for internal administrative
purposes, or as required by lawful subpoena, litigation discovery
request, government-regulatory inquiry or request for information, and
the parties may share information concerning the Agreement with their
legal counsel and tax advisors as necessary for purposes of legal or
tax advice. Anicom and Brzustewicz agree to instruct all individuals
whom they inform of the nature, terms, and/or conditions of this
Agreement, of the confidential nature of the Agreement. In response to
any inquiry from third persons not otherwise referred to in this
paragraph concerning this Agreement,
15
<PAGE>
Brzustewicz agrees to limit his response solely to a statement he has
resigned and that the matter has been resolved or words of similar
effect.
18. This Agreement and the attached Release of Claims shall be construed
without regard to the identity of the person who drafted their
provisions and their provisions shall be construed as if each of the
parties participated in its drafting. Any rules of construction that a
document is to be construed against the drafting party shall not apply
to this Agreement.
19. Brzustewicz states that he has read and understands that this Agreement
and the attached Release of Claims is meant as a settlement and
release, releasing Anicom from any and all claims he may have against
it other than the Surviving Claims, that he voluntarily agrees to the
terms herein, that he knowingly and willingly intends to be legally
bound by the same, that he was given adequate opportunity to consider
this Settlement Agreement and Release of Claims, and that the terms and
conditions hereof were determined by negotiation between Brzustewicz
and Anicom.
20. Brzustewicz acknowledges that any purported revocation of this
Agreement must be in writing and signed by him, directed to Anicom's
Vice President & General Counsel and received by Anicom's Vice
President & General Counsel prior to the end of the Revocation Period.
21. This Agreement shall be governed by and construed in accordance with
the laws of the State of Michigan.
16
<PAGE>
22. If any action is brought to interpret or enforce any provision of this
Agreement or the rights or obligations of any party to the Agreement,
the prevailing party shall be entitled to recover reasonable attorneys'
fees and costs from the losing party in opposition.
23. No provisions of this Agreement may be modified, amended or terminated
except by a written agreement executed by all of the parties to this
Agreement.
24. This Agreement and the attached Release of Claims constitutes and
contains the entire agreement and understanding between the parties
concerning the subject matter of this Agreement, and supersedes all
prior negotiations, proposed agreements and understandings, if any,
between the parties.
25. This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which together shall constitute one and
the same document.
26. All of the terms and conditions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
heirs, successors and assigns.
27. Each person executing this Agreement warrants and represents that he is
duly authorized to execute the Agreement on behalf of and to legally
bind, the party for whom he is signing.
[BALANCE OF PAGE LIFT BLANK INTENTIONALLY]
17
<PAGE>
IN WITNESS WHEREOF, the Agreement is duly executed on the dates
appearing below.
ANICOM, INC.
Dated:________________________ By_______________________________
Donald C. Welchko,
Chief Financial Officer
ROBERT BRZUSTEWICZ, SR.
Dated:________________________ _________________________________
Robert Brzustewicz, Sr.
18
EXHIBIT 10.16
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement") is
effective April 6, 1998 and as executed on the date appearing below
opposite relevant signatures by and among Glen M. Nast ("Nast") and Anicom,
Inc., a Delaware corporation ("Anicom").
WHEREAS, Nast and Anicom entered into an employment agreement as
of March 12, 1996, wherein Nast was to be employed by Anicom through March
12, 2001 ("Nast Employment Agreement"); and
WHEREAS, the parties mutually wish to accelerate the expiration of
the Nast Employment Agreement and to settle and compromise all matters with
respect to the Nast Employment Agreement.
THEREFORE, in consideration of the above, the parties hereto agree
as follows:
1. The foregoing recitals are incorporated by reference herein and made a
part hereof as though fully set forth.
2. Terms not defined herein shall have the meaning given them in the Nast
Employment Agreement.
3. In consideration of the releases contained herein, Anicom shall pay to
Nast Five Hundred Forty Thousand Dollars ($540,000) ("Settlement
Proceeds"); provided however, that Anicom's. obligation to pay the
Settlement Proceeds shall only arise and shall be expressly conditioned
upon Nast having not elected to revoke this Agreement prior to the
expiration of the "Revocation Period" as described in Paragraph 14.
Within twenty four (24) hours after the expiration of the Revocation
Period, Anicom shall wire transfer the Settlement Proceeds less income,
FICA and Medicare taxes appropriately withheld in
<PAGE>
connection with such disbursement (the "Net Settlement Proceeds") to
the Lipson, Neilson, Jacobs & Cole P.C. Client Trust Account (the
"Transferee Account"). The wire transfer information is as follows:
Bank: Huntington Banks of Michigan (Troy, Michigan)
Routing Code: # 072410343
Account No. # 4250 011 4430
Upon receipt of the Net Settlement Proceeds, Nast or his legal
counsel shall provide written confirmation to Anicom of receipt of the Net
Settlement Proceeds. Anicom shall promptly furnish Nast or his legal
counsel with a schedule identifying the taxes withheld in connection with
the wire transfer of the Net Settlement Proceeds. In the event any taxes,
interest and/or penalties are assessed against Anicom or Nast as a result
of this Agreement or with respect to payments made pursuant hereto which
involve taxes which are customarily the responsibility of an employee, Nast
agrees to indemnify Anicom for said taxes, interest and/or penalties and to
be responsible for any taxes, interest and/or penalties assessed against
him. Anicom shall be responsible for payment of any FICA, FUTA or Medicare
employment taxes associated with payments made pursuant hereto which are
customarily the responsibility of an employer.
In the event that Anicom shall fail to timely wire transfer the
Net Settlement Proceeds to the Transferee Account, then in such event,
Anicom shall be in default hereunder and interest shall commence to accrue
(as of the expiration of the Revocation Period) on the Settlement Proceeds
at the rate of Eighteen Percent (18%) per annum, compounded monthly, or at
the maximum legal rate of interest allowed by law if lesser in amount.
2
<PAGE>
Upon default by Anicom hereunder, Nast shall furnish Anicom with
notice of such default in the manner and to the person as set forth in
paragraph 20 (the "Notice of Default"). If Anicom shall not cure such
default hereunder by payment to Nast of the Settlement Proceeds (and
accrued interest thereon) within thirty (30) days of the date upon which
Nast furnished Anicom the Notice of Default, then the restrictive covenants
set forth in Section 6 of the Nast Employment Agreement shall terminate and
no longer be of any legal or equitable force or effect. The termination of
such restrictive covenants shall not constitute the sole, absolute or
exclusive right or remedy of Nast at law or in equity and it is expressly
acknowledged that Nast shall be entitled to exercise all other rights or
remedies at law or in equity to receive the Settlement Proceeds and such
additional payments or benefits provided to him under this Agreement.
4. Effective upon the Effective Date, the options granted by Anicom to
Nast to purchase up to 5,000 shares of the common stock of Anicom for
the aggregate option price of $43,750 (on a per share bases, for an
option price of $8.75 per share) pursuant to a December 9, 1996
Nonqualified Stock Option Agreement shall be fully vested and
exercisable as to any or all of the entire 5,000 shares granted
therein, notwithstanding the expiration of the Nast Employment
Agreement. The expiration of the Nast's employment by Anicom will not
impact Nast's ability to exercise any option to purchase shares granted
by the December 9, 1996 Nonqualified Stock Option Agreement. Nast, his
heirs, beneficiaries, and/or his assigns, may exercise such options
through December 9, 2006. Other than the clarification set forth in
this section, all other terms of the aforementioned December 9, 1996
Nonqualified Stock Option Agreement shall remain in effect.
3
<PAGE>
(a) Effective upon the Effective Date, Nast shall be fully
vested in all account balances established or maintained
with respect to any Anicom Qualified Plan (as such term
is defined in such Section 4.3 of the Nast Employment
Agreement). It is acknowledged that the aggregate
account balance of Nast's in the Anicom 401K Plan
currently approximates $32,000.00. This Agreement serves
as an acknowledgment that: (i) Nast is fully vested in
such Qualified Account Plan Balance; (ii) that Anicom
will, within sixty (60) days of the expiration of the
Revocation Period, provide Nast with the customary
distribution package provided to Qualified Plan
participants upon occurrence of a "break in service"
(the "Distribution Package"); and (iii) that Anicom will
fully and completely implement the elections and
directions furnished by Nast to Anicom in connection
with the submission of the Distribution Package by Nast
to Anicom on or before September 15, 1998 or within
thirty (30) days of the submission of the Distribution
Package by Nast, whichever shall later occur.
5. In further consideration of the agreements set forth herein,
Anicom agrees to (i) continue to provide Nast with health
insurance equivalent to that provided to Nast prior
4
<PAGE>
to the expiration of the Nast Employment Agreement, at no cost to
Nast, until March 1, 2001, and (ii) after March 1, 2001, to
provide applicable COBRA benefits thereafter through the
applicable COBRA coverage period.
6. Effective upon the Effective Date, Anicom hereby releases and
discharges Nast from any and all liability and obligation related
to the Nast Employment Agreement, other than any liability or
obligation arising from the restrictive covenants set forth in
Sections 5 and 6 of the Nast Employment Agreement together with
such remedies for breach of such restrictive covenants as set
forth in Section 9 of the Nast Employment Agreement. The language
of such restrictive covenants and remedies for breach thereof as
set forth in the Nast Employment Agreement is as follows:
5. Restrictive Covenants.
5.1 Employee's Acknowledgment. Employee agrees
and acknowledges that in order to assure Anicom that Anicom will
retain its value as a going concern, it is necessary that Employee
undertake not to utilize his special knowledge of the Business and
his relationships with customers and suppliers to compete with
Anicom. Employee further acknowledges that.
(a) Anicom is currently engaged in the Business;
(b) Employee has occupied a position of trust
and confidence with Northern prior to the date of this Agreement
and will acquire an intimate knowledge of proprietary and
confidential information concerning Anicom and the Business as a
Senior Executive Vice President of Anicom in Troy, Michigan after
the date of this Agreement;
(c) the agreements and covenants contained in
this Section 5 are essential to protect Anicom and the goodwill of
the Business;
(d) Anicom would be irreparably damaged if
Employee were to provide services to any person or entity or
otherwise act in violation of the provisions of this Agreement;
5
<PAGE>
(e) the scope and duration of the Restrictive
Covenants are reasonably designed to protect a protectable
interest of Anicom and are not excessive in light of the
circumstances; and
(f) Employee acknowledges that the Restrictive
Covenants are being entered into as a condition to, and in
connection with, a sale of substantially all of the assets of
Northern to a wholly-owned subsidiary of Anicom.
5.2 Non-Compete. The "Restricted Period" for
purposes of this Agreement shall be the period of time commencing
on the date hereof and ending on the second anniversary of the
effective date of the termination of Employee's employment by
either Anicom or Employee, for any reason, provided that Anicom
may not terminate Employee's employment hereunder during the
Initial Employment Period without "Cause" (as defined in Section
7(d)). Employee hereby agrees that at all times during the
Restricted Period, Employee shall not, directly or indirectly, as
employee, agent, consultant, stockholder, director, co-partner or
in any other individual or representative capacity, own, operate,
manage, control, engage in, invest in or participate in any manner
in, act as a consultant or advisor to, render services for (alone
or in association with any person, firm, corporation or entity),
or otherwise assist any person or entity that engages in or owns,
invests in, operates, manages or controls any venture or
enterprise that directly or indirectly engages or proposes to
engage in the Business anywhere within thirty (30) miles of any
office of Anicom or Purchaser existing as of the earlier of the
date of determination and the effective date of the termination of
Employee's employment (collectively, the "Territory"); provided,
however, that nothing contained herein shall be construed to
prevent Employee from (i) engaging in a business in which the sale
of wire and cable is ancillary to the conduct of the business and
such business does not compete with Anicom, or (fi) investing in
the stock of any competing corporation listed on a national
securities exchange or traded in the over-the-counter market, but
only if Employee is not involved in the business of said
corporation and if Employee and his "associates" (as such term is
defined in Regulation 14A promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof),
collectively, do not own more than an aggregate of two percent of
the stock of such corporation.
5.3 Non-Solicitation. Without limiting the
generality of the provisions of Section 5.2 above, Employee hereby
agrees that, during the Restricted Period, Employee will not,
directly or indirectly, as employee, agent, consultant,
stockholder, director, partner or in any other individual or
representative capacity solicit business from, or otherwise seek
to alter or influence Anicom's relationship with, (a) any Person
who is or was a customer of Anicom during the Restricted Period,
or from any successor in interest to any such Person, for the
purpose of marketing, selling or providing any such Person any
services or products offered by or available from Anicom, or
encouraging any such Person to terminate or otherwise alter his,
her or its relationship with Anicom, or (b) any Person who is or
was a "Prospective Customer" of Anicom, for the purpose of
marketing, selling or providing any such Person any services
offered by or available from
6
<PAGE>
Anicom or encouraging any such Person to terminate or otherwise
alter his, her or its relationship with Anicom. For purposes of
this Agreement, "Prospective Customer" shall mean any Person who
either Northern or Anicom has contacted (orally or in writing),
during the one year period prior to the earlier of (i) the date of
determination or (ii) the effective date of the termination of
Employee's employment with Anicom, with the goal of such Person
becoming a customer of Northern or Anicom.
5.4 Interference with Employee Relationships.
During the Restricted Period, Employee shall not, directly or
indirectly, as employee, agent consultant stockholder, director,
co-partner or in any other individual or representative capacity,
other than as expressly authorized by Anicom to act on behalf of
Anicom, employ or engage, recruit or solicit for employment or
engagement, any person who is or becomes employed or engaged by
Anicom during the Restricted Period, or otherwise seek to
influence or alter any such Person's relationship with Anicom.
5.5 Interference with Supplier Relationships.
During the Restricted Period, Employee shall not, directly or
indirectly, as employee, agent, consultant, stockholder, director,
co-partner or in any other individual or representative capacity,
other than as expressly authorized by Anicom to act on behalf of
Anicom, seek to influence or alter Anicom's relationship with (a)
any Person who is or was a supplier or vendor of Anicom during the
Restricted Period, or any successor in interest to any such
Person, or (b) any Person who is or was a "Prospective Supplier"
of Anicom. For purposes of this Agreement, "Prospective Supplier"
shall mean any Person who Northern or Anicom has contacted (orally
or in writing) during the one year period prior to the earlier of
(i) the date of determination or (ii) the effective date of the
termination of Employee's employment with Anicom, with the goal of
such Person becoming a supplier or vendor of Northern or Anicom.
5.6 Blue Pencil. If any court of competent
jurisdiction shall at any time deem the term of this Agreement or
any particular Restrictive Covenant too lengthy or the Territory
too extensive, the other provisions of this Section 5 shall
nevertheless stand, and the Restricted Period shall be deemed to
be the longest period permissible by law under the circumstances
and the Territory shall be deemed to comprise the largest
territory permissible by law under the circumstances. The court in
each case shall reduce the Restricted Period and/or the Territory
to a permissible duration or size.
6. Confidential Information. During the term of this
Agreement and thereafter, Employee shall keep secret and retain in
strictest confidence, and shall not, without the prior written
consent of Anicom, furnish, make available or disclose to any
third party or use for the benefit of himself or any third patty,
any Confidential Information, except to the extent reasonable
necessary to carry out Employee's duties and responsibilities to
Anicom. As used in this Section 6, "Confidential Information"
shall mean any information relating to the Business or affairs of
Anicom, including but not limited to information relating to
financial statements, business plans, forecasts, purchasing plans,
7
<PAGE>
customer identities, potential customers, employees, suppliers,
equipment, programs, strategies and information, analyses, profit
margins or other proprietary information used by Anicom in
connection with the conduct of the Business, 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 on the part of Employee. Employee
acknowledges that the Confidential Information is vital,
sensitive, confidential and proprietary to Anicom.
9. Employee acknowledges and agrees that the covenants
set forth in Section 5 and 6 of this Agreement (collectively, the
"Restrictive Covenants") are reasonable and necessary for the
protection of Anicom's business interests, that irreparable injury
will result to Anicom if Employee breaches any of the terms of the
Restrictive Covenants, and that in the event of Employee's actual
or threatened breach of any such Restrictive Covenants, Anicom
will have no adequate remedy at law. Employee accordingly agrees
that in the event of any actual or threatened breach by him of any
of the Restrictive Covenants, Anicom shall be entitled to
immediate temporary injunctive and other equitable relief, without
bond and without the necessity of showing actual monetary damages,
subject to hearing as soon thereafter as possible. Nothing
contained herein shall be construed as prohibiting Anicom from
pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages which it
is able to prove.
Nast hereby reaffirms the above covenants and provisions appearing
in the Nast Employment Agreement. It is agreed that the restrictive
covenant set forth in Section 5 of the Nast Employment Agreement duplicated
above terminates March 12, 2003 and will not extend beyond March 12, 2003.
7. Nast acknowledges and understands that the payments and commitments
provided for him under this Agreement are in consideration of Nast
waiving and otherwise releasing Anicom and its past and present parent
and subsidiary companies, affiliates, owners, directors, officers,
agents, employees, successors, heirs and assigns (the "Anicom Group"),
from certain claims, demands, rights, liabilities, and causes of
action. Accordingly, by the execution of this Agreement, and in return
for the consideration given to Nast as detailed in paragraphs 3, 4 and
5 of this Agreement, Nast does hereby release,
8
<PAGE>
waive, forever discharge and covenants not to sue or to file
administrative charges against the Anicom Group with respect to any and
all claims, demands, rights, liabilities, and causes of action of any
kind or nature arising out of or in connection with Nast's employment
relationship with Anicom or his separation from employment with Anicom,
and any and all other claims, known and unknown, which Nast has or may
have against Anicom, other than the "Surviving Claims" as defined in
Section 8. In conjunction with the foregoing, Nast agrees to sign the
attached Release of Claims, which is incorporated herein by this
reference.
8. It is acknowledged and agreed that the terms and provisions of
paragraph 7 which provide for a general release by Nast of the Anicom
Group shall not apply to one or more of the following claims
(collectively the "Surviving Claims":
(i) The obligations of Anicom to Nast as set forth in
Agreement and specifically paragraphs 3, 4 and 5 of
this Agreement;
(ii) The obligation to indemnify Nast with respect to
any liability or obligation which is covered by any
insurance policy obtained by Anicom in which Anicom
and/or Nast are or were insured or covered parties,
including but not limited to directors' and
officers' liability insurance;
9
<PAGE>
(iii)Any liability or obligation of Anicom to Nast
pursuant to Article XII of the Restated Certificate
of Incorporation of Anicom, Inc. with respect to
Nast's service as an officer of Anicom; or
(iv) Any and all claims, demands, rights, liabilities,
and causes of action of any kind or nature
whatsoever which arise or accrue with respect to
events occurring subsequent to the execution date
of this Agreement.
(a) It is also agreed that the neither the execution of this
Agreement nor the Release of Claims described herein
shall affect, modify, enlarge, diminish, impact, amend,
terminate, create, revoke or otherwise change or alter
the following:
(i) The obligation of Anicom to make the last
$1,133,768 payment to Northern Wire & Cable, Inc.
(now known as Northern Liquidation Company) on
March 12, 1999, pursuant to the March 12, 1996
NonNegotiable Note executed by Anicom as maker
originally given to Northern Wire & Cable, Inc.; or
10
<PAGE>
(ii) Any right, privilege, immunity or power inherent
to, attendant with or otherwise associated with the
capital stock in Anicom (or any successor in
interest of Anicom) which is owned by Nast, his
heirs, personal representatives, transferees,
successors or assigns, regardless of whether such
capital stock is now owned or hereafter acquired.
9. As part of this Agreement, Nast also agrees (a) to waive
reinstatement and not to seek future employment in any position
with Anicom, or any of its parents, subsidiaries or affiliates,
and (b) to refrain from making any unfavorable comments, in
writing or verbally, about Anicom, its staff or its policies or
procedures.
10. This Agreement does not constitute an admission by Anicom of a
violation of any contract, law, order, regulation, enactment or
public policy, and Anicom specifically denies any such violation
or wrongdoing. This Agreement, its execution, and implementation
shall not in any respect be construed, and shall not be admissible
in any proceeding, as evidence of (1) an admission of an unlawful
employment practice under any federal, state or local statute,
regulation, order, or public policy, or (2) an admission by Anicom
of a violation of the common law or public policy of the State of
Michigan or that of any other State, relating to the discharge of
employees or the termination of the employment relationship
between employer and employee, or (3) any tort or breach of
contract by Anicom; provided however, that none of the foregoing
restrictions shall
11
<PAGE>
prohibit Nast from introducing this Agreement into evidence in
connection with a legal proceeding enforcing the terms of this
Agreement or seeking damages resulting from a breach thereof by
Anicom.
11. Except as provided in paragraph 12, below, the parties agree to
return any property in their possession which belongs to the other
party on or before the expiration of the Revocation Period.
12. Upon expiration of the Revocation Period, Nast shall relinquish
his use of the automotive vehicle furnished to him by Anicom (the
"Vehicle"). At that time, Nast shall drive the Vehicle to the
parking facilities at 2301 W. Big Beaver, Suite 525, Troy,
Michigan 48084. All sets of keys for the Vehicle shall be left
with Lipson, Neilson, Jacobs & Cole, P.C. Representatives of
Anicom shall promptly send personnel to take possession of the
keys to the Vehicle and to take possession of the Vehicle. It is
understood that the foregoing protocol is for convenience purposes
only and no bailment relationship has been established with
respect to the Vehicle among Anicom and Nast, or with respect to
either of them and any other person. Upon expiration of the
Revocation Period, all tangible personal property currently or
formerly contained within Nast's desk at Anicom facilities which
is currently within the custody or control of Anicom shall be
promptly delivered to Lipson, Neilson, Jacobs & Cole, P.C.
13. The parties agree that any press release or internal communication
to be issued relating to the expiration of the Nast Employment
Agreement shall state that Nast's motivation in leaving the
employment of Anicom was his desire to pursue charitable activity
and business pursuits unrelated to the business activity of Anicom
and that Anicom
12
<PAGE>
was willing to honor Nast's desires. Anicom, for itself and on
behalf of its parents, subsidiaries, affiliates, owners,
directors, officers, agents, employees, successors, heirs and
assigns agrees to refrain from making any unfavorable comments, in
writing or verbally, about Nast.
14. Nast, Anicom and their respective legal counsel expressly
recognize that this Agreement shall be revocable for the seven (7)
calendar day period following execution of this Agreement by Nast.
Accordingly, this Agreement shall not become effective or
enforceable until 5:00 p.m. EDT of the eighth day immediately
following the date of this Agreement (the "Effective Date"). The
period of time between the execution of this Agreement and the
Effective Date shall constitute the "Revocation Period". Nast,
Anicom and their respective legal counsel further expressly
recognize that upon expiration of the Revocation Period, this
Agreement will become irrevocable. In any action to enforce this
Agreement, the terms of the Agreement shall be binding, and the
reneging party expressly and irrevocably waives any right to
contest or collaterally attack its terms on any basis, including
but not limited to ignorance or mistake. This acknowledgment is
not a mere recital by the parties.
15. In compliance with The Older Workers Benefit Protection Act (P.L.
101-433), Anicom and Nast do hereby acknowledge as follows:
(a) Nast acknowledges that he fully understands this
Agreement;
(b) Nast acknowledges that this Agreement and his
release and waiver of claims as expressly provided
13
<PAGE>
under this Agreement and the attached Release of
Claims specifically applies to any rights or claims
he may have against Anicom or any party released
herein under the Federal Age Discrimination in
Employment Act of 1967, as amended;
(c) This Agreement does not purport to waive rights or
claims that may arise from acts or events occurring
after the date that this Agreement is executed by
the parties;
(d) Nast acknowledges that the consideration provided
for in this Agreement and the provisions of this
paragraph is in addition to any amounts to which he
is already entitled;
(e) Nast further acknowledges that he has been advised
of his right to consult with an attorney prior to
signing this Agreement and that he has been given a
period of twenty one (21) days within which to
consider whether to sign this Agreement; and (f)
This Agreement shall be revocable by Nast until
expiration of the Revocation Period. 16. It is
further agreed that Nast will not encourage any
employee or former employee of Anicom in litigating
claims or filing administrative charges against
Anicom, and/or its
14
<PAGE>
parents, subsidiaries, affiliates, owners, agents,
officers, directors, shareholders, or employees,
unless required to provide testimony or documents
pursuant to a lawful subpoena or as otherwise
required by law. Further, Anicom shall not
encourage the prosecution of any third party claims
against Nast.
17. Both Nast and Anicom agree to keep the nature, terms, and conditions of
this Agreement confidential. Anicom and Nast may disseminate the
Agreement as necessary for internal administrative purposes, or as
required by lawful subpoena, litigation discovery request,
government-regulatory inquiry or request for information, and the
parties may share information concerning the Agreement with their legal
counsel and tax advisors as necessary for purposes of legal or tax
advice. Anicom and Nast agree to instruct all individuals whom they
inform of the nature, terms, and/or conditions of this Agreement, of
the confidential nature of the Agreement. In response to any inquiry
from third persons not otherwise referred to in this paragraph
concerning this Agreement, Nast agrees to limit his response solely to
a statement he has resigned and that the matter has been resolved or
words of similar effect.
18. This Agreement and the attached Release of Claims shall be construed
without regard to the identity of the person who drafted their
provisions and their provisions shall be construed as if each of the
parties participated in its drafting. Any rules of construction that a
document is to be construed against the drafting party shall not apply
to this Agreement.
19. Nast states that he has read and understands that this Agreement and
the attached Release of Claims is meant as a settlement and release,
releasing Anicom from any and all
15
<PAGE>
claims he may have against it other than the Surviving Claims, that he
voluntarily agrees to the terms herein, that he knowingly and willingly
intends to be legally bound by the same, that he was given adequate
opportunity to consider this Settlement Agreement and Release of
Claims, and that the terms and conditions hereof were determined by
negotiation between Nast and Anicom.
20. Nast acknowledges that any purported revocation of this Agreement must
be in writing and signed by him, directed to Anicom's Vice President &
General Counsel and received by Anicom's Vice President & General
Counsel prior to the end of the Revocation Period.
21. This Agreement shall be governed by and construed in accordance with
the laws of the State of Michigan.
22. If any action is brought to interpret or enforce any provision of this
Agreement or the rights or obligations of any party to the Agreement,
the prevailing party shall be entitled to recover reasonable attorneys'
fees and costs from the losing party in opposition.
23. No provisions of this Agreement may be modified, amended or terminated
except by a written agreement executed by all of the parties to this
Agreement.
24. This Agreement and the attached Release of Claims constitutes and
contains the entire agreement and understanding between the parties
concerning the subject matter of this Agreement, and supersedes all
prior negotiations, proposed agreements and understandings, if any,
between the parties. 25. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same document.
16
<PAGE>
26. All of the terms and conditions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
heirs, successors and assigns.
27. Each person executing this Agreement warrants and represents that he is
duly authorized to execute the Agreement on behalf of and to legally
bind, the party for whom he is signing.
[BALANCE OF PAGE LIFT BLANK INTENTIONALLY]
17
<PAGE>
IN WITNESS WHEREOF, the Agreement is duly executed on the dates
appearing below.
ANICOM, INC.
Dated:_________________________ By:_______________________
Donald C. Welchko
Chief Financial Officer
GLEN. M. NAST
Dated:__________________________ __________________________
Glen M. Nast
18
EXHIBIT 10.17
ANICOM, INC.
1998 ASSOCIATE
STOCK PURCHASE PLAN
(Adopted effective July 1, 1998)
<PAGE>
ANICOM, INC.
1998 ASSOCIATE
STOCK PURCHASE PLAN
(Adopted effective July 1, 1998)
TABLE OF CONTENTS
Page
ARTICLE I ESTABLISHMENT AND PURPOSE........................1
1.1 Purpose..........................................1
ARTICLE II DEFINITIONS...............................................1
2.1 Account..........................................1
2.2 Agreement or Option Agreement....................1
2.3 Board of Directors or Board......................1
2.4 Code or Internal Revenue Code....................1
2.5 Committee........................................2
2.6 Common Stock.....................................2
2.7 Company..........................................2
2.8 Continuous Service...............................2
2.9 Contribution Rate................................2
2.10 Disability.......................................2
2.11 Eligible Employee................................2
2.12 Exercise Date....................................3
2.13 Exchange Act.....................................3
2.14 Fair Market Value................................3
2.15 Grant Date.......................................3
2.16 Option...........................................3
2.17 Option Period....................................3
2.18 Option Price.....................................3
2.19 Participant......................................3
2.20 Plan.............................................4
2.21 Plan Year........................................4
2.22 Representative...................................4
2.23 Retirement.......................................4
2.24 Securities Act...................................4
2.25 Subsidiary.......................................4
2.26 Termination of Employment........................4
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<PAGE>
Article III ADMINISTRATION............................................5
3.1 Committee Structure and Authority................5
ARTICLE IV STOCK PROVISIONS..........................................7
4.1 Number of Shares Subject to the Plan.............7
4.2 Release of Shares................................7
4.3 Restrictions on Shares...........................7
4.4 Stockholder Rights...............................8
4.5 Stock Valuation..................................8
4.6 Custodian........................................8
ARTICLE V ELIGIBILITY; OPTION PROVISIONS...................9
5.1 Eligibility......................................9
5.2 Grant of Options.................................9
5.3 Option Period....................................9
5.4 Option Price....................................10
5.5 Contribution Rate...............................10
5.6 Purchase of Shares..............................11
5.7 Cancellation of Options.........................11
5.8 Terminated Employees............................11
5.9 Deceased Employees..............................11
5.10 Disabled or Retired Employees...................12
5.11 Limitations.....................................12
5.12 Nonassignability................................12
ARTICLE VI GENERAL PROVISIONS APPLICABLE
TO THE PLAN...................................13
6.1 Termination of Plan.............................13
6.2 Investment Representation.......................13
6.3 Effect of Certain Changes.......................13
6.4 Withholding.....................................16
6.5 No Company Obligation...........................17
6.6 Committee Discretion............................17
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<PAGE>
ARTICLE VII MISCELLANEOUS...................................17
7.1 Indemnification of the Board and
Committee.....................................17
7.2 Mitigation of Excise Tax........................18
7.3 Interpretation..................................18
7.4 Governing Law...................................18
7.5 Limitations on Liability........................18
7.6 Validity........................................19
7.7 Assignment......................................19
7.8 Captions........................................19
7.9 Amendments......................................19
7.10 Entire Agreement................................19
7.11 Rights with Respect to Continuance of
Employment....................................19
7.12 Options for Shares in Substitution for
Stock Options Granted by Other
Corporations..................................20
7.13 Procedure for Adoption..........................20
7.14 Procedure for Withdrawal........................20
7.15 Expenses........................................20
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<PAGE>
ANICOM, INC.
1998 ASSOCIATE
STOCK PURCHASE PLAN
(Adopted effective July 1, 1998)
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Purpose. The Anicom, Inc. 1998 Associate Stock Purchase Plan (the
"Plan") is hereby established effective July 1, 1998 by Anicom, Inc. The
adoption of the Plan is expressly conditioned upon the Plan's approval by the
security holders of Anicom, Inc. within twelve (12) months after the date the
Plan is adopted. The purpose of the Plan is to promote the overall financial
objectives of the Company and its stockholders by motivating participants in the
Plan to achieve long-term growth in stockholder equity in the Company. The Plan
is intended as an "employee stock purchase plan" within the meaning of Section
423 of the Code, and Options granted hereunder are intended to constitute
options granted under such a plan, and the Plan document and all actions taken
in connection with the Plan shall be constructed consistently with such intent.
ARTICLE II
DEFINITIONS
The following sections of this Article II provide basic definitions of
terms used throughout the Plan, and whenever used therein in the capitalized
form, except as otherwise expressly provided, the terms shall be deemed to have
the following meanings:
2.1 "Account" shall mean the bookkeeping account established on behalf
of a Participant to which shall be credited all contributions paid for the
purpose of purchasing Common Stock under the Plan, and to which shall be charged
all purchases of Common Stock pursuant to the Plan. The Company shall have
custody of such Account.
2.2 "Agreement" or "Option Agreement" means, individually or
collectively, any enrollment and withholding agreement entered into pursuant to
the Plan. An Agreement shall be the right of the Company to withhold from
payroll amounts to be applied to purchase Common Stock.
2.3 "Board of Directors" or "Board" means the Board of Directors of the
Company.
<PAGE>
2.4 "Code" or "Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, and any subsequent Internal Revenue Code. If there is a
subsequent Internal Revenue Code, any references herein to Internal Revenue Code
sections shall be deemed to refer to comparable sections of any subsequent
Internal Revenue Code.
2.5 "Committee" means the person or persons appointed by the Board of
Directors to administer the Plan, as further described in the Plan.
2.6 "Common Stock" means the shares of the Common Stock of the Company,
$.001 par value per share, whether presently or hereafter issued, and any other
stock or security resulting from adjustment thereof as described in Section 6.3.
2.7 "Company" means Anicom, Inc. and includes any successor or assignee
corporation or corporations into which the Company may be merged, changed or
consolidated; any corporation for whose securities the securities of the Company
shall be exchanged; and any assignee of or successor to substantially all of the
assets of the Company.
2.8 "Continuous Service" shall mean, subject to modification by the
Committee, an Eligible Employee's number of full years and completed months of
continuous employment with the Company or a Subsidiary from his last hiring date
to his date of Termination of Employment for any reason. The Committee may
provide rules from time to time regarding the calculation of Continuous Service
and the method for crediting such service.
2.9 "Contribution Rate" means the rate determined under Section 5.5
2.10 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or a Subsidiary, or if the Participant is not covered by such plan, a
mental or physical illness that renders a Participant permanently and totally
incapable of performing his duties as an employee of the Company or a
Subsidiary. Notwithstanding the foregoing, a Disability shall not qualify under
this Plan if it is the result of (a) a willfully self-inflicted injury or
willfully self-induced sickness; or (b) an injury or disease contracted,
suffered, or incurred, while participating in a criminal offense. The
determination of Disability shall be made by the Committee. The determination of
Disability for purposes of this Plan shall not be construed to be an admission
of disability for any other purpose.
2.11 "Eligible Employee" means each employee of the Company or a
Subsidiary (if the Subsidiary has adopted the Plan) on a Grant Date except that
the Committee in its sole discretion may exclude:
(a) any employee who has accrued less than a minimum period of Continuous
Service established by the Committee (but not to exceed 2 years).
(b) any employee whose customary employment is 20 hours or less per week;
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<PAGE>
(c) any employee whose customary employment is for not more than 5 months
in any calendar year;
(d) any employee who would directly or indirectly own or hold (applying
the rules of Section 424(d) of the Code to determine stock ownership)
immediately following the grant of an Option hereunder an aggregate of five
percent (5%) or more of the total combined voting power or value of all
outstanding shares of all classes of stock of the Company or any Subsidiary; and
(e) any employee who is a highly compensated employee of the Company or
Subsidiary within the meaning of Section 414(q) of the Code.
Any period of service described in the preceding sentence may be decreased in
the discretion of the Committee.
2.12 "Exercise Date" means such one or more dates determined by the
Committee on which the accumulated value of the Account shall be applied to
purchase Common Stock. The Committee may accelerate an Exercise Date in order to
satisfy the employment period requirement of Section 423(a)(2).
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.14 "Fair Market Value" means the value determined on the basis of the
good faith determination of the Committee pursuant to the applicable method
described in Section 4.5 and as adjusted, averaged or otherwise modified by the
Committee.
2.15 "Grant Date" means the date or dates established by the Committee on
which one or more Options are granted pursuant to the Plan. The Committee may
determine for any Plan Year that there shall be no Grant Date, in which case no
Options shall be granted for that Plan Year. The terms and conditions of any
Option granted on a particular Grant Date shall be independent of and have no
effect on the terms and conditions of any Option granted on another Grant Date.
2.16 "Option" means the right to purchase Common Stock pursuant to the Plan
and any Agreement.
2.17 "Option Period" means the period beginning on the Grant Date and
expiring on the Exercise Date as determined by the Committee, subject to the
limitations of Section 5.3.
2.18 "Option Price" means the price at which the Company's Common Stock
granted as of a specific Grant Date may be purchased under an Option. The price
shall be subject to the limitation set forth in Section 5.4.
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<PAGE>
2.19 "Participant" means an Eligible Employee who satisfies the eligibility
conditions of the Plan and to whom an Option has been granted by the Committee
under the Plan, and in the event a Representative is appointed for a
Participant, then the term "Participant" shall mean such appointed
Representative, or successor Representative(s) appointed, as the case may be,
provided that "Termination of Employment" shall mean the Termination of
Employment of the Participant.
2.20 "Plan" means the Anicom, Inc. Stock Purchase Plan, as herein set forth
and as may be amended from time to time.
2.21 "Plan Year" means, for the first Plan Year, the period starting on
July 1, 1998, and ending on December 31, 1998; and for all subsequent Plan
Years, the twelve (12) consecutive month period starting on January 1 and ending
on the following December 31. The Committee may at any time in its discretion
designate another period as the Plan Year.
2.22 "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had his primary residence at the date of the Participant's
death; (b) the person or entity acting as the guardian or temporary guardian of
a Participant's estate; or (c) the person or entity which is the beneficiary of
the Participant upon or following the Participant's death. A Participant may
file a written designation of his Representative with the Committee. Such
designation of his Representative may be changed by the Participant at any time
by written notice given in accordance with rules and procedures established by
the Committee.
2.23 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or a Subsidiary, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.24 "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated pursuant thereto.
2.25 "Subsidiary" means any company, as currently defined in Section 424(f)
of the Code. Unless otherwise indicated the term "Company" shall hereinafter be
deemed to include all Subsidiaries of the Company which have adopted the Plan.
2.26 "Termination of Employment" means the latest date on which a person
ceases, for whatever reason, to be an employee of the Company. For determining
whether and when a Participant has incurred a Termination of Employment for
cause, "cause" shall mean any act or omission which permits the Company to
terminate the employment agreement or arrangement between the Participant and
the Company for cause as defined in such agreement or arrangement, or in the
event there is no such employment agreement or arrangement or the agreement or
- 4 -
<PAGE>
arrangement does not define the term "cause," then "cause" shall mean (a) any
act or omission which the Company believes is of a criminal nature, and the
result of which the Company believes is detrimental to the interests of the
Company; (b) the material breach of a fiduciary duty owing to the Company,
including without limitation, fraud and embezzlement; or (c) conduct or the
omission of conduct on the part of the Participant which constitutes a material
breach of any statutory or common-law duty of loyalty to the Company.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be administered
by the Committee. The Committee shall be comprised of two or more disinterested
members of the Board of Directors selected by the Board. A majority of the
Committee shall constitute a quorum at any meeting thereof (including telephone
conference) and the acts of a majority of the members present, or acts
unanimously approved in writing by the entire Committee without a meeting, shall
be the acts of the Committee. A person shall be considered disinterested for
this purpose only if, at the time he exercises discretion in administering the
Plan, he is a "disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act. The Board shall have the authority to remove, replace or fill any
vacancy of any member of the Committee upon notice to the Committee and the
affected member. Any member of the Committee may resign upon notice to the
President of the Company or to the Board. The Committee may allocate among one
or more of its members, or may delegate to one or more of its agents, such
duties and responsibilities as it determines. Subject to the provisions of this
Plan, the Committee shall have full and final authority in its discretion to:
(a) determine from time to time whether a person is
is an Eligible Employee as of any Grant Date;
(b) determine the Option Price;
(c) determine the number of shares of Common Stock
available as of any Grant Date or subject to each Option;
(d) determine any Grant Date, Exercise Date and
Option Period, and provide for all aspects of payroll deduction,
suspension or withdrawal;
(e) determine, subject to the Plan, the time or times
and the manner when each Option shall be exercisable and the duration
of the Option Period;
(f) provide for the acceleration of the right to
exercise an Option (or portion thereof);
- 5 -
<PAGE>
(g) prescribe additional terms, conditions and
restrictions in the Agreement and to provide for the forms of Agreement
to be utilized in connection with this Plan;
(h) determine whether a Participant has incurred a
Disability;
(i) determine what securities laws requirements are
applicable to the Plan, Options, and the issuance of shares of Common
Stock hereunder and request of a Participant that appropriate action be
taken;
(j) cancel, with the consent of the holder or as
otherwise provided in the Plan or an Agreement, outstanding Options;
(k) require as a condition of the exercise of an
Option or the issuance or transfer of a certificate of Common Stock,
the withholding from a Participant of the amount of any federal, state
or local taxes as may be necessary in order for the Company or
Subsidiary to obtain a deduction and as may be otherwise required by
law;
(l) determine whether and for what reason an
individual has incurred a Termination of Employment or an authorized
leave of absence;
(m) treat all or any portion of any period during
which a Participant is on an approved leave of absence as a period of
employment for purposes of accrual of his rights under an Option;
(n) determine whether the Company or any other person
has a right or obligation to purchase Common Stock from a Participant
and, if so, the terms and conditions on which such Common Stock is to
be purchased;
(o) determine the restrictions or limitations on the
transfer of Common Stock;
(p) determine whether an Option is to be adjusted,
modified or purchased, or become fully exercisable, under Section 6.3
of the Plan or the terms of an Agreement;
(q) adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the administration
of this Plan;
(r) appoint and compensate agents, counsel, auditors
or other specialists to aid it in the discharge of its duties;
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(s) correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Agreement relating to
an Option, in such manner and to the extent the Committee shall
determine in order to carry out the purposes of the Plan; and
(t) construe and interpret this Plan, any Agreement,
and take all other actions, and make all other determinations and take
all other actions deemed necessary or advisable for the administration
of this Plan.
In the absence of the appointment of a Committee, the two or more
members of the Board who have served the longest period of time as members of
the Board and who are disinterested persons within the meaning of Rule 16b-3 of
the Exchange Act shall be the Committee. No member of the Committee, while
serving as such, shall be eligible to receive any Option hereunder, although
membership on the Committee shall not affect or impair any such member's rights
under any Option granted to him at a time when he was not a member of the
Committee. A member of the Committee shall not exercise any discretion
respecting himself under the Plan.
ARTICLE IV
STOCK PROVISIONS
4.1 Number of Shares Subject to the Plan. The stock subject to the
Options granted under this Plan shall be the Company's Common Stock. Unless
otherwise amended by the Board and approved by the stockholders of the Company
to the extent required by law, a maximum number of 200,000 shares of Common
Stock of the Company (or such number as may result following any adjustment
pursuant to Section 6.3) shall be reserved and available for Options granted
under the Plan. The shares issued with respect to Options under the Plan may be
authorized and unissued shares, or shares issued and reacquired by the Company.
4.2 Release of Shares. If any shares of Common Stock available for
subscription are unsubscribed, or if any Option granted hereunder shall be
cancelled, forfeited, expire or terminate for any reason without having been
exercised or realized in full, any shares of Common Stock subject to
subscription or subject to such Option shall again be available and may
thereafter be granted or otherwise applied under this Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Option shall be subject to the terms and conditions specified herein and
to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to (1) the listing of such shares on any stock exchange (or other public market)
on which the Common Stock may then be listed (or regularly traded), (2) the
completion of any registration or qualification of such shares under federal or
state law, or any ruling or
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regulation of any governmental body which the Committee, in its sole discretion,
determines to be necessary or advisable, and (3) the tendering to the Company of
such documents and/or payments as the Committee may deem necessary, including
documents the Committee deems necessary to satisfy any applicable withholding
obligation in order for the Company or another entity to obtain a deduction on
its federal, state or local tax return with respect to the exercise of an
Option. The Company may cause any certificate for any share of Common Stock to
be delivered to be properly marked with a legend or other notation reflecting
the limitations on transfer of such Common Stock as provided in this Plan or as
the Committee may otherwise require. The Company has no obligation to register
shares of Common Stock issued pursuant to the Plan. Fractional shares shall not
be delivered, but shall be rounded to the next lower whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a
stockholder as to shares of Common Stock subject to an Option until, after
proper exercise of the Option or other action required, such shares shall have
been recorded on the Company's official stockholder records as having been
issued or transferred. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date such shares are recorded
as issued or transferred in the Company's official stockholder records, except
as provided in Section 6.3.
4.5 Stock Valuation. If and when the value of Common Stock shall be
required to be determined, it shall be determined in accordance with the
following provisions by the Committee, as applicable:
(a) if the Common Stock is listed on a national securities
exchange or quoted on the NASDAQ National Market System ("NASDAQ/NMS"),
the closing price of the Common Stock on the relevant date, as reported
on the composite tape or by the NASDAQ/NMS, as the case may be;
(b) if the Common Stock is not listed on a national securities
exchange or quoted on the NASDAQ/NMS, but is traded in the
over-the-counter market, the average of the closing bid and asked
prices for the Common Stock on the relevant date, or the most recent
preceding day for which such quotations are reported by NASDAQ/NMS; and
(c) if, on the relevant date, the Common Stock is not publicly
traded or reported as described in (i) or (ii), on the basis of the
good faith determination of the Committee.
4.6 Custodian. Shares of Common Stock purchased pursuant to the Plan
may be delivered to and held in the custody of such investment or financial firm
as shall be appointed by the Committee. The custodian may hold in nominee or
street name certificates for shares purchased pursuant to the Plan, and may
commingle shares in its custody pursuant to the Plan in a single account without
identification as to individual Participants. By appropriate instructions to the
custodian on forms to be provided for the purpose, a Participant may from time
to time
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obtain (a) transfer into the Participant's own name or into the name of the
Participant and another individual as joint tenants with the right of
survivorship of all or part of the whole shares held by the custodian for the
Participant's account and delivery of such shares to the Participant; (b)
transfer of all or part of the whole shares held for the Participant's account
by the custodian to a regular individual brokerage account in the Participant's
own name or in the name of the Participant and another individual as joint
tenants with the right of survivorship, either with the firm then acting as
custodian or with another firm, or (c) sale of all or part of the whole shares
held by the custodian for the Participant's account at the market price at the
time the order is executed and remittance of the net proceeds of the sale to the
Participant. Upon termination of participation in the Plan, and upon receipt of
instructions from the Participant, the shares held by the custodian for the
account of the Participant will be transferred and delivered to the Participant
in accordance with (a) above, transferred to a brokerage account in accordance
with (b), or sold in accordance with (c), above.
ARTICLE V
ELIGIBILITY; OPTION PROVISIONS
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan as of any Grant Date shall be those persons
(and only those persons) who are Eligible Employees of the Company (including a
Subsidiary that has adopted the Plan) on a Grant Date.
5.2 Grant of Options. The Committee shall have authority to grant
Options under the Plan at any time or from time to time to all Eligible
Employees as of a Grant Date. (To the extent an Option is granted to any
Eligible Employee of an entity on a relevant date, all Eligible Employees of the
entity shall be granted an Option to the extent required by law.) An Option
shall entitle the Participant to receive shares of Common Stock at the
conclusion of the Option Period, subject to the Participant's satisfaction in
full of any conditions, restrictions or limitations imposed in accordance with
the Plan or an Agreement, including without limitation, payment of the Option
Price. Each Option granted under this Plan shall be evidenced by an Agreement,
in a form approved by the Committee, which shall embody the terms and conditions
of such Option and which shall be subject to the express terms and conditions
set forth in this Plan and to such other terms and conditions as the Committee
may deem appropriate. The grant and exercise of Options hereunder shall be
subject to all applicable federal, state and local laws, rules and regulations
and to such approvals by any governmental or regulatory agency as may be
required. As of any Grant Date, each Eligible Employee shall be granted Options
with the same rights and privileges as any other Eligible Employee on that Grant
Date, except the amount of the Common Stock which may be purchased by any
Participant under any Option may bear a uniform relationship to the total
compensation, or the basic or regular rate of compensation, (as determined by
the Committee) of all Eligible Employees on that Grant Date, and the Option may
establish a maximum amount of Common Stock which may be purchased.
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5.3 Option Period. Each Agreement shall specify the period for which
the Option thereunder is granted, which shall be determined by the Committee. In
no event shall the Option Period extend beyond the period permitted under
Section 423(b)(7) of the Code.
5.4 Option Price. Subject to the limits stated herein, the Option Price
per share at which shares of Common Stock may be acquired upon exercise of an
Option shall be determined by the Committee. Unless otherwise specified by the
Committee, with respect to any Exercise Date, the Option Price shall not be less
than the lesser of eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock (averaged over such period as the Committee may determine and as
permitted by law) on the applicable Grant Date and eighty-five percent (85%) of
the Fair Market Value of a share of Common Stock (averaged over such period as
the Committee may determine and as permitted by law) on the applicable Exercise
Date. The Committee reserves the right to increase the Option Price by the value
of any accretion to the amounts credited to an Account if the Participant is
credited with such accretion regardless of the method of accounting for such
accretion.
5.5 Contribution Rate. If an Eligible Employee elects to participate,
the Participant shall file an Agreement with the Committee within the time
period designated by the Committee. The Committee may provide that the Agreement
shall specify either a percentage of the Participant's compensation (as defined
by the Committee) or a dollar amount determined by the Participant to be
deducted each pay period, or the Committee may permit only a specified
percentage or a specified amount. Such amount shall be credited to the Account
and shall be the Participant's Contribution Rate. Such deductions shall begin as
of the first regularly scheduled payroll date on or after the later of the Grant
Date and the date specified by the Committee. The Committee may establish
minimum and maximum percentages or amounts to be contributed and a date by when
such Agreement must be filed with the Committee. Notwithstanding the foregoing,
in no event may more than $8,000 be deducted from the Participant's compensation
(as defined by the Committee) for each Option Period and the maximum number of
shares which can be purchased by a Participant during the Option Period shall
not exceed such amount divided by eighty-five percent of the Fair Market Value
of a share of Common Stock on the applicable grant date (as determined under
Section 5.4). Such contributions will be held in the general funds of the
Company, and no interest shall accrue on any amounts held under this Plan,
unless expressly determined by the Committee. If payroll deductions are made by
a Subsidiary, that corporation will promptly remit the amount of the deduction
to the Company. A Participant's Contribution Rate, once established, shall
remain in effect during the Option Period unless and until contributions are
suspended or fully discontinued in order to comply with Section 401(k) of the
Code or for such other reasons as the Committee in its sole discretion may
determine, or if the Participant shall request suspension or discontinuance. If
a Participant requests to suspend payroll deductions the Participant may do so
at such times and in such manner as the Committee may permit, and previously
deducted amounts shall be retained until the earlier of the Exercise Date and
the date the Participant totally discontinues payroll deductions and requests a
distribution of the Account. A Participant who has suspended contributions may
recommence payroll deductions at such time, if at all, as determined by the
Committee. If a Participant requests to
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totally discontinue payroll deductions, the Participant may do so by providing
written notice to the Committee. There shall be paid to the Participant the
value of the Participant's Account as soon as administratively possible and the
Participant shall not receive any shares as of the Exercise Date.
5.6 Purchase of Shares. Subject to Sections 5.7, 5.8, 5.9, 5.10 and
5.11 on each Exercise Date, a Participant who has previously executed an
Agreement with respect to a specific Grant Date and made one or more payments
described in Section 5.5 shall be deemed to have exercised the Option to the
extent of the value of the Account, subject to the $8,000 limit set forth in
Section 5.5 with respect to the Option being exercised, and shall be deemed to
have purchased such number of full shares of Common Stock as equals the value of
the Account, subject to the limits of Sections 423(b)(3) and 423(b)(8) of the
Code and the number of shares available as of the Exercise Date and
proportionably allocable to other Participants for that Grant Date. The number
of shares of Common Stock to be purchased as of any Exercise Date shall be
determined by dividing the Option Price per share of the Common Stock into the
Account value and the value of the shares so purchased shall be charged to the
Account. Any value remaining in an Account of the Participant shall be returned
to the Participant and not applied to purchase Common Stock. Certificates of
Common Stock purchased hereunder may be held by the custodian as provided in
Section 4.6. Any Common Stock issued to the Participant who is subject to
reporting under Section 16 of the Exchange Act must be held for six (6) months
to the extent required by law to avoid liability under the Exchange Act. The
Committee may amend the Plan or any Agreement or provide in operation for
Participants to dispose of shares of Common Stock received upon the Exercise
Date on or immediately thereafter (which time may include any period during
which the Option is held) to the extent such change would not result in
liability under Section 16 of the Exchange Act. If the total number of shares to
be purchased as of any Exercise Date by all Participants exceeds the number of
shares authorized under this Plan or made available by the Committee as to any
Exercise Date, a pro rata allocation of the available shares will be made among
all Participants authorizing such payroll deductions based on the amount of
their respective payroll deductions through the Exercise Date.
5.7 Cancellation of Options. Except as otherwise provided in an
Agreement, an Option shall cease to be exercisable and shall be cancelled on or
after the expiration of the Option Period.
5.8 Terminated Employees. Except as otherwise provided by the Committee
or in an Agreement, any Participant who incurs a Termination of Employment for
any reason, except death, Disability or Retirement, during the Option Period
shall cease to be a Participant, the Option shall be null and void on the date
of the Termination of Employment without notice to the Participant and the
balance of the Account of the Participant shall be distributed to him as soon as
administratively possible.
5.9 Deceased Employees. If a Participant shall die during an Option
Period while an Eligible Employee, no further contributions by deduction from
regularly scheduled payments on behalf of the deceased Participant shall be
made, except that the Representative may make a single
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sum payment with respect to the Option at any time on or before the Exercise
Date equal to the amount the Participant would have contributed as determined by
the Committee for the payroll periods remaining to the Exercise Date. The
Representative may at any time prior to the Exercise Date request a distribution
of the Account. If the Representative does not request a distribution, the
balance accumulated in the deceased Participant's Account shall be used to
purchase shares of the Common Stock on the previously mentioned Exercise Date.
5.10 Disabled or Retired Employees. If a Participant incurs a
Termination of Employment due to Disability, or if a Participant incurs a
Termination of Employment due to Retirement, during an Option Period, no further
contributions by deduction from regularly scheduled payments on behalf of the
disabled or retired Participant shall be made, except that the Participant may
make a single sum payment with respect to the Option at any time on or before
the Exercise Date equal to the amount the Participant would have contributed as
determined by the Committee for the payroll periods remaining to the Exercise
Date. The Participant may at any time prior to the Exercise Date request a
distribution of the Account. If the Participant does not request a distribution
of the Account, the balance accumulated in the disabled or retired Participant's
Account shall be used to purchase shares of the Common Stock on the previously
mentioned Exercise Date.
5.11 Limitations. Notwithstanding any other provision of this Plan, in
no event may a Participant (i) purchase under the Plan during a calendar year
Common Stock having a fair market value (determined at Grant Date) of more than
$25,000 or (ii) receive any rights to purchase stock hereunder if he or she
beneficially owns, immediately after such receipt, five percent (5%) or more of
the total voting power or value of all classes of stock of the Company.
5.12 Nonassignability. Neither the Option nor the Account shall be
assigned, transferred (except as herein provided), pledged, or hypothecated in
any way (whether by operation of law or otherwise), other than by will or the
laws of descent and distribution or pursuant to a domestic relations order which
would be a qualified domestic relations order as defined in the Code or ERISA
(if the Plan were described in the relevant Sections) but only to the extent
consistent with Section 423 of the Code. Except as provided herein, the Option
is exercisable during a Participant's lifetime only by the Participant or the
appointed guardian or legal representative of the Participant, and neither the
Option nor the Account shall be subject to execution, attachment, or similar
process. Any attempted assignment, transfer, pledge, hypothecation, or other
disposition contrary to the provisions hereof, and the levy of any attachment or
similar process upon the Option or the Account shall be null and void and
without effect. The Company shall have the right to terminate the Option or the
Account in the event of any such assignment, transfer, pledge, hypothecation,
other disposition of the Option or the Account, or levy of attachment or similar
process, by notice to that effect to the person then entitled to exercise the
Option; provided, however, that termination of the Option hereunder shall not
prejudice any rights or remedies which the Company may have under an Agreement
or otherwise.
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ARTICLE VI
GENERAL PROVISIONS APPLICABLE TO THE PLAN
6.1 Termination of Plan. To the extent required by law, this Plan shall
terminate on the last day of the ten (10) year period commencing with the
effective date or at such earlier time as the Board may determine, and no
Options shall be granted under the Plan after that date. Any Options outstanding
under the Plan at the time of its termination shall remain in effect until they
shall have been exercised, expired or otherwise cancelled, settled or terminated
as provided herein or in an Agreement, and such outstanding Options shall not be
affected by such termination of the Plan. The provisions of the Plan in respect
to the full and final authority of the Committee under the Plan, other than the
authority to grant Options, and in respect of a Participant's obligations
respecting shares of Common Stock received pursuant to the exercise of an Option
shall continue notwithstanding the termination of the Plan.
6.2 Investment Representation. In the event the disposition of Common
Stock acquired upon the exercise of any Option is not covered by a then current
registration statement under the Securities Act and is not otherwise exempt from
such registration, the Common Stock so acquired shall be restricted against
transfer to the extent required by the Securities Act or regulations thereunder,
and each Agreement shall contain a requirement that, upon demand by the Company
for such representation, the individual exercising an Option shall state in
writing, as a condition precedent to each exercise of the Option, in whole or in
part, that the Common Stock acquired by such exercise is acquired for investment
purposes only and not for resale or with a view to distribution. The Committee
may set forth in an Agreement such other terms and conditions relating to the
registration or qualification of the Common Stock under federal or state
securities laws as it desires, including, in its discretion, the imposition of
an obligation on the Company to cause the Common Stock issued to a Participant
to be registered under the Securities Act.
6.3 Effect of Certain Changes.
(a) Anti-Dilution. In the event of any Company stock dividend,
stock split, combination or exchange of shares, recapitalization or
other change in the capital structure of the Company, corporate
separation or division of the Company (including, but not limited to, a
split-up, spin-off, split-off or distribution to Company shareholders
other than a normal cash dividend), sale by the Company of all or a
substantial portion of its assets (as measured on either a stand-alone
or consolidated basis), reorganization, rights offering, partial or
complete liquidation, or any other corporate transaction or event
involving the Company and having an effect similar to any of the
foregoing, then the Committee may adjust or substitute, as the case may
be, the number of shares of Common Stock available for Options under
the Plan, the number of shares of Common Stock covered by outstanding
Options, the exercise price per share of outstanding Options, and any
other characteristics or terms of the Options as the Committee shall
deem necessary or appropriate to reflect equitably the effects of such
changes to the Participants; provided,
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however, that any fractional shares resulting from such adjustment
shall be eliminated by rounding to the next lower whole number of
shares with appropriate payment for such fractional share as shall
reasonably be determined by the Committee.
(b) Change in Control. If there is a Change in Control of the
Company (as defined herein) or the Committee reasonably anticipates a
Change in Control is likely to occur then (1) the Committee may cause
each Option to be immediately exercisable; (2) the Committee may
provide that any Option exercisable on the date of any such Change in
Control may be purchased by the Company in an amount equal to the
excess, if any, of the aggregate fair market value per share of Common
Stock subject to the Option (or portion thereof) over the aggregate
Option Price of the shares subject to the Option (or portion thereof)
which the Committee determines to purchase; or (3) the Company may
provide for any combination of (1) and (2) above. For purposes of this
Section 6.3(b), the aggregate fair market value per share of Common
Stock subject to the Option that the Committee determines to purchase
shall be determined by the Committee by reference to the cash or fair
market value, determined by the Committee, of the securities, property
or other consideration receivable pursuant to the Change in Control
described in this Section 6.3(b). The aggregate Option Price of the
Common Stock shall be determined by multiplying the number of such
shares by the Option Price. If the event of a Change in Control
described in Section 6(c)(iii), and if the Option is unexercised and
the Committee does not exercise its discretion hereunder to purchase
the Option, then the Option shall be regarded as the right to receive
the securities, property, cash or other consideration receivable by
shareholders of the Company immediately prior to the Change in Control
described in Section 6(c)(iii). The provisions of this Section 6.3(b)
shall be construed consistently with the terms or conditions of any
regulation or ruling respecting the status of Options under Section 423
of the Code and the receipt of cash or other consideration coincident
with the cancellation of such Options, and in order to provide the
Participant the economic benefit of the Option without incurring
liability under Section 16(b) of the Exchange Act.
(c) "Change in Control" shall be deemed to have occurred on
the first to occur of any of the following events:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of twenty-five percent 25% or more of either (A) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however,
that the following acquisitions shall not constitute a Change
in Control of the Company: (1) any acquisition directly from
the Company (excluding an acquisition by virtue of the
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exercise of a conversion privilege), (2) any acquisition by
the Company, (3) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company, or (4) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses
(A), (B) and (C) of subsection (iii) of this Section are
satisfied; or
(ii) Individuals who, as of the effective date of this
Plan, constitute the Board of Directors of the Company (the
"Incumbent Board of the Company") cease for any reason to
constitute at least a majority of the Board of Directors of
the Company; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board of the Company shall be
considered as though such individual were a member of the
Incumbent Board of the Company, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as contemplated by Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board of Directors of the Company;
or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (A)
more than seventy-five percent (75%) of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such reorganization,
merger or consolidation in substantially the same proportions
as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case
may be, (B) no Person (excluding the Company, any employee
benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning immediately
prior to such reorganization, merger or consolidation,
directly or indirectly, twenty-five percent (25%) or more of
the Outstanding Company Common Stock or Outstanding Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, twenty-five percent (25%) or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger or
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consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (C) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board of the
Company at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(iv) Approval by the shareholders of the Company of
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition, (A)
more than seventy-five percent (75%) of, respectively, the
then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B)
no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company or such corporation and any
Person beneficially owning, immediately prior to such sale or
other disposition, directly or indirectly, twenty-five percent
(25%) or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, twenty-five percent
(25%) or more of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(3) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board of the Company at the time of the execution of the
initial agreement or action of the Board providing for such
sale or other disposition of assets of the Company.
(d) The Committee may, in its discretion, grant to the
Participant, in exchange for the surrender and cancellation of the
Option, a new Option on such terms and conditions as may be determined
by the Committee in accordance with the Plan.
6.4 Withholding. Notwithstanding any other provision hereof, as a
condition of delivery or transfer of shares of Common Stock, the Committee in
its sole discretion may require the Participant to pay to the Company, or the
Committee may at its election withhold from any wages, salary, or stock to be
issued to a Participant pursuant to the exercise of an Option, or other payment
due to the Participant, an amount sufficient to satisfy all present or estimated
future
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federal, state and local withholding tax requirements related thereto. A
Participant or former Participant shall notify the Company immediately of such
disposition in writing and make all necessary arrangements in order for the
Company or a Subsidiary to obtain any and all deductions, as determined by the
Committee. The Participant may satisfy any requirement under the Plan or an
Agreement with respect to the Company's federal, state or local tax withholding
obligation by requesting that the Committee withhold and not transfer or issue
shares of Common Stock with a Fair Market Value equal to such withholding
obligation, otherwise issuable or transferable to him pursuant to the exercise
of that portion of the Option. An Agreement may provide for shares of Common
Stock to be delivered or withheld having a Fair Market Value in excess of the
minimum amount required to be withheld, but not in excess of the amount
determined by applying the Participant's maximum marginal tax rate. Any right or
election of the Participant under this Section 6.4 shall be subject to the
approval of the Committee and shall be in compliance with Section 16 of the
Exchange Act. The amount of required withholding shall, at the election of the
Participant, be at a specified rate not less than the statutory minimum federal
and state withholding rate and not greater than the maximum federal, state and
local marginal tax rate applicable to the Participant and to the particular
option exercise transaction.
6.5 No Company Obligation. The Company shall have no duty or obligation
to affirmatively disclose to a record or beneficial holder of an Option, and
such holder shall have no right to be advised of, any material information
regarding the Company at any time prior to, upon or in connection with the
exercise of an Option.
6.6 Committee Discretion. The Committee may in its sole discretion
include in any Agreement an obligation that the Company purchase a Participant's
shares of Common Stock received upon the exercise of an Option (including the
repurchase of any unexercised Options which have not expired), or may obligate a
Participant to sell shares of Common Stock to the Company upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article VI shall be construed by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee may from time to time determine.
ARTICLE VII
MISCELLANEOUS
7.1 Indemnification of the Board and Committee. In addition to such
other rights of indemnification as they may have and to the extent permitted by
law, the Company shall indemnify, defend and hold harmless the Board, the
Committee, the members of the Committee, the officers of the Company, and any
agent or representative selected by the Board or Committee (collectively
"indemnified party") against the reasonable expenses, including, without
limitation, attorneys' fees, actually and necessarily incurred in connection
with the defense of any action, suit or proceeding, or any threat thereof, or in
connection with any appeal therein, to which they or
- 17 -
<PAGE>
any of them may be a party by reason of any act or omission in connection with
the Plan or any Option granted thereunder, and against all amounts paid by them
in settlement thereof (provided such settlement is approved by legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such indemnified party is
liable for gross negligence or gross misconduct in the performance of his
duties; provided that within sixty (60) days after institution of any such
action, suit or proceeding the indemnified party may in writing elect to defend
the same at its sole expense, and if such election is made, the Company shall
have no further liability or obligations to the indemnified party under this
Section. The provisions of this Section 7.1 shall in no way limit any other
obligation or arrangements the Company may have with regard to indemnifying an
indemnified party.
7.2 Mitigation of Excise Tax. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 7.2),
either alone or together with other payments or rights accruing to the
Participant from the Company ("Total Payments") would constitute a "parachute
payment" (as defined in Section 280G of the Code and regulations thereunder),
such payment or right shall be reduced to the largest amount or greatest right
that will result in no portion of the amount payable or right accruing under the
Plan being subject to an excise tax under Section 4999 of the Code or being
disallowed as a deduction under Section 280G of the Code. The determination of
whether any reduction in the rights or payments under this Plan is to apply
shall be made by the Committee in good faith after consultation with the
Participant, and such determination shall be conclusive and binding on the
Participant. The Participant shall cooperate in good faith with the Committee in
making such determination and providing the necessary information for this
purpose. The foregoing provisions of this Section 7.2 shall apply with respect
to any person only if after reduction for any applicable federal excise tax
imposed by Section 4999 of the Code and federal income tax imposed by the Code,
the Total Payments accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of the
Plan and after reduction for only federal income taxes.
7.3 Interpretation. Whenever necessary or appropriate in this Plan and
where the context so requires, the singular term and the related pronouns shall
include the plural and the masculine and feminine gender.
7.4 Governing Law. The Plan and any Agreement shall be governed by the
laws of the State of Delaware (other than its laws respecting choice of law).
7.5 Limitations on Liability. No liability whatever shall attach to or
be incurred by any past, present or future stockholders, officers or directors,
merely as such, of the Company under or by reason of any of the terms,
conditions or agreements contained in this Plan, in an Agreement or implied from
either thereof, and any and all liabilities of, and any and all rights and
claims against the Company, or any shareholder, officer or director, merely as
such, whether arising at common law or in equity or created by statute or
constitution or otherwise, pertaining
- 18 -
<PAGE>
to this Plan or to an Agreement, are hereby expressly waived and released by
every Participant as a part of the consideration for any benefits provided by
the Company under this Plan. A person who shall claim a right or benefit under
this Plan shall be entitled only to claim against the Company for such benefit.
7.6 Validity. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
7.7 Assignment. This Plan shall inure to the benefit of and be binding
upon the parties hereof and their respective successors and permitted assigns.
7.8 Captions. The captions and headings to this Plan are for
convenience of reference only and in no way define, limit or describe the scope
or the intent of this Plan or any part hereof, nor in any way affect this Plan
or any part hereof.
7.9 Amendments. The Board of Directors may at any time amend, waive,
discharge or terminate the Plan even with prejudice to a Participant. The Board
or the Committee may amend, waive, discharge, terminate, modify, extend, replace
or renew an outstanding Option Agreement even with prejudice to a Participant;
provided such a change does not cause the Plan to fail to be a plan as described
in Section 423 of the Code.
7.10 Entire Agreement. This Plan and the Agreement constitute the
entire agreement with respect to the subject matter hereof and thereof, provided
that in the event of any inconsistency between the Plan and the Agreement, the
terms and conditions of this Plan shall control.
7.11 Rights with Respect to Continuance of Employment. Nothing
contained herein or in an Agreement shall be deemed to alter the at-will
employment relationship between the Company or a Subsidiary and a Participant.
Nothing contained herein or in an Agreement shall be construed to constitute a
contract of employment between the Company or a Subsidiary and a Participant.
The Company or, as applicable, the Subsidiary and the Participant each continue
to have the right to terminate the employment relationship at any time for any
reason. The company or Subsidiary shall have no obligation to retain the
Participant in its employ as a result of this Plan. There shall be no inference
as to the length of employment hereby, and the Company or Subsidiary reserves
the same rights to terminate the Participant's employment as existed prior to
the individual becoming a Participant in this Plan.
7.12 Options for Shares in Substitution for Stock Options Granted by
Other Corporations. Options may be granted under the Plan from time to time in
substitution for stock options or stock appreciation rights held by employees,
directors or service providers of other corporations who are about to become
employees of the Company as the result of a merger or consolidation of the
employing corporation with the Company, or the acquisition by the Company
- 19 -
<PAGE>
of the assets of the employing corporation, or the acquisition by the Company of
the stock of the employing corporation, as the result of which it becomes a
designated employer under the Plan. The terms and conditions of the Options so
granted may vary from the terms and conditions set forth in this Plan at the
time of such grant as the majority of the members of the Committee may deem
appropriate to conform, in whole or in part, to the provisions of the Options in
substitution for which they are granted.
7.13 Procedure for Adoption. Any Subsidiary of the Company may by
resolution of such Subsidiary's board of directors, with the consent of the
Board of Directors and subject to such conditions as may be imposed by the Board
of Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution. The Board shall have the power to make such
designation before or after the Plan is approved by stockholders.
7.14 Procedure for Withdrawal. Any Subsidiary which has adopted the
Plan may, by resolution of the board of directors of such Subsidiary, with the
consent of the Board of Directors and subject to such conditions as may be
imposed by the Board of Directors, terminate its adoption of the Plan; provided
such termination of adoption does not cause the Plan to fail to be a plan
described in Section 423 of the Code.
7.15 Expenses. Expenses of the Plan, including the fees or expenses
incurred by the transfer agent in connection with the transfer of Common Stock
and brokerage fees or expenses incurred in connection with the acquisition of
Common Stock in connection with the Plan or transfer to the Participant, shall
be charged to the Accounts of affected Participants or charged to the accretion
to the amounts credited to any Account if the Participant is credited with such
accretion regardless of the method of accounting for such accretion, except to
the extent paid by the Company or otherwise accounted for by the Company. Any
expense or fee associated with the Common Stock, including, for example,
custodian or brokerage fees after the Common Stock is transferred to the
Participant or for his account, or fees or commissions in connection with the
disposition of shares, shall be borne by the Participant.
Executed and effective as of the _____ day of ____________, 1998.
ANICOM, INC.
By: _______________________________
Title: _______________________________
- 20 -
EXHIBIT 21
ANICOM SUBSIDIARIES
Anicom Multimedia Wiring Systems Incorporated, a Nova Scotia corporation
TW Communication Corp., a New York corporation, which does business under the
name "Anicom TW"
CONSENT OF INDEPENDENT ACCOUNTANTS
EXHIBIT 23.1
We consent to the incorporation by reference in the registration statements of
Anicom, Inc. on Form S -3/A (File Nos. 333-41225, 333-30791 and 333-14719), Form
S-3 (File Nos. 333-67651, 333-61715, and 333-50641) and Form S-8 (File Nos.
333-68119, 333-61719, 333-34357, and 333-01602) of our report, dated February
17, 1999 on our audits of the consolidated financial statements and financial
statement schedule of Anicom, Inc. as of December 31, 1998 and 1997 and for each
of the three years in the period ended December 31, 1998, which report is
included in the 1998 Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
March 29, 1999
Chicago, Illinois
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-K.
</LEGEND>
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